Changing behavioural trends that shape the next-normal consumer

COVID-19 has had a devastating impact on the health and well-being of people worldwide. One of the most striking features of the pandemic is how far-reaching its impact on consumers' lives has been. We took a closer look at what it means in eight areas to better understand how consumers' habits and preferences are changing.

Home

During the Lockdown, the home has transformed into a multiverse. It's where we work, eat, play, and socialize with our families and friends. Even though overall consumption has decreased, the percentage of categories designated for home has increased. In the months of social isolation, consumers' net intention to participate in a variety of activities at home shifted, with increases of 54 percentage points for cooking, 30 to 40 percentage points for entertaining at home and 22 percentage points for DIY. Similar shifts were observed around the world.

Shopping

Overall, consumer spending will continue to decline - in the United States, personal consumption is expected to fall 12 percent over the next two years, not returning to pre-crisis levels until 2023-24. What we buy has changed in all categories. We are buying less cosmetics and more flour. The pre-pandemic explosion of small brands has given way to a strong preference for global A-brands. After years of growth, out-of-home consumption has all but disappeared; many of us do not even go to stores anymore. In many markets, the surge in e-commerce has compressed the equivalent of several years of growth into just a few months.

Work

For many workers, the office is now in the living room. For the cohort that was still able to work during the pandemic, most work takes place remotely and digitally, with a sharp increase in the use of digital tools for collaboration. The number of daily users of Zoom rose from ten million to 200 million in three months, and the number of paying customers of Slack has doubled. At the same time, there has been a huge increase in unemployment, which is expected to reach about 15 percent in the United States in the third quarter of 2020, according to the results.

Health and wellness

Public health and uncertainty about how long the pandemic will last became top concerns for consumers during the lockdown, with 68 percent saying they were very or extremely worried. Self-care has climbed up the priority list for most consumers. Again, digitization is playing a bigger role as the use of e-pharmacy and e-medicine increases. Of consumers who had to cancel medical appointments during the lockdown, 44 percent resorted to telemedicine options, and online searches for telemedicine increased more than ninefold.

Learn

Learning and studying inevitably went virtual, driving the adoption of new tools. The number of users of distance learning services increased by 120 percent. The shift of learning from outdoors to indoors has blurred the lines between learning and leisure.

Entertainment

Consumers stuck at home are spending more time, but likely less money, on their entertainment as the trend toward digital options accelerates. Downloading gaming apps has increased by more than 30 percent year-over-year, while 45 percent of consumers say they are using more online streaming services at home. Netflix added 16 million new subscribers in five months, while Disney+ nearly doubled its subscriber base to about 50 million - a feat that took Netflix seven years to achieve. Popular out-of-home activities are trying to adapt to this new reality: Nascar and the NBA are introducing online product offerings, J. Paul Getty Museum is offering virtual tours, and Metropolitan Opera is streaming performances.

Travel and mobility

Consumers are staying home in droves. Tourism has all but ground to a halt, and air travel is down 90 percent overall. At the same time, there is a growing preference to avoid public transport and densely populated transport hubs, which has reduced demand for mobile consumption. While it could take years for international travel demand and supply to return to pre-crisis levels, domestic travel could pick up much sooner as consumers head off on summer holidays.

Communication and information

Overall, media consumption has increased across nearly all channels (see sidebar, "The Digital Transformation"). Forty-three percent of consumers watch more television, 40 percent use more social media, and 28 percent listen to more radio. Online news readership is up 39 percent. What has not increased? Print media, where the ongoing decline has worsened with a 33 percent drop in readership.

The general shifts toward new behaviors mask significant differences.

While headlines tend to make sweeping statements about our new digital world, the reality is that the pace at which we reach the next normal and the path to get there will be anything but uniform. The forces driving behavioral change are likely to continue at varying strengths over the next six to 24 months, with frequent starts, stops, and reversals.

Whether the new behaviors fade or persist until the next normal depends on a number of factors. We found that there is considerable variation in the adoption of new behaviors in four main areas:

Consumer Experience

Are the new behaviors engaging and a good experience? Are they more satisfying than the behaviors they replace? The answer to these questions has a significant impact on whether the new behaviors are retained. In Italy, for example, 60 percent of consumers shopped online during the crisis, but less than ten percent found the experience satisfying. This suggests that Italian consumers will make limited use of e-commerce in the long term. In China, on the other hand, adoption is high, and a high percentage of consumers say they will continue to shop online after the pandemic.

This reality is also evident in the healthcare sector. While the use of e-pharmacies and e-physicians in the United States has doubled or tripled during the crisis, only 40 to 60 percent of consumers express an intention to continue using these services. Providers who want to retain these customers need to address these numbers and identify where services are inadequate. By testing solutions, they can improve the chances that consumers will continue to use their services after the crisis has subsided.

Country

Although the trends are similar across countries, they vary in strength. Overall, four country archetypes can be identified:

• Temporary setback. In China, the economic impact of COVID -19 is likely to be just another obstacle in the path, and therefore trends such as trade restriction or a decline in discretionary spending will be less severe than elsewhere. Because China recovered relatively quickly from the pandemic, it has been able to move faster than other countries. Trends already in place, such as a preference for relatively little physical contact and high levels of hygiene when shopping, or the heavy penetration of digital media into all areas of life, will accelerate. But because a large number of consumers in China were already using digital and remote channels before the pandemic, the change in digital usage rates will not be as big as in other countries.
• Big shock. In developed countries like United Kingdom and the United States, the economic shock was large. As was the case during the Great Recession of 2008-09, we expect severe long-term cuts in consumer spending and a significant decline in trade. The acceleration of e-commerce is largely expected to continue due to a well-developed delivery infrastructure. Health and safety concerns are strong in the United States and at United Kingdom. Data seems to indicate that health and safety awareness will also increase significantly in the long term.
• Big Shock, Lower Digital Adoption. In developed countries in continental Europe, such as France, Germany, Italy and Spain, the economic shock will be as large as in United Kingdom and the United States, leading to a decline in discretionary spending. In addition, countries with businesses that depend on foreign tourism revenue, such as fashion houses in Paris or Rome, will be disproportionately affected. E-commerce acceleration in continental Europe is unlikely to catch on as quickly as in United Kingdom, the United States, or China because many of the new entrants have not had a satisfactory experience due to relatively poorer delivery and online engagement infrastructure.
• Digital Acceleration. The impact on developing markets such as India and Brazil is less clear and will largely depend on how well these countries manage the crisis in the coming months. However, it is very likely that COVID-19 will accelerate the trend towards digitalisation, albeit from a low base.

Consumer Segment

While many consumers have adopted new behaviors overall, there are significant differences between generations and cohorts. For example, Generation Z, which had high levels of digital adoption prior to COVID -19, is unlikely to see a significant increase, but the survey shows that they are much more likely to be economically impacted by the crisis due to their disproportionate exposure to self-employment and the sharing economy in particular. Income differences also appear to lead to pronounced behavioral differences among consumer segments. The wealthier have not felt the economic impact as much as other cohorts and will have more resources for digital acceleration than people living paycheck to paycheck. The segments will not be the same in all countries. For example, consumer sentiment data shows that retirees in the United States will not feel the economic impact as much as retirees in China.

Values

Behaviors based on personal values, such as sustainability or the desire for personal interaction, will take hold differently in the long term depending on local infrastructure and other conditions in different countries and regions (see figure). Some behaviors that seem entrenched now may regress. For example, if restrictions are relaxed, will there be a backlash in rejection of remote experiences and a drive for physical contact? The emphasis on health and hygiene that has led to an increase in single-use plastic has reversed some of the earlier focus on sustainability. Will this continue, or will consumers see COVID -19 as a wake-up call, an indication of the potentially catastrophic consequences of climate change?

Businesses need to rethink how and where they engage with consumers.

With the World Health Organization (WHO) stating that COVID -19 will be with us for some time, businesses must prepare for a rapidly changing environment that may fluctuate between blackout and transitional phases. As consumers go through these cycles, the new trends may wax and wane, but for the most part they will persist until we are finally past the transition phase.

As these new behaviors become entrenched, companies will need to adapt to fundamentally different consumer preferences and behaviors in terms of how consumers get their information, what and where they buy, and how they experience the product or service. Many companies will need to increase their investment in insights and plan to keep up with the changes. Companies that engage with consumers should focus on the key points at which they connect with their customers:

How consumers receive information

With many consumers switching brands, it is critical for marketers to raise awareness of their brand to improve its consideration. At the same time, the flight to online sources for information and entertainment has increased the importance of digital channels. If you want to reach consumers, you have to meet them where they are. And that is increasingly the internet.

What consumers buy

Given health concerns, both shopping and going to the checkout must be as touch-free as possible. Consumers concerned about infections have already made a decisive shift away from cash to cashless systems and credit cards. Getting shoppers to buy requires an omnichannel experience that includes drive-through, curbside pickup and other delivery options that address the new focus on health, safety and convenience.

We have also seen customers migrate to established big brands for trusted sources. With uncertainty likely to persist, companies should focus on renewing and building consumer trust through excellent shopping experiences and the way they engage with the community during this challenging time.

Where consumers shop

Online shopping has increased dramatically, but a large portion of purchases are still made in stores. The new hierarchy of needs will put health and hygiene at the top of the priority list. Retailers should rethink store design and opening hours to make it safe and quick to get in and out. They also need to adapt to a different type of customer, one who shops less frequently and consumes less overall, but buys more per purchase.

Store product ranges will also need to evolve to reflect the new economic realities. Value for money will become increasingly important, as will demand for different price ranges. High growth categories are likely to include homewares and health, while demand for high discretionary products will most likely decline. There will be more opportunities for both large national brands and private labels.

How consumers experience

As consumer preferences change rapidly, retailers and other consumer-facing businesses will need to offer a strong feedback loop. This means improving their ability to gather data and qualitative feedback to stay ahead of trends.

Given the long list of actions consumer-facing businesses need to take in the short to medium term, planning ahead is essential. A brief diagnostic will help companies identify their biggest opportunities and risks and prioritize the appropriate actions.

As the world makes the slow transition from coping with the crisis COVID -19 to recovering and getting back on track, it is clear that the lockdown had a profound impact on people's lives. The period of contagion, self-isolation, and economic uncertainty will change consumer behavior, in some cases for years. With many of the longer-term changes still in the making, companies have an opportunity to help shape the next normal if they act now. Three conclusions emerge from our efforts to paint a holistic picture of the new consumer after COVID -19:

• COVID-19 is changing consumer behavior in every aspect of their lives. While consumers were retreating at home, new digital services were being adopted at a rapid pace. In addition to growing health and hygiene concerns, the economic recession, and the associated decline in consumer spending, the magnitude of change in people's lives is staggering.
• The general shifts toward new behaviors mask significant differences. Consumer behavior is likely to fluctuate until we reach the next normal. How long it lasts will depend on a number of factors, including satisfaction with new experiences, demographics, infrastructure and the severity of the recession.
• Businesses need to rethink how and where they engage with consumers. They should prepare for structural challenges and upheaval in several areas. Overall consumption is shrinking, the composition of the shopping basket is changing significantly, and consumers are changing the way they receive their information.