Major changes in consumer behaviour linked to COVID-19
1. An explosion of e-commerce and in-store pickup
With strict lockdown measures and palpable anxiety in major city centres this spring, it was no surprise to see online sales skyrocket in Quebec. Our data science team calculated an increase of 118% in Quebec by the end of March 2020. This trend has led to an increase in home deliveries, as well as in-store and curbside pickup. Many consumers have discovered that not only do these practices feel safer, they are also a more practical way to shop. In one of its reports, Adobe Analytics points to a 62% increase in this type of practice in March of this year, compared to the same period last year. (Analysis from February 24 to March 21, 2020, compared to 2019 – Adobe Analytics, April 2020).
2. An increase in time spent online
Another lockdown-related change is the dramatic growth in time spent online, whether it’s to watch a show, a documentary, to get the latest news or to stream a workout. Given that many are likely to continue working from home for some time, and the fact that a second wave may be on its way, it would not be surprising if time spent online remained high, as the ComScore study below suggests.
(Source: Comscore)
3. Re-prioritization of needs
In addition to new digital habits, the pandemic has also impacted consumers’ purchasing power. According to a GlobalWebIndex study, 74% of respondents believed that COVID-19 had or would impact their income.
A drop in income obviously leads to a re-prioritization of consumer needs and purchases. With that in mind, the Boston Consulting Group performed an analysis to identify which consumer products and services would be impacted the most as a result of these changes over a 6-month time frame, by the end of August. It demonstrates that spending is being rebalanced, moving towards savings and wellness products, and shifting away from travel and luxury products.
(Source: BCG)
That being said, with the current gradual easing of lockdown measures and the arrival of the end of year, the desire to do things and have fun could engender a resurgence of interest in the neglected categories.
On the other hand, as seen in Quebec with Le Panier Bleu, local buying is likely to continue driving demand, as is the desire to buy from companies that give back to the local community. Even before the pandemic hit, 72% of Canadians expected companies to contribute to society. (Source: US – Trends 2.0 by Cowd DNA, September 2018, Canada).
How can we anticipate consumer behaviour over the coming months?
Knowing that people are ordering more online than ever before, that they’re spending more time online, and that their priorities have changed, how can we anticipate what their behaviour will look like over the coming months? Which of these new habits will stick? Should we be adapting our products and services and, if so, how? This is the scope of the challenge we face today.
The market will soon be saturated with products and applications designed to meet the new demand related to the coronavirus. We will see some of these offers capture substantial demand while others fail to capture enough traffic.
As a solution, McKinsey’s recent model of consumer behaviour in the “new normal” is very interesting and allows behaviour to be classified according to two axes:
- Growth in the volume of users since the crisis
- Intention to continue after the crisis
By performing user research, we can estimate the likelihood that different behaviours will be maintained over time in order to adapt a business model:
Δ Potential for use in the new normal=
(X% user growth since the start of the crisis) * (Y% willingness of users to continue)
Following the estimate of the potential for use in the “new normal,” behaviours are classified into four categories:
- Fast accelerators: (Strong growth in users since the crisis) * (Strong willingness of users to continue)
- Exciting for now: (Strong growth in users since the crisis) * (Low willingness of users to continue)
- Return to old normal: (Low growth in users since the crisis) * (Low willingness of users to continue)
- Potential to stick: (Low growth in users since the crisis) * (Strong willingness of users to continue)
(Source: McKinsey)
Adapting your strategy to the "new normal"
As we have seen previously, by adopting a structured methodological approach, we are able to take a more measured look at the future and adapt our medium- and long-term strategies in order to minimize the shock of a drop in sales.
Stress-test your digital assets
If you weren’t already doing it, now is the time to maximize and optimize your online presence in order to achieve impeccable omnichannel synergy. In normal times, the revenue split for retail businesses between digital and in-store sales is around 15% and 85%, respectively. With online shopping on the rise, businesses should expect to have to support a major increase in orders from their digital platforms.
The past and coming months are opportunities to stress-test your digital assets and their omnichannel synergy. It’s not a new idea, but the notion of a “zero friction” user experience has never been more important. Consumers expect a simple, smooth and contactless experience for their home delivery or in-store pickup.
Challenging physical points of sale
Given that the growth of online shopping is clearly here to stay, some players such as Microsoft have chosen to close most of their stores around the world. David Porter, vice president of the group responsible for brands, said in a statement: “Our sales have grown online as our product portfolio has evolved to largely digital offerings, and our talented team has proven success serving customers beyond any physical location.”
Beyond the distribution system, this leads us to question whether large brands really need to be physically present in formerly strategic locations such as large urban centres, which some might go so far as to qualify as vanity locations. With often expensive rent and operating costs and a drop in the number of visitors to these places, is it still relevant to maintain shops on main arteries, or is it better to refocus efforts towards a digital presence and a robust distribution system? This is a question all businesses need to ask themselves today.
Impact on digital media strategy
To answer this question, the teams at Google Canada encourage the use of the Now, Next, Later model, a planning tool used in many industries to evaluate and adapt marketing strategies. It helps determine what action to take now, what to focus on over the next few months and what to focus on for the long term.
(Source: Google)
COVID-19 has created new behaviours and strengthened existing ones, such as video viewing. Between 2017 and 2019, we were already seeing a 22% increase in the time spent on YouTube (Source: ComScore, video trend). With these changes and the growth of local initiatives, we can expect more questions in the coming months from marketers about which distribution strategies and channels to focus on.
According to a recent study conducted by AdExchanger with specialists in the digital media industry, 18% of respondents were reassessing their digital partners specifically because of the pandemic while more than half (52%) had already been reassessing their strategy and now say that the pandemic has accelerated their process of digital transformation.
In terms of media placements, we are seeing increased investment in video and social networks. With the new trend of remote work and the decline in traffic in major centres, digital outdoor signage is being passed over in favour of other channels. (Digital Out Of Home, digital outdoor signage) (Source: 2020 Industry Outlook: How COVID-19 Reset Digital Marketing).
Despite a projected drop in investments for 2020 of nearly $20 billion, it is very encouraging to note that the desire to build sustainable digital assets is not diminishing among the experts surveyed. With the growing weight of digital in the balance, nearly half will maintain or increase their investments in MarTech, Ad Tech and data technologies (Source: 2020 Industry Outlook: How COVID-19 Reset Digital Marketing).
Providing a local, fluid and contactless omnichannel experience
The decline in digital investments does not mean the end of local targeting strategies, however. With health rules that may differ from one city, province or country to another comes the challenge of omnichannel cohesion. It is more important than ever to adapt your strategic approach with a hyperlocal angle. This will allow advertisers to adapt to the specific contexts of the different target geographic areas in order to maximize the potential return on investment of their marketing initiatives.
At a time when anxiety is still palpable, it will be necessary to ensure that creative approaches comply with current health rules. It may also be relevant to mention these new services and those adapted in the creative approach.
Ultimately, with price as the main incentive to buy during the end of 2019, availability and free delivery/return will be decisive factors in the buying process in 2020. Sixty-six per cent of consumers say brands should offer free services due to the pandemic. (Source: COVID-19 – COVID-19 Barometer, Kantar. Survey of 25,000 consumers in 30 markets).
The easing of quarantine measures around the world are giving the semblance of a return to normal. However, we are unlikely to return to the pre-COVID world as we knew it. The companies that successfully get through these challenging times will be those who are able to be agile and resilient in the face of constantly changing consumer behaviour.
Do you have questions about the approach your business should take? The Adviso team is here to help.