(Updated May 21, 2020)
Around the world, many markets are now planning and testing their exit strategies from living restrictions implemented to “flatten the curve” of the novel coronavirus (COVID-19). With no playbook in hand, each government is carving its own pathway to “a new normal,” complete with restrictions, health-safety protocol and changed consumer behaviors, in hopes of restarting the economy while still keeping the virus under control.
Nielsen is tracking these changes and establishing clear navigation beacons for companies trying to understand the changes and plan for what comes next. We’ll be updating this page regularly with the latest news and insights.
Three Exit Scenarios
Factoring in macroeconomic conditions and the resulting impact on consumers’ lifestyle and consumption, Nielsen has identified three exit scenarios as markets lift restrictions and begin to return to a new normal. These horizons build on the six consumer behavior thresholds we identified early in the pandemic and provide a framework for understanding the changing consumer dynamics, as well as the intensity and permanence of that change over time.
Most countries edging forward are looking toward the Rebound horizon, wherein the market successfully manages the virus and re-opens the economy after less than three months of restricted living.
However, how hard the market was impacted, if there are challenges managing the virus after lockdown, and the primary industries driving growth will mean a longer recovery time. Consumer behavior will recalibrate, drastically widening the gap between consumers and countries who remain shielded from the harshness of the economic impact and those who are not.
Australia ranks among the world’s most successful countries in containing the coronavirus pandemic. Early lockdown efforts, along with public adherence to living restrictions and widespread testing have helped keep the number of coronavirus cases low.
Given the current levels of control of the virus spread and the relative health of the economy leading into the event, the market is headed toward the Rebound horizon in the third quarter. But even as the country returns to a ‘new normal,’ it is unlikely consumers’ future routines will revert back to mirror what they did previously.
Since the pandemic, we have seen significant changes in the way consumers in the Pacific have shopped and what we have purchased during this time. For example, in Australia, households added more retailers into their repertoires. This was, in part, driven by out-of-stocks in stores, but as restricted living came into play, ‘local’ shopping also became more prevalent. In the month of March, Nielsen Homescan research revealed that all of this cross-shopping activity resulted in an increase in 30 million shopping trips.
Additionally, a number of category resets are already in play. A return to home cooking and baking has emerged as more consumers have more time on their hands at home and also use it as an opportunity to bring the family together in the kitchen. Consumers are also looking to bring the cafe experience at home, signalled by strong growth in premium coffee options such as ground coffee and coffee beans. And we have seen an increase in hair colourants in the absence of hair salons, while hair styling products have declined as people are going out less.
Some of these behaviors will revert as coffee shops and hair salons begin to reopen. However, some expectations will have fundamentally or permanently changed.
May 11 marks the beginning of a loosening of France’s restrictions, which will happen gradually, based on how active the virus is in a given area. Everyone will be required to wear masks in most places and children will be allowed to return to school, but classroom sizes will be restricted. Shops can open, but not restaurants, bars or cafes. This phased approach is an effort to enable areas least affected to Rebound or Reboot with less government assistance.
Already Bloomberg Economics estimates France’s economy will shrink by 8.6%. France’s diversified economy may help it recover faster, but tourism, aerospace and textile industry-dependent areas, as well as places where the health care system remains under pressure, may be looking at a Reinvent timeframe.
Already this pandemic has re-shaped France’s retail channel with click-and-collect and home-delivery growth booming. In the first week of restricted living, 1.2 million homes tried ordering groceries online, including almost half a million retirees.
Fifty-one percent of French respondents in a recent survey said they are eating more at home. The French are putting more fresh foods in their click-and-drive baskets than they are when they visit brick and mortar stores. While this trend isn’t expected to last post-pandemic, in the week ending April 11 charcuterie grew 169%, beans, 159%, and fruits 148%. And while sales of pasta and rice are normalizing, flour is still growing at 150% in the week ending April 11.
Interestingly, organic sales growth have been higher in these categories, a sign that French consumers see these products as higher quality. This was true especially in regions with higher incidences of families, and overall, organic products have been growing much faster than conventional goods.
“The health crisis we are going through will put a strong focus on health products, as we can already see in public opinion in Asia. And it will push distributors to go even further in the assortment of fresh products, to respond to increased consumption at home (fewer trips, more telework, less frequentation of restaurants). Two phenomena that could well benefit organic in the categories where it is still to be developed.”
Daniel Ducrocq, Retailer Services Director, Nielsen
Starting on April 14, Italy slowly began to ease its restrictions beginning with small shops, and as of May 4, construction and manufacturing were allowed to resume. By May 18, retailers and museums are expected to reopen followed by the possibility of bars, restaurants and hair salons in June. Schools, however, will remain closed until September.
As one of the first countries to go on lockdown and GDP growth of just 0.8% prior to the pandemic, Bloomberg Economics predicts a 13% contraction. While the goal is to return to “normal” by the third quarter, recovery is likely to look uneven throughout the country depending on how hard the region was hit by the virus, if there are flare ups and the primary industries supporting the region. Tourism dominant areas will likely experience a Reinvent timeline, while manufacturing-dominant regions may be able to see a Reboot.
As lockdown measures lift, there has been a slow return to brick and mortar stores, and pandemic pantry spikes have evened out, although sales of cleaning categories remain high.
On Monday, April 13, Spain’s Madrid region began lifting its strict lockdown restrictions, sending 300,000 nonessential workers back to work, mainly in manufacturing and construction, gradually moving the country towards Threshold 6 (Living a New Normal). On May 2, people were allowed to go out for walks and exercise followed by the re-opening of certain businesses, such as hairdressers. Bars and restaurants were allowed to serve pre-ordered takeaway.
In April, the Bank of Spain estimated that the country’s GDP could fall between 6.6% and 13.6% this year due to the coronavirus. According to the National Statistics Institute (INE), household spending fell by 7.5% in the first quarter. With tourism an important economic driver for the country and current unemployment rate of 14.4%, much of the country is looking at a slow recovery.
Even as the country lifts restrictions, health-safety sales growth remain high, antiseptic alcohol sales have climbed in the last few weeks landing at 355.4% in the week ending April 26, just under liquid soap at 388%.
Consumers are finding a “new normal” in their grocery behavior. E-commerce continues to grow, reaching 77.8% in the week ending April 12, while supermarket and hypermarket sales growth numbers have returned to pre-pandemic levels.
Retailers that set themselves apart by prioritizing the health of their customers, reducing touchpoints, and expanding their delivery and pick up services, will be able to clearly differentiate themselves during a pivotal moment.
The end of April marked the beginning of many states lifting restrictions after lockdown or partial shutdown. About half of the states have reopened various businesses, with a handful to follow in the coming days. Given the divergent policies across the states, it’s likely that some regions will Rebound more quickly than others, which will likely face a protracted recovery into the Reboot or Reinvent horizons.
Still, the country as a whole faces a long road ahead economically. In the first quarter, the GDP shrank 4.8%, while predictions for the second quarter are ranging from -38.8% to- 65%. The International Monetary Fund (IMF) is predicting that the U.S. will account for a 31% decline in the worldwide GDP this year.
Seven-in-10 Americans (71%) expect the spread and intensity of the virus’ impact in their country to increase, and almost a third, 28%, suspect that the situation will last six months or more. With 54% of U.S. respondents saying they are cooking more at home, pantry and center-of-store items are experiencing the strongest growth. Purchases of frozen and shelf-stable fruit grew at 3-5x the rate of fresh fruit in the year-to-date period ended April 4.
Pantry items such as powdered milk and dried beans have leveled off some, but are still high at 39.1% and 67.4%, respectively in the week ended April 25. Health-safety products continue to be important, and consumers are taking interest in these items where stock has been replenished. Hand sanitizer, for example, has regained momentum up 420% in sales growth in the week ended April 25.
We see evidence of a homebody economy emerging, following similar trends we’ve seen in Asia. The total volume of TV and COVID-19-related conversations on Twitter alone reached nearly 9 million since the start of 2020 in the U.S.—a staggering 40X increase between January and March amid the peak novelty of the coronavirus pandemic. With most kids still at home for the foreseeable future and limited childcare options, 300% more kids 6-11 and teens 12-17 are watching TV at mid-day (12 p.m.).
Consumers are certainly leveraging e-commerce to safely gain access to essentials. The channel has seen a 46% increase in buyers since the pandemic. In store purchase frequency, on the other hand, has taken a nosedive since the pandemic, but basket size continued to increase in the week ending April 18.
We’re monitoring these patterns closely, as they are still evolving. And we will continue to track how markets around the world begin to emerge into a new normal.
INTERESTED IN More MARKET-SPECIFIC INSIGHTS ARound THE IMPACT OF COVID-19 ON CONSUMER BEHAVIOR?
Responding to Consumers’ COVID-19 Concerns
As more markets begin to emerge from lockdowns, there are some early signs that our consumer habits will be forever changed by COVID-19. Three critical accelerators will fast track long-term behavioral shifts. We’ve identified a few ways businesses can prepare for shifting consumer demands as markets move through the six thresholds.
Emphasize Quality and Efficacy
Throughout the thresholds, consumers will be seeking greater assurance that the products they buy are free of risk and of the highest quality when it comes to safety standards and efficacy, particularly with respect to cleaning products, antiseptics and food items. In the short term, this intensified demand from consumers will require manufacturers, retailers and other related industry players to clearly communicate why their products and supply chains should be trusted. In the longer term, and dependent on the eventual scale and impact that COVID-19 has on consumer markets, it may speed up a re-think on how shoppers evaluate purchases and the benefits that they see as the key factors to consider.
Be Transparent About Local Origins
More than ever, shoppers want to understand the supply chain, with complete transparency from farm to factory to distribution, and they want details of the measures being taken to assure their safety. Promoting a product’s local origins could help manufacturers and retailers assuage some consumer concerns. A Nielsen survey on disloyalty last year found that global consumers report being heavily swayed by origin: 11% of global consumers said they only bought products manufactured in their country while an additional 54% “mostly” bought local products.
With millions working from home and digital connectivity taking even more of a hold on everyday habits, consumers will have greater motivations and fewer perceived barriers to more actively seek technology-enabled solutions to assist in everyday tasks like shopping. Companies that can leverage technologies—by meeting changing consumer demands online, enabling seamless interactions through direct-to-consumer offerings and enhancing consumer experience with augmented and virtual realities—have the opportunity to earn consumer loyalty well after consumers’ concerns subside.