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Understanding the Two Sides of Every Sale
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Understanding the Two Sides of Every Sale

Canadian shoppers continue to readjust their need states as they search for convenient, cost-effective ways to meet new needs amid rising COVID-19 cases and increased stay-at-home orders. In doing so, constrained and insulated consumers alike have become omnichannel super-users and are leveraging e-commerce in different ways to adjust for the rise in in-home consumption. 

Globally, the pandemic has been a boon for fast-moving consumer goods (FMCG) sales; it has also boosted adoption of digital and true omnichannel shopping, with in-home consumption rising significantly as a result. Total FMCG sales increased by 11% during the 45-week period ended Nov. 7, 2020, as consumers funneled their out-of-home spend into in-home spend. The grocery industry has seen record growth, but the pandemic is fueling economic worry as well as FMCG growth.

In July, the Conference Board® Global Consumer Confidence Survey, conducted in collaboration with Nielsen, found that 86% of Canadians had adopted a recessionary mindset—revealing that consumers of all types—not just those financially affected—are looking to save. While the effects of the pandemic have been widespread, the impact has been different for insulated and constrained consumers, which speaks to a polarization that needs to be top of mind for manufacturers and retailers looking to engage with varied consumers experiencing different realities.

Exploring the Polarizing Trends within FMCG

The abundance of time spent at home has generated a variety of new self-serviced needs. Insulated and constrained consumers are both driving FMCG growth, but these groups are behaving very differently in terms of how they shop and why—and the different behaviors each open specific doors of opportunity for retailers.

Much like different consumers browse at different rates, constrained spenders report spending more time browsing online to decide where to shop for groceries compared with insulated consumers, meaning they are more engaged. Given the online channel’s added convenience in comparing products and prices, shoppers willing to search for the best deal (those being largely from the constrained segment) will become even more invested in using e-commerce to source grocery purchases in the ‘new normal.’

In-store shopping has perhaps never looked more different. Constrained spenders, while more financially affected by the pandemic than insulated spenders, continue to drive FMCG sales growth—both in and out of physical stores. While these shoppers increased their overall spend by 6% during the 30 weeks ended Sept. 26, 2020, they made significantly fewer trips to physical stores (-15%) during the 21 weeks ended Aug. 1. To make up for the decreased frequency, constrained shoppers are loading up when they do shop, growing their baskets by 30% per trip. Despite the bigger baskets, constrained shoppers aren’t stockpiling the way we saw earlier in the year, which means that every purchase they make holds specific significance at the time of the purchase. With a homebody mindset, however, insulated consumers tend to keep more essentials on hand than during normal times, with total FMCG spend up 16% during the aforementioned period.

Both insulated and constrained consumers are contributing to substantial FMCG growth, however, insulated shoppers increased their spend at a much faster pace.

Constrained shoppers are far less optimistic than insulated consumers in terms of future financial outlook, and they’re carefully stretching their dollars as a result. That means they’re seeking out stores with lower prices and ditching premium name brands, while the most preferred saving strategies among insulated consumers include stocking up on sale items and shopping within retailer loyalty programs. Although retailers and manufacturers may perceive constrained consumers as less loyal (given their penchant to seek out value over other factors), these shoppers carefully plan where and why they shop. 

Now, where exactly are Canadians shopping? When looking at how share of wallet has shifted across major brick-and-mortar formats, grocery stores gained dollar share of trade throughout the pandemic, while mass, warehouse, drug and dollar stores experienced declines. When considering where to shop, August Homescan panel data reveals that two-thirds of constrained Canadians report being highly influenced by promotions and lower prices overall. In an effort to save time and money, constrained shoppers shifted some of their share of spend from grocery to mass merchandise and club retailers during the 21 weeks ended Aug. 1, 2020, as they sought out one-stop-shops. 

Insulated shoppers increased their share of spend within grocery store formats, while constrained consumers increased their share of spend within mass and club retailers.

Retailers can attract constrained shoppers through promotional sales, economy package formats, value brands and e-commerce tools that allow shoppers to compare product attributes to find the best deals. To engage insulated shoppers, retailers should focus on enhancing the homebody experience through premium product offerings and capitalizing on loyalty programs to invoke repeat purchases. 

E-commerce Spearheads Growth 

Completely blowing brick-and-mortar growth out of the water, online shopping spiked by 113% during the 30 weeks ended Sept. 26, 2020. Importantly, constrained and insulated spenders drove this massive growth at equal rates. In looking at category purchasing, however,  constrained and insulated spenders increased their online food purchasing at different levels (+123% and +186%, respectively), but for both groups, total food had an equal online dollar share, meaning constrained and insulated consumers are leaning into online food at identical rates. 

Comparatively, insulated spenders are more likely to use online channels as a means to order goods that they then pick up at a physical store (i.e., click-and-collect and curbside pickup). On the other side of the fence, constrained consumers are more likely to opt for home delivery. There still is a high potential for the constrained segment to adopt and use in-store fulfillment methods, as 27% of these shoppers fulfilled online purchases via click-and-collect or curbside pickup according to Nielsen’s Homescan Panel Views Survey conducted August 2020. Constrained shoppers will continue to further shift their spend from brick-and-mortar channels into the online space as they become increasingly motivated by sales and utilize the channel to compare high-value, low-cost items.

As Canada confronts increased living restrictions and higher COVID-19 infection rates, traditional grocery retailers will continue to operate with region-specific restrictions, which means that consumers in certain regions will need to cope with longer lines to get into stores this winter. For those unwilling to brave frigid temperatures and the risk of infection for fresh food, consumers of all types will increase their online spend across categories and make omnishopping an even larger part of their routines. Regardless of their ability to spend, constantly reminding shoppers about promotions, offering exclusive in-app savings and implementing loyalty programs across channels will entice consumers to shop. As consumers become more entrenched in their omnichannel habits, expectations will follow suit and require retailers and brands to create equivalent experiences both online and offline.

Methodology

The insights in this article were derived from the following sources:

  • Nielsen Homescan Total Tracked Sales for the 21 weeks ended Aug. 1, 2020 and 30 weeks ended Sept. 26, 2020. 
  • Nielsen Homescan Panel Views COVID-19 Moving Forward Survey, August 2020 – Canada
  • Nielsen MarketTrack National All Channels: 45 weeks to Nov. 7, 2020
  • Nielsen & Conference Board Survey – Q1 vs Q2 2020 Canada 
  • Statistics Canada Pre-COVID February 2020 vs. July 2020