EY Oceania consumer products and retail leader Lisa Nijssen-Smith pinpoints how COVID-19 is giving rise to new consumer groups.
The impact of COVID-19 has reached every corner of every industry, with the retail sector feeling the effects of it unlike anyone else.
The unprecedented global pandemic has presented brands with not only a new physical environment to operate within but also a new era of consumers that display different behaviours and prioritise different values when it comes to purchasing.
Understanding what matters most to the COVID-19 era consumer is vital to ensure brands not only survive but thrive in these conditions. Nearly all brands will need to shift their priorities in order to adapt to what may be the new norm for the foreseeable future.
To help brands grapple with the COVID-19 era consumer and the impact that this is having on buyer behaviour, EY developed the Future Consumer Index (FCI) - a global study conducted each month tracking changes in consumer attitudes, outlook, values and behaviour across 18 countries.
The results we have seen for Australia are showing us that consumers are reporting significant value-based shifts and it is these shifts that are affecting buying decisions.
Our latest data shows 52% of consumers have changed their values and the way they look at life, and 47% say they will do more of their shopping online. These statistics are underpinned by the belief in the time it will take Australia to recover from the pandemic – 34% having the view it will take one to two years, a further 26% say more than two years.
The global pandemic has forced consumers to continually adapt as lockdowns and social distancing restrictions have completely shifted peoples’ lifestyle, routine and financial position.
The various lockdowns within each state across the country have resulted in a trend in consumer behaviour that sees a surge in spending after lockdown restrictions ease - we’ve even seen cases where individual brands have had a rush of in-store purchases as they re-open bricks and mortar stores.
As the health crisis continues, we can expect to see such spending patterns continue, all of which makes it hard for brands to deal with inventory demands.
One of the most recent examples of the surge in demand can be found in the June retail trade data released by the Australian Bureau of Statistics (ABS).
The data showed the recent lockdown in Melbourne drove increased sales in toilet paper, pasta and rice – products that were in high demand during the start of the health crisis and had tapered off as restrictions eased.
The importance of values
Understanding consumers has always been important for brands but the uncertainty that the pandemic has created means brands need to work even harder to uncover what matters most to their customers over the next 6-12 months.
EY FCI data shows that there are five key areas that consumers are prioritising in COVID-19: Affordability, Health, Planet, Society and Experience.
Looking at these groups in more detail what we find:
Affordability first: This group prioritise living within their means, avoiding buying things they don’t really need. When they do have to make a purchase, they are keen to look for the best deals. The focus is the product delivering what they need rather than placing priority on the brand.
Health first: Health and feeling safe underpins the purchasing decisions of this segment. Brands and products that they trust to be safe will be the first choice. Such consumers will also minimise their risk in their purchasing process, for example purchasing online rather than in store because it feels safer.
Planet first: A strong awareness of the impact of consumption choices will have on the world around is the number one priority. Brands and products that reflect similar values will be sought out as these consumers are determined to cut waste and reduce their environmental impact.
Society first: The social impact of purchases with the belief of working together for the greater good are the priorities for this segment. These consumers buy from brands that are honest and transparent with what they do, who are also genuinely putting the needs of the society and community on par with profits.
Experience first: Intent on living in the moment and looking for experiences that help them get the most out of life are the priorities for these consumers. This segment is willing to try new brands, products and services, particularly those that signal their values and feel personalised.
Understanding these five priority areas and nature of the health crisis facing us means reassessing the traditional ways of engaging, interacting and marketing to consumers.
Brands need to identify what drives consumers in the current market and then look at how they differentiate the customer experience for the consumer whether it be a digital or bricks and mortar experience.
Looking at the digital experience, a major challenge for brands in today’s market is to deliver a digital customer journey that feels consistent and engaging with the customer at each step, from acquisition to conversion to loyalty.
That physical presence and touchpoints of walking into a bricks and mortar store, engaging with the shop assistant and completing the transaction through conversation is no longer an option for many brands.
Equally, consumers are choosing not to take this option if they can complete the purchase through the comfort of their home.
To assess their position, brands can look from the “outside in”.
Looking at what the experience is like for the consumer will help to identify points of friction and opportunities to replace physical touchpoints with digital ones, which will ultimately add value to the consumer’s interaction with brand.
Agility and strong systems will increase resilience
As the global pandemic continues, brands are going to be forced to move between the changes in consumer interaction and it is data that is going to be key to doing this seamlessly.
What this means for brands is exploring all forms of data to make informed and fast choices about inventory, staff rostering, opening times, warehousing and delivery – basically all the information that provides insight into how consumers interact with the brand.
For those brands with bricks and mortar stores it might be as simple as making better use of shopping centre or city centre data on foot traffic to help make decisions on opening times and staff rostering.
All supply chains at some point during the last five months have experienced disruption and some of the disruption has been out of the control of brands due to border closures and global market delays.
However, what has become clear in the last few months is the importance of having a supply chain system that is robust.
As the health crisis continues, brands should be looking at their back-end systems and getting their house in order so that they are able to ride out the next 6-12 months of disruption.
This also includes being prepared or reassessing supply chain options for the upcoming shopping boom times of Black Friday and Christmas. Re-tooling supply chains for greater resilience, end-to-end visibility will be key to reducing costs and meeting consumer demands.
The reality of COVID-19 is one which has presented brands with new challenges that are going to be felt for the foreseeable future.
However, with such challenges comes new opportunities that will allow for a chance to step back and ensure a product or service is truly meeting the demands of the new consumer behaviour and values.
Brands must take note of what their consumers are asking for and how this global pandemic is affecting their purchasing priorities. Now is the time for brands to review, respond and adapt to the COVID-19 era consumer.