The ripple effects of the COVID-19 pandemic have been felt across the globe and the retail industry is no exception. The pandemic generated widespread fear regarding health, job security, quality of life and financial stability at both a personal and macro-level. In response to this fear spending has slowed which has directly impacted the income of others.
While it is challenging to be positive, there are a variety of positive trends which have been ignited by the COVID-19 pandemic. One of them is the opportunity for innovation that has emerged as retail organizations adapted to the rapid demand for basic-goods, sanitation supplies and PPE. In addition,as the recovery cycle commences, it’s an opportunity for retailers to re-evaluate their operations and go-to-market strategy. As businesses resume operations, experts are predicting four different paths for an economic recovery.:
- The first, and best, scenario, , is the V-shaped recovery where the economy recovers and resumes the same pace of growth after a period of recession.
- The second scenario is the U-shaped recovery where the economy bounces back into a lower growth slope than the previous one.
- The third scenario is the W-shaped recovery where the economy bounces back, goes into a slump and then comes back up again – leading to multiple waves of recovery before stable growth.
- The fourth, and worst, scenario, is the L-shaped recovery where the growth is completely lost and the economy remains in a stasis for a very long period of time.
What’s common across all of these recovery paths is that consumer trends are shaping demand, which is having a direct impact on the future of the global economy.
Demystifying The Post-COVID World
In the midst of rapidly evolving market forces, businesses are adjusting to the “new” new normal, embracing change to survive, and sometimes thrive, in this post-COVID era. While some businesses have embraced change, others that lacked foresight, diversification,or relied on gut instinct have paid a heavy price through layoffs, huge revenue losses or even bankruptcy.
While there’s a lot of talk around Post-COVID trends, it is important to distinguish between changes in consumer behavior that are temporary vs. changes that are here to stay. Similar to the stages of economic recovery outlined by Harvard Business Review, consumer behavior can also be mapped into three phases:
- Short-term reversible changes: Similar to the “V-Shaped Recovery” these are trends customers will bounce back from once businesses resume operations and the virus is better understood . It’s the goods and services consumers are thinking, “Once things start getting better, I’m definitely getting back to doing this”.
- Long-term reversible changes: Similar to the “U-Shaped Recovery” this is what customers will take time to bounce back from. It’s when they’re thinking, “It’s probably a good idea to refrain from doing this for some more time”. For instance, it’s going to take consumers some time to trust non-packaged goods. But that doesn’t mean that food trucks are going away forever.
- Long-term irreversible changes: Similar to the “L-Shaped Recovery” are cases where consumers are likely to never go back to the way they used to do things. They’ve accepted the new normal with the “I can’t imagine going without this” thought process. For instance, adoption of contactless payments and mobile ordering were adopted by many out of necessity to avoid infection but have introduced new levels on convenience.
While many businesses have proven to effectively adapt to short and long term reversible changes, the long term prosperity of businesses will rely on their ability to adapt to long-term irreversible changes in consumer behavior.
Let’s dive deeper into phase 3 and look at 8 consumer trends that are going to be hard to reverse post COVID-19.
8 Ways COVID-19 Has Changed Long-Term Consumer Behaviour
Changes in financial stability, , product availability, store operations and social distance are just a few of the many hurdles that have led customers to rethink their priorities in terms of how they allocate their spend across retailers.
#1 Self-Servicing Will Become Commonplace
Convenience to customers has always been the prime agenda of all retailers – social distancing has accelerated the development of self-service models manifold. In fact, BOPIS (buy online pick up in store) and BOSS (buy online and ship to store) gained increasing popularity amidst consumers. According to Adobe Analytics data, BOPIS orders — which include curbside — increased 87% year over year from late February to March 29. Grocery stores, pharmacies and restaurants aren’t the only ones getting in on curbside pickups: Kohl’s, Best Buy and Dick’s Sporting Goods are among the big names that recently added this option, too.
#2 Virtuality – The New Reality
Beyond BOPIS and BOSS, customers are now relying on AR & VR to try out glasses, clothing and even furniture virtually! For instance, IKEA customers can explore kitchen interiors with VR.
In the wake of the pandemic, customers will now prefer to move more of the whole purchasing cycle online than we have ever seen before. Virtually every commodity and industry will need to be prepared to fulfill demand digitally. As per a Coresight report, in 2020, consumer spending on reality technologies is projected to reach $7 billion, and distribution and services spending on the technologies could reach $4.4 billion.
#3 Online Payments
Another major area where COVID-19 has rapidly accelerated development is helping customers move from offline to online payments (ApplePay, PayPal, Venmo). Pre-COVID, online payments were a choice rather than a necessity. Post-COVID, digital and contactless payments have become mainstream.
In response to retailers enabling as many forms of online payment as possible, consumers will embrace the convenience and prefer the online mode of payment across channels, for big and small purchases. As we talk about online payments as a way of life, it’s likely that physical gifts will be replaced by digital gift cards and cash.
#4 Luxury vs Necessity: Shift In Wallet-Share
Due to the pandemic, the items that consumers’ purchase have shifted. In addition to the limited availability of goods due to closed stores, there are two major factors at play here – financial uncertainty and changes in pricing due to shifts in demand. As a result, consumers have spent (and continue to spend) on necessities, while saving up for the future.
With increasing availability of access to luxury goods, COVID will lead to the emergence of 5 customer segments as per a recent EY survey.
#5 Increasing Investments In Health
It’s no surprise that when a pandemic takes over the world, the first thing you would think about is your health and that of your loved ones. Out of the necessities that consumers are spending on, health products are taking up a huge share of wallet. From basic products like sanitisers to immunity boosters, the consumption of health-improvement and sanitary products are becoming a way of life. Germaphobia is not going away anytime soon, and with improved sense of sanitation and hygiene, the demand for such products is unlikely to go down.
#6 Increasing Preference For Local Stores
With limited mobility and spend allocated to necessities, consumers have been relying on local stores for their day-to-day needs. Many are even making a conscious decision to shop local to contribute to their community’s well being during this difficult time. With personalization, high levels of service , convenience and low pricing governing customer loyalty, it’s likely that consumers will stick around to small shops for their day-to-day needs as they develop relationships and experience greater levels of personalization.
#7 Changing Attitude Towards Privacy
As per an EY survey, 53% of consumers in their index would make their personal data available if it helped to monitor and track an infection cluster. From customers guarding every piece of their data to them willingly sharing sensitive information like location – COVID has helped customers build trust in sharing data in a very short span of time. Over time, consumers will be more and more comfortable sharing their data with retailers if they trust it’s used responsibly, which would help retailers get to know their customers on a whole new level and personalize offers and promotions like never before.
#8 Low Tolerance For Errors
COVID-19 gave true meaning to Darwin’s phrase “Survival of the fittest”. Businesses not financially sound to take the pandemic on bit the dust, while the rest pushed harder for share of wallet. With many more options in the market catering to consumer needs (and local stores taking greater prominence than before), higher service standards have led to higher expectations. Unwilling to settle for anything but the best, customers are surrounded by ample alternatives to their needs as they gain access to more and more products.
Errors like delayed deliveries, frequent out-of-stocks or bad customer service are not on the table anymore. Retailers leveraging the opportunity to optimize pricing, promotions & inventory in real-time across their in-store and digital channels will continue to hold a majority of the market share, while the rest will compete for a small fraction of the market.
Welcoming The Post-COVID Retail Era
COVID-19 has forced many retailers to evaluate their business decisions right from the fundamentals, and act fast to keep up with changing market conditions and growing competition at the same time. Amidst all this, one constant remains – customers continue to be loyal to brands that personalize, customize and continually optimize in real-time to meet their demands for the best goods and services.
By harnessing real-time insights and recommendations, Hypersonix has enabled its customers to not just survive the COVID era, but rapidly adapt to thrive in a post-COVID era despite the many changes in consumer behavior.
Curious how we can help your retail business? Let us show you. Request a free personalized demo today.
This blog also appeared on RIS News.