An increased demand for quality
In some countries the early stages of the pandemic saw panic purchasing, a desire to stockpile and scarcity of some products as a result. However, supply chains remained largely in place and, according to GfK’s Consumer Panel, FMCG sales for Jan-May 2020 vs 2019 grew across Europe. FMCG sales in markets such as Czech Republic, Austria, Slovakia, Germany and Denmark grew by 15% or more. We also saw an increase of spend per shopping trip for the same period.
In many cases quality, health and indulgence has been winning out as a buying motivator over price. On average across Europe:
Source: GfK Consumer Panel Adaptation Report
Following a period of adaptation, people have sought to make themselves more comfortable with the situation of being stuck at home. This has had – initially at least – three implications.
The first is that people initially have more disposable income as they could no longer eat out, take holidays and attend entertainment and leisure venues. Even with a relaxation of restrictions, opportunities for entertainment and hospitality expenditure remain curtailed in many countries.
Secondly, in worrying times people sought the reassurance of comforting brands and favorite experiences – an urge to self-indulge. Finally, if people are spending more time at home they want their homes to be as perfect as possible. This leads to a rise in home and garden improvement and other home-based projects.
Perhaps surprisingly the demand for quality higher priced products actually went up. It was a chance for advertisers to re-connect with customers in different ways. People had more time and they were interacting with a lot more content that they were are interested in.
Initially this focus on quality may be reassuring to quality brands. There is arguably a shift in budgeting, a replacement of the cost they do not have for entertainment. Nonetheless, the pandemic will inevitably bring economic consequences which will see many homes operating on restricted budgets, so it can be argued that this focus on quality may not be sustainable during a protracted economic crisis.
The pandemic significantly increased people’s reliance on online shopping and home delivery, with many experiencing new delivery categories like grocery for the first time. Again, this may be a case of people adapting behavior initially out of necessity, but seeing long-term benefits. So where do our experts think this leaves the high street and the shopping mall? Is the balance between online shopping and physical browsing and shopping permanently changed?
There was general agreement that businesses will need to adapt to this new reality and reassess the balance between online and offline activity.
Lockdown has sped up the digital transformation process and a lot of businesses were forced to adapt quicker than they were planning. Business that return to being pure bricks and mortar will not be responding to the way digital consumer behaviors are trending
Our experts did not accept that this means the death of the high street and shopping mall. The retail experience will still be valued, but within the context of omnichannel retail.
Meanwhile, the need for retailers to adapt their shop spaces to comply with social distancing requirements may actually be a benefit, dovetailing with a pre-existing desire to streamline and declutter the retail experience.
So the crisis may have accelerated a move to more omnichannel retailing, kick-starting online trading for those lagging behind and could also lead to a permanent re-evaluation of physical retail environments.
We will remember this crisis as the biggest accelerator of digitalization across the media and advertising industry
Decreased traffic into, and reliance upon, city centers may also benefit local high streets, local retailers and local produce, either shopped or delivered locally. Before COVID, GfK was already picking up increased search for regional products, for environmentally-friendly produce sourced locally, and that trend has been accelerated by the crisis.
Digital transformation has accelerated for the very small shop owner, in many cases borne of necessity to survive the crisis. Arguably the technology and the entry into online selling has become increasingly easy for an independent local business like a baker or greengrocer. That means that on the local high street, the small retailer can access new audiences, sell online and be an even more active part of their community, which will give them long-term sustainability. Meanwhile major distribution platforms provide a route for local businesses to reach global markets.
On the one hand the online revolution has created global behemoths like Amazon and Alibaba, on the other it has removed the barriers to entry for local businesses to maximize customer bases. If the COVID crisis marks a move towards more de-centralized, more dispersed workforces and related expenditure as people spend more time in their local areas, that has fascinating implications for the future shape of economies.