Businesses thrive on stability and predictability, which simplify long-term planning. But since consumer habits are constantly changing, business owners must be prepared to take advantage of shifts in the market, from trending tastes to technology-driven disruptions. There is no denying the COVID-19 pandemic was a disruptor; businesses and consumers were forced to adapt to restrictions imposed on them. Now, as we begin to emerge from the crisis, there are two questions business owners must ask: How did consumer behavior change during the pandemic? And, which of these changes in consumer behavior are likely to having staying power?
We begin with an unscientific reflection on what we noticed in our own behavior and that of our colleagues:
- A long hiatus from dining in restaurants and going to the cinema, live theatre, concert venues, or sporting events.
- An increase in shopping online, streaming entertainment, and exercising at home.
- Greater scrutiny of the source and hygiene practices behind the products we purchase
- Less emphasis on brand loyalty, and more concern over availability and price
Our changing habits seem to track well with the general population, according to happi.com, which recently condensed a McKinsey study of changing consumer behaviors. Not surprisingly, digital shopping was up, especially on essentials such as OTC medicine, groceries, and household supplies. Consumers are trying new products at higher rates, and in many cases the switch is linked to availability and convenience. Premium brands are being hurt as consumers look for greater value. Consumers are becoming much more hygiene conscious, so contactless merchant services are on the rise.
Around 40 percent of U.S. consumers have reduced spending with heavy cutbacks in nonessentials. Americans are spending more time at home on activities they used to do away from home, and more than 70 percent are apprehensive about resuming regular activities outside the home. McKinsey also notes that consumer behaviors vary according to how affluent a person is, that person’s age, and whether they are working, unemployed or retired.
We think we can safely disregard changes based on a tightening of the purse strings. As the economy opens back up, people will have more money to spend and will feel more comfortable spending it. We have observed this ebb and flow through countless business cycles. Premium brands may struggle in the short term, but quality will once again be a major consideration in purchases.
COVID changes have largely benefited companies that market at-home activities, such as the exercise bike Peloton, streaming entertainment, and various online conference services and learning courses. As homeowners continue to cocoon, consumer products that make cocooning more comfortable are bound to do well:
- Home exercise equipment
- Home entertainment systems
- Consumer electronics
- Home furnishings
- Housewares and appliances
- Home security systems
- Health and beauty products
Certain forms of entertainment should rebound. The experience of live music, theatre and sports cannot be replicated in your living room. However, many consumers already have lavish home theatres for an authentic cinema experience without the high prices and hassles of going out. So, goodbye multiplex. Of course, this was a downward trend that existed before COVID and simply accelerated.
We also believe that hygiene will be a concern that lingers. Activist consumers who scrutinize a company’s ethical profile, labor relations, carbon footprint, and other “global citizenship” criteria are likely to make purchasing decisions based on a company’s hygienic practices. Consumers who have health issues or live with vulnerable family members will also keep up their guard.
But, what about products and services that have traditionally relied on brick-and-mortar outlets to get their products into consumer hands? One could argue that once restrictions are lifted, consumers will be eager to go out and about and touch, hold and assess products physically at point of purchase. This would certainly prompt levels of online shopping to ebb slightly. But the long-term trend is towards acceleration of online shopping, due more to demographics than COVID. Currently, about 32 percent of the world’s population is Generation Z. These young people were raised on the Internet and many have not yet entered the workforce, so their full impact is yet to be felt. It would be wise for businesses of all stripes to recognize that “demography is destiny,” and increase their direct-to-consumer efforts.
The coming Direct to Consumer (DTC) revolution will initially favor established conglomerates such as Kraft Heinz and PepsiCo that already have name recognition, consumer loyalty and immense resources. But many consumers value innovation and novelty, and everyone loves an underdog story. DTC can level the playing field for entrepreneurial companies who have been locked out of the large retail chains and big box stores. Thus, the post-COVID market is likely to be more dynamic, as consumers, freed from force of habit, begin to explore new possibilities.