Globally COVID19 has had a significant economic impact, let’s take a glimpse at the scale of the impact
· A 3.2% estimated contraction in global GDP
· 50% work force at the risk of losing their livelihood
· >50% decline in purchase intent across discretionary categories as consumers adopt a savings first mindset.
To counter an impending recession, governments across the world have injected liquidity into the economy. India too announced economic package to the tune of about 10% of its GDP.
Global consumer optimism index about economic recovery is low. European consumers were the least optimistic, US consumers were more optimistic in march, optimism has continued to drop. Optimism in Asian countries has held steady, with China (52) and India (57) remaining consistently. Global E-Commerce adoption is on the rise; Grocery and Digital Entertainment have seen significant uplift
Owing to global lockdown, US, India, APAC all show positive intent to increase online shopping frequency across several categories in the next two weeks, including on groceries, food home delivery, household supplies, personal care, non-food child products, and books/magazines/newspapers. 40-60% of consumers have picked up new tech/digital solutions and intend to continue with these new habits. With most countries still under lockdown of some level, consumers expect to shop more online for entertainment.
Five emerging trends during and post COVID-19:
1. Increased e-commerce adoption: e-commerce is well on its way to become a pivotal part of retail
2. Increased preference for value: consumers have become more conscious about savings, and a shift to financial prudence is expected.
3. Hygiene becomes a key consideration: consumer research shows that brands that are performing better than competition on safety and hygiene measures is showing higher uptake on preference and sale.
4. Offline and small firms continue to suffer a cash crunch: ecosystems will look up to market leaders and seasoned players and firms with strong balance sheets to weather the crisis
5. A stronger corporate affairs agenda: market leaders like Flipkart will lead the way to come up with innovative practices to comply with Government guidelines, yet not lose focus on customer need gaps.
However, what’s happening closer to home?
Interestingly, Indians, vs their counterparts in the US & Europe, are more optimistic but India, as a nation, is edgy and anxious. Consumers are more worried about disruption in their day-to-day living than health issues. Indian resilience, and ‘hacker’ mentality is leading consumers to be more experimental, with some switching to safer/value driven options. Perhaps they are less worried about their health because the virus spread is relatively under control, compared to other countries, and mortality rate among older generations is higher, whereas India is a younger nation.
COVID has accelerated e-commerce adoption; traditionally offline consumers are coming online –
· 30% higher wallet share from existing e-com consumers purchasing more in the same categories
· 16% of existing e-com consumers explored purchases in new categories (Expanded Trialists)
· 11-14% New to online consumers (First Time trialist) in groceries, entertainment, education tech etc
Consumer was always evolving; that process is now playing out faster than anyone imagined
Companies were already struggling to keep up with changing consumer behaviours before the pandemic. Now it’s even more critical for companies to anticipate how consumers will change and respond to specific segment needs. Morphing into four different consumer cohorts.
Now let’s highlight some of the changes in consumer behaviour / changes in customer expectations owing to COVID:
Savings First Mindset: Financial uncertainty triggers a savings-first mindset. Consumers defer spending and exhibit a flight to safer investment assets.
-This is similar to the trend observed post global financial crisis in 2008, household savings showed a stark jump
-During lockdown, as the economic activity came to a grinding halt, the crisis had led to a spike in the country’s unemployment rate to as high as 27.11% from 7% in pre-COVID-19- according to the Centre for Monitoring Indian Economy (CMIE).
-Our consumer work also reflects the impact owing to these developments, about 50-60% of people articulate their fear of either losing their job or experiencing pay cuts. Job losses among the working population would have implications on savings. And in such a situation, a value driven mindset gets accentuated.
-Despite the above, a few interesting habits are emerging within a cohort of consumers:
–Owing to restrictions on mobility and norms around working from home and work at home, mobile has become critical to existence and is the new essential according to consumers.
– while cautious spending is the norm, – pent up demand for certain high ASP categories is expected to build up.
– ‘Revenge spending’ is the overindulgence in retail therapy by consumers who have missed shopping at their favourite outlets thanks to the lockdown. This is an early trend coming in from China, where consumers like to indulge in luxury purchases. For India this trend can swing either ways, Indians (whichever economic strata) believe in saving for future.
Preference for value will be accentuated
While many consumer experts are talking about this more and more now. Our own consumer data shows that “variety at the lowest price” is the primary axis to choose a brand or portal. The lockdown has also resulted in better planning at the consumer end, resulting in fewer grocery panic buys and in larger basket sizes looking for better value per purchase.
Higher digital adoption
-While offline is adjusting to social distancing, hygiene norms, and offline shopping by appointment might become new normal. Meanwhile, in light of proposed six feet distancing, online adoption for categories such as household supplies, groceries, telemedicine, baby care and toys has gone up.
-Adoption of contactless payment and delivery is going up on the grounds of safety and hygiene. This gives an opportunity for Flipkart to strengthen value leadership by innovating on an axis that’s important to consumers.
Higher digital adoption – Overall time spent has gone up
As per the Nielsen BARC SP tracking report there is a 20% increase in human digital minutes per day to 270 minutes
Major apps across Gaming, Video/OTT and Short Video/ apart from videoconferencing saw greater daily usage and downloads.
But as lockdown restrictions ease in future, total time spent may go down, if numbers from China are an indication. During lockdown the country showed a 30% increase in Smartphone time, which went down, yet a net gain of 12% vs pre-COVID-19.
In-home consumption has gone up
Online education has been one of the biggest winners, with schools / colleges abruptly shut down.
Telemedicine: Unprecedented COVID-19 outbreak created utter challenges on traditional healthcare systems in India giving rise to this trend
In such times, how do you really think a brand should talk to its consumers. That will be a great way to wrap this up this piece too.
Firstly, talk to the consumers. Stopping the line of communication because the sales are limited is cardinal error. Be present and be digital. Now is not the time to cut back on market presence. In fact, consumers are more than ever present online and brand needs to grab these opportunities of brand time on various channels. Secondly, Be Big, and do Big – stability and stature can be very reassuring. Example – CSR programs etc. Next, be relevant and be flexible and adapt quickly to the changing needs of the consumers, if hygiene is what they are looking for in home delivery, that’s what they should get in abundance. And Finally, be positive and encourage.