Looking at the occurrence of infections worldwide and the measures taken by governments in different countries to prevent and protect the population, Nielsen identified three distinct timelines for global market regeneration. This framework describes what lifestyle and consumer behaviors will look like in each of the three scenarios. It is obvious that the length of the lockdown has an influence on the overall economic development, the financial situation of the individual, the labour market, social life and the consumer climate.
If the transition to the ‘new normal’ progresses rapidly – by the end of third-quarter 2020 – consumers and companies will return to old habits, patterns and behaviour to a large extent (rebound). However, if consumers spend a longer period of time in a lockdown situation, say until the end of fourth-quarter 2020, the economic, financial and social consequences will be greater and new strategies will have to be developed to revive consumption and the economy (reboot). If the restrictions last 12-18 months, governments will be forced to compensate for the severe economic, financial and social consequences and companies will have to fundamentally rethink their product portfolios to meet changing consumer demands (re-invent).
We believe the Netherlands will transition from the lockdown phase to a ‘new normal’ by the end of third-quarter 2020. According to our framework, which states to what extent consumers will resume old habits and at which points we presumably perceive a change in consumer dynamics, we see several areas in which an impact can be expected:
1. CHANGES IN SPENDING PATTERNS DUE TO LOWER DISPOSABLE INCOME
With the increased financial pressure and job insecurity, many consumers will redistribute their spending or saving in certain areas. On the basis of observations in previous crisis situations and consumer surveys, we believe that changes in spending patterns will particularly affect the areas of fashion, takeaway, travel/holidays and replacement purchases.
2. CHANGED SHOPPING BASKETS IN THE FMCG SECTOR
In the current situation, where many consumers are still working from home or wanting to work from home more in the future, we expect that daily food and fresh food will continue to show higher growth rates in the coming months, and buying fresh goods naturally requires more frequent, smaller purchases. In addition, the topic of hygiene will of course continue to play a role, so that corresponding product groups will continue to grow disproportionately in the future. We also assume that product groups that are perhaps more likely to be in the “luxury/pampering” segment will have a chance of additional sales, true to the motto “if I have to save money elsewhere, then at least I’m treating myself to something special at home”.
3. CHANGED PRICE MECHANISMS
From a recent consumer study pre-COVID-19, we know that 57% are aware of the prices of the products they usually buy. 28% of shoppers mentioned that they changed stores based on which one they thought had the best promotions during that trip.
This certainly highlights an increasing price sensitivity, which will only increase as we enter what the Dutch Bank predicts to be an upcoming economic crisis in the Netherlands. Reviewing your pricing, promotion and loyalty strategies will be vital to respond to these changing consumer needs.
4. CHANGED VALUES
Some retailers and manufacturers at home and abroad have reacted quickly to the stricter hygiene regulations with new ideas. Electronic entrance controls, contactless deliveries by driverless vehicles, new apps for safer shopping and disinfection of shopping trolleys are just a few examples. In addition, due to increased health and hygiene awareness, consumers are increasingly focusing on “healthy” products with special ingredients that have a positive effect on the immune system. Especially for personal care and home care categories, attributes such as hygiene and health will become the new standard. Manufacturers must prepare themselves for this in order to (continue to) retain customers. Consumers are often prepared to pay a higher price for home care products with claims such as “immune system strengthening” or “for the protection of the family”.
The importance of product claims will vary by category, and some will have a stronger resonance than others. Therefore, it is critical for brands to understand which claims are appropriate for which products to ensure that they 1) meet consumer needs and 2) potentially have the ability to charge a higher price if they can differentiate their offering in the marketplace – which will be more attractive to consumers on unchanged incomes who can afford this “luxury”.
5. ORIGIN PREFERENCES
Prior to the pandemic, the importance of buying local was already quite prominent within FMCG. In 2019, almost 40% of shoppers looked at where a grocery item was produced, favoring either local/regional products, or products produced in their “home country.”
During and after the pandemic, the demand for local origin products, be it for transparency, trusted ingredients, or just to “support local” will only grow in importance for consumers.
In terms of the e-commerce channel development, there is no doubt that e-commerce has seen a massive adoption rate as a result of the pandemic. What is interesting is the amount of shoppers that state they’ll continue purchasing groceries on online platforms after the pandemic ends. 24% of respondents surveyed said they would continue to buy their fresh food online (up 5% from their pre-COVID shopping behavior), 26% will continue to buy packaged food (up 6%) and 27% reported that they would continue to buy their beverages online (up 7%).
How purchasing intentions transform into action, however, will depend essentially on consumer satisfaction with regard to simplicity of product selection, delivery period, delivery flexibility, delivery quality, and pricing. We’ll dive deeper in how shopper sentiments have changed in our upcoming syndicated report, “Shopper Shifts to a New Normal.”