Many retailers have been adapting to the COVID-19-driven world on the fly, and for good reason—42 percent of consumers believe the way they shop will fundamentally change as a result of the outbreak, according to data from international accounting giant EY.
These changes include more of a focus on local businesses and social responsibility: 34 percent of consumers indicate that they would pay more for local products, while 25 percent and 23 percent would pay more for trusted brands and ethical products, respectively.
The first edition of the EY Future Consumer Index, which surveyed 4,859 across the U.S., Canada, the U.K., France and Germany, split these consumers into four different consumer behavior segments based on their reaction to the crisis—“Cut deep,” “Stay calm, carry on,” “Save and stockpile” and “Hibernate and spend.”
“Save and stockpile” consumers represent the largest of the four segments at 35.1 percent, and aren’t so much concerned about the pandemic, but are worried about their families and pessimistic about the long-term effects. These shoppers spend much less on apparel and footwear (72 percent) and leisure activities (85 percent) but shell out 36 percent more on groceries. Meanwhile, the “Cut deep” segment (27.3 percent) has been hit hardest by the pandemic and has scaled back spending across all categories. Almost one-quarter have lost their employment, either temporarily or permanently. Seventy-eight percent of them are shopping less frequently, and 64 percent are only buying the essentials.
“Stay calm, carry on” shoppers (26.2 percent) have been the least affected by the pandemic and typically spend the same despite worries about other people stockpiling. And the “Hibernate and spend” demographic (11.4 percent) is by far the smallest but has ramped up its buying due to fears of the pandemic’s impact. This segment spends 53 percent more on groceries, 20 percent more on apparel and footwear and 24 percent more on leisure activities.
The four segments identified could morph into five very different ones as the crisis subsides. For example, the Index currently suggests that over time, most consumers in the “Save and stockpile” segment will migrate to two new segments: “Remain frugal” and “Cautiously extravagant.” These new consumer segments, detailed in the Index, could emerge post-COVID-19 and be summarized as: “Keep cutting” (13.1 percent), “Stay frugal” (21.7 percent), “Get to normal” (31.4 percent), “Cautiously extravagant” (24.7 percent) and “Back with a bang” (9.1 percent).
Of the two largest segments, 52 percent of the “Cautiously extravagant” group expects to spend more on apparel and footwear once the COVID-19 outbreak dissipates, while just 1 percent of the “Get to normal” demographic will spend more within those categories.
As part of the Index, EY teams have been modeling future shopping scenarios, with one such model called “Waste nothing” hypothesizing that consumers could view time, talent and natural resources as equally valuable, with traditional notions of status receding, replaced by purpose and social good.
This is supported by the Index, in which 33 percent of consumers strongly agree that they will re-evaluate the things they value most as a result of the pandemic, while more than one-quarter say they are already paying more attention not just to what they consume but also the impact of the products they purchase.
The need for environmental awareness was thrust back into the public consciousness as Earth Day celebrated its 50th anniversary on Wednesday. A Kearney study revealed that 48 percent of shoppers said the pandemic had made them more concerned about the environment, while 55 percent said they were more likely to purchase environmentally friendly products as a result of their COVID-19 experiences.
Consumers say the way they shop is likely to change as well, as 59 percent are very likely to bring reusable shopping bags to stores and 57 percent are very likely to carry reusable mugs or bottles.
But as these shoppers continue to place greater value on sustainability and the effects of their consumption, they believe retailers need to hold up their end of the bargain. As many as 78 percent of consumers believe companies could be doing more to help them make decisions that improve environmental outcomes.
“The time for ‘evaluating market response’ is over,” said Greg Portell, lead partner in Kearney’s global consumer practice. “It’s past time that branders, retailers, and manufacturers take clear, authentic leadership on environmental issues. In the middle of a pandemic we see consumers telling us—loudly and clearly—that it’s not enough to cut a check to an environmental organization or have some polished messaging in the annual report. What’s important here is executing against those lofty positions in the form of very tactical solutions consumers will perceive as authentic during and after COVID-19. Consumers demand a lot more out of the companies they support.”
Perceptions of sustainability and social good are continuing to evolve, but EY calculated another future scenario where shoppers adopt more open attitudes to privacy and sharing personal data due to the pandemic, deeming that doing so is better for society. The Index found that 53 percent of shoppers would be willing to make their personal data more available if it helped to monitor and track an infection cluster.
With this in mind, retailers should consider how increased consumer positivity around sharing data will create opportunities for new business models, particularly in demand forecasting. This kind of data, which could potentially give further insight into consumer habits and desires, could accelerate the demand for greater product traceability, creating an environment in which consumers and companies operate with total transparency.