The spread of the Coronavirus pandemic has had a drastic impact on the economic performance of various industry sectors worldwide. Apart from declining demand, rising unemployment is also a big challenge that has grown since economies shut down. While some of the jobs have returned as economies have started reopening, the impact of the pandemic is believed to be long-lasting. The impact was severe even during the first phase of the shutdown. A large number of industry sectors including aviation, retail, manufacturing, and automobiles experienced a swift fall in demand. On the one hand, while supply chain resilience has been put to test in almost all sectors, several retailers also closed many of their stores and some shut down operations completely.
Coronavirus has fundamentally changed our world. It is not just the industry landscape that has altered with Covid-19 but consumer behavior and consumer sentiment have also undergone a major change with the pandemic. Consumers are looking at brands and products through a new lens and their buying decision, as well as buying behavior, are influenced by several new factors. These changes are going to have a clear impact on the industry and the sales and revenues of various brands including big and small.
While the rising unemployment worldwide is going to have a direct impact on how and how much people buy, there are other factors also related to the pandemic having a serious effect on people’s buying decisions around the world. Apart from the health perspective, there is also an economic perspective on the pandemic that has left consumers around the world concerned. While people are trying to adapt to the new normal, they are also adopting varying attitudes, behaviors, and buying habits in response to the pandemic.
People are concerned for themselves as well as their families and their societies and how the pandemic will affect them in the short and the long run. Several new trends have emerged with the pandemic. Digital commerce has received a boost due to the pandemic as more and more people are shopping for groceries online. While some people started feeling worried and resorted to panic buying, others remained indifferent. However, these changes matter for most businesses except for the largest few who seem to have all the necessary resources and capabilities for times like these. Apple, Microsoft, Amazon, and Google, all have seen their market caps climb steadily even during the pandemic.
Leading Consumer Behavior trends identified during the pandemic
Consumers’ net optimism has decreased.
Net optimism among the consumers has decreased due to Covid-19. Overall, net optimism in various geographies varies but with Covid-19 growing more severe even in areas where optimism among the consumers was higher earlier, it has declined in the later phase.
In China, UK, and India, net optimism among the consumers has undergone a sharp decline from April to July. In the US as well as Germany and France also, the level of net optimism among consumers has declined from April to July.
Moreover, consumers in most parts of the world expect that the impact of Covid-19 is going to last long. In several of the hard-hit countries in Europe, a large number of consumers surveyed by McKinsey believe that the impact of Covid-19 is going to last longer than 4 months.
In China, consumers mostly believe that Covid-19 will not have an impact on their personal lives and routines for an extended period. However, in countries like the US, France, and Germany, consumers believe that their finances will recover in less than four months. So, the overall level of net optimism among consumers varies by region.
Income levels are declining and people are spending only on the essentials
Worldwide, consumers have continued to experience a decline in their income levels. However, the level of income loss varies by country. While the income level of consumers has remained more stable in countries like Japan and Germany, it has seen a sharper decline in countries including South Africa, India, and Brazil.
The level of spending by consumers is related to the level of net optimism. In countries where the level of net optimism among the consumers is low, spending is expected to remain lower for a long period. However, in the countries where overall optimism among the consumers is high, spending could pick up faster.
However, as their income levels are declining, people are cutting costs and spending only on the essential things like groceries or health-related items. This is a truth that most businesses will need to reconcile with.
Digital becomes a priority
Most consumers in various parts of the globe and more so in the harder-hit regions are shifting to digital channels for buying goods and services. In general, it would not be wrong to say that Covid-19 has given a boost to digital. People are practicing physical distancing and therefore trying to avoid physical touchpoints.
In the Asian and American countries, consumers are leveraging digital options across several categories. In the countries where e-commerce infrastructure is more developed, the acceptance of digital solutions is steadily growing among people.
Consumer behavior is adjusting across most countries and therefore consumers will adopt digital commerce for a larger number of products and services. However, in the regions where the approval of e-commerce has been low, consumers might return sooner to offline channels.
It is not just about groceries and other essentials, but for other things too including entertainment and education, consumers are shifting towards the digital channels. Across most countries, people have adopted online streaming channels for entertainment and video chat apps at a faster rate. Apart from video conferencing for work, the use of telemedicine has also grown across several regions.
In several regions, these trends will last longer than the pandemic and people will continue to use e-commerce channels as well as digital streaming and video chat apps for longer.
Consumers’ love for local is growing
Across the world, in several regions, the love of consumers for locally made and sourced products is growing during the pandemic. More and more consumers are buying products that are produced locally. There are also several countries that are championing for Buy Local including China, Italy, South Korea, and Spain.
According to sources, e-commerce brands like Amazon and Flipkart might also soon start showing the country of origin against the products they sell on their platforms. In India specifically, the boycott of Chinese products grew during the pandemic driven higher by Chinese incursion on India’s North-Eastern borders. However, the call for buy local had been growing stronger even before that in the region.
As consumer behavior might have gone a permanent change by the time the pandemic is over, the businesses must try to adopt ways to connect locally. This includes highlighting local provenance as well as customizing for the needs of the local customers.
Consumers’ return to outdoor shopping activities will be delayed for long
A large number of consumers still feel it unsafe to resume their outdoor activities despite many countries reopening their economies. Consumers have grown more health-conscious during the pandemic and apart from a higher focus on cleaning and hygiene, they do not intend to return to outdoor activities soon.
It means that malls and gyms will continue to see lower activity even after reopening for a prolonged period. Across various countries, consumers will prefer stores that have adopted physical distancing measures.
What businesses must do to stay connected with consumers during the pandemic?
While businesses have reduced the use of physical touchpoints during the current crisis, businesses can still manage to stay connected with their consumers. However, they will need to be more flexible in almost all aspects of their business operations including sales and customer service.
Businesses will need to adopt fresh operating and marketing strategies so they can better respond to the changing consumer behavior patterns as well as market space. Apart from that, businesses also need to focus on digital since it will drive most of their sales during and after the pandemic. So, first of all, they must make operational changes that make it easy to operate their business according to the new digital strategy.
This will also require setting a more flexible digital taskforce. However, a large number of businesses around the world have already switched to this model since most of the consumer interaction now takes place in the digital sphere.
Companies also need to change their marketing plan as per the new demand and purpose. This is also a time when businesses will need to redefine how they connect with their consumers, customers, and employees as well as reimagine their business operating model. However, the companies also need to redefine their relationships with the other stakeholders in their business ecosystem.
If possible, businesses should also reconsider their product and services portfolio. Demand and consumption patterns have changed around the world and by updating their products and services portfolio businesses may be able to respond to the changing situation better. This is also the time when businesses would like to make a move towards a smarter data-driven operating model. However, they should also start planning their investment for the post-COVID era.