Navigating the Three Phases of Covid-19 – Phase One “The Consumer”

By: Bob Dearing, CFE

Many people view Covid-19 as a singular event that sooner or later will be eradicated by a miracle vaccine that will return our lives to pre-pandemic status.  While I do think we will eventually get a vaccine that may provide us with a sense of security, that may be months, or longer, into the future. The damage, however, has been done and we will feel the effects of Covid-19 well into the foreseeable future.

So, what does this all mean and how should we view the logical progression of what we can expect in the coming days, weeks, and months. There is little doubt that everyone’s daily life will be altered in one way or another. The pandemic has left its mark and the solution cannot be viewed as a singular event since it has set off a chain of issues that are all interconnected. Each of these must be addressed both singularly and collectively to begin to establish the “next normal.” Not an easy task from anyone’s perspective. Let’s look at the three parts of the Covid-19 triad and how each is connected to and dependent upon the other. The issues are:

• The Consumer
• The Company
• The Employee

There is really a fourth “The Election” that is clearly a wild card that will and is impacting behaviors. The effect at this point is largely psychological but over time will become more physical as the cycle moves forward. But for now, let’s start with the first issue:

The Consumer 

We are all consumers and Covid-19 has changed behaviors across every part of our daily lives. A recent survey by McKinsey & Company, “US Consumer Sentiment During the Coronavirus Crisis,” has identified five key consumer behaviors that are likely to have a lasting impact. The behaviors are:

• Shift to value and essentials: With recovery expected to take more than six months only essential categories are showing a net spending intent.  Most discretional categories are still -20% to -40% pre-Covid-19

• Flight to digital and omnichannel: More consumers intend to continue to shop online. Shopper growth expected to be 15% to 30% in most categories. Contactless services have seen an increase during the crisis and consumer intent to continue these services ranges from 40% to 65%.

• Shock to loyalty: Over 77% of Americans have tried either new brands, places to shop, or shopping methods during the crisis, primarily driven by value and convenience. Most of the consumers that tried new ways of shopping intend to continue post-Covid-19.

• Health and caring economy: Consumers are looking for use of masks and physical barriers when deciding where to shop in-store and the importance of this visible safety sign is increasing. Company actions are increasing in importance (e.g., care that companies provide to employees) as a buying factor since the crisis started.

• Homebody economy: 68% of Americans are not engaging in “normal” out-of-home activities and are waiting to see indicators beyond lifting restrictions. Americans have adopted at-home solutions across categories with an intent to continue post-crisis.

What do these behavior changes mean?

The five behaviors identify the consumer overall but do not recognize the specifics of how and why people are shopping the way they do. Let’s put it in perspective. The pandemic has basically changed the world as we know it. Covid-19 has forced people to live differently, buy differently, and in many ways, think differently. Things are changing in real-time. People are forming new habits now that will forever change how and where we shop and where we live and work.

How has the consumer changed?

What people are buying has changed across categories. Essential purchases are growing, led by grocery items and personal hygiene items while non-essentials, like cosmetics, are lagging. Consumers are shopping fewer times but purchasing more per visit. E-commerce continues to expand and has condensed what normally would have been multi-years of growth into a short period of months. Omnichannel distribution has become a necessity. Many people have all but given up out-of-home consumption like restaurants, salons, shopping for non-essential items and even visits with doctors have given way to telemedicine.    

What companies need to do.

Businesses must become much more agile in their approach to the consumer. The Covid-19 impact on the consumer has been broad and deep and understanding the needs of their customer base is critical to a company’s success. Online shopping has surged, requiring companies to rethink how they connect with the consumer. They must understand how their consumers are reacting and find ways to develop customized or personalized strategies to meet their needs. Overall consumption is shrinking, and the consumer is undergoing significant changes in the mix of their product needs. Consumers are looking for ways to save money and are much more likely to seek out alternative shopping options, primarily for basics. McKinsey reports that once consumers have tried a new shopping behavior (positive experience), 72% intend to continue with that source. One other important statistic, 77% of consumers have tried a new shopping behavior.      

The next phase.

This is part one of Navigating the Three Phases of Covid-19. Please follow us for Part two and Part three coming soon.   

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