Consumer Shopping Is Changing – Here's Why Small Businesses Should Care
Online shopping has increased dramatically, and that isn’t going to change.
Between stay-at-home orders and social distancing, entire consumer sectors have been forced to buy differently. Several months into COVID-19, online shopping has not only skyrocketed across a number of categories, but consumers’ intent to shop online continues to increase, even as many retailers have already reopened or are planning to do so soon.
Specific categories where continued growth is expected include over-the-counter (OTC) medicine, groceries, household supplies, and personal-care products. Even “nonessential” categories such as skincare, makeup, apparel, jewelry, and accessories show signs of continued growth.
Millennials and high-income earners are leading the pack when it comes to shopping online.
While the migration to online shopping has been more or less universal across most categories, higher wage earners and millennials (roughly 25 to 40 years of age) are the driving force behind shifting their spending to online for both essential and discretionary items.
Gen X has undergone a similar online shift, although not to the same extent as Millennials. Gen Z has focused its shift online to specific categories, including apparel, footwear, at-home entertainment, and food takeout or delivery.
Consumers are switching brands at unparalleled rates.
A staggering 75% of consumers in the U.S. are actively considering new (to them) shopping behaviors as a direct response to economic pressures, temporary and permanent store closings, and shifting priorities. This widespread change in behavior has also been demonstrated by a shattering of brand loyalties, with over a third of consumers trying a new product brand and a quarter of them integrating a new private-level brand. In fact, out of all the consumers who have tried different brands, nearly three-quarters of them intend to incorporate these brands into their routine purchases. Interestingly enough, Gen Z and high earners were shown to be the most likely to switch brands.
Large, trusted brands are among the major beneficiaries of this consumer shift, enjoying 50% growth during the crisis, while private labels have actually outpaced the retail market. Some 80% of customers who started using a private brand during the pandemic express that they intend to continue using it once the coronavirus crisis diminishes.
Brands need to make products readily available and communicate their value.
Availability (both in-store and online), convenience, and value are the primary reasons shoppers have presented for their switching brands.
For marketers, this emphasizes the necessity to rapidly become aware of when consumers are shifting to brands or retailers and then manage the logistics to ensure that products and services are available.
Consumer shopping is changing in response to health and safety concerns.
While some Americans have shown little or no reluctance to go back out to shop, many are still apprehensive. When considering whether or not to return to more “normal” shopping behaviors, hygiene and hygiene transparency have surfaced as significant sources of concern. It’s become increasingly important for stores and restaurants to not only follow hygiene guidelines (thorough cleaning and face coverings for consumers/employees are top priority) but also to effectively convey that these procedures are being followed.
Consumers in the U.S. have already begun to change their behavior due to hygiene concerns. Contactless activities, such as food and grocery delivery and curbside pickup, are rising in popularity. Other hygiene-enhancing technologies are also doing well and are likely to continue to do so, going forward. For example, over three-quarters of American consumers report that they intend to continue or increase their usage of self-checkout in retail post-COVID-19. Millennials and Gen Z are the largest groups shown to be adopting these contactless activities.
Consumer shopping intent is primarily concentrated on essential items.
Around 40% of U.S. consumers have cut back on spending in general, and they expect to continue to economize on nonessentials in particular. This truth reflects extreme discomfort about the state of our economy.
With overall spending declining among consumers in the U.S., intent to spend in essential categories is rising. Even among individuals with higher incomes, where essential items are gaining momentum, intent to buy inessential products is still lagging considerably. As the worst part of the crisis (presumably) subsides, a remarkable resurgence in online spending for nonessential categories such as apparel and footwear is apparent. This is most noticeable among high-income earners and Gen Z.
Consumers want value for their money.
Linked to concerns about the state of the economy is a broadening focus on value – particularly for essential categories. People want to get the things that they need most for the least amount of money.
Americans are spending their time at home differently than before.
People are spending more of their at-home time on household activities, media, and news. Over the past three months, consumers’ intent to eat more meals at home, even post-COVID, has strengthened dramatically. Online entertainment platform use has escalated. Home fitness is thriving, with a notable upswing in equipment purchases and online activity. Even in less-restricted areas, consumers expect to spend more time on at-home activities in the post-pandemic environment.
Americans are worried about returning to regular activities outside of the home.
As the economy continues to reopen, nearly three-quarters of consumers in the U.S. express their hesitancy to resume normal activities outside the home. Going to a hair salon, gym, or restaurant is a concern, but even more so are shared environments, such as public transportation, ride-sharing, air travel, and being in congested places (like large indoor or outdoor events).
The shift in consumer shopping trends varies greatly by consumer segment.
McKinsey & Company has identified five customer segments fueled by optimism, health, and financial dealings, each of them relatively similar in size. These five segments showcase consumer trends to a differing degree and manifest the following characteristics:
- Affluent and unaffected consumers indicate a general optimism about the future, are typically male and make in excess of $100,000 per year. These consumers tend to be able to stay at home during the coronavirus crisis, affording them the opportunity to shop online more often. This group is slightly less sensitive to price than other segments due to greater job stability.
- Uprooted and underemployed consumers are experiencing a sizable impact on both their health and finances due to job insecurity. They’re conservative about how they spend money, with a low degree of optimism about future economic conditions. Unsurprisingly, this group is downsizing to essential items and value, swapping out brands, and shopping online whenever possible.
- Financially secure but anxious consumers are largely 65 years of age and older, and they’re generally cynical about economic conditions post-COVID-19, and this has had a major impact on their buying habits. This group has articulated the biggest need for hygiene transparency, with greater-than-average concerns regarding safety and well-being and anxieties about the ability to obtain necessary supplies.
- Consumers who are out trying to make ends meet are being vigilant about how they spend money and feel that their jobs and employment security have been exceedingly impacted by COVID-19. This group has a substantial representation of minority groups and rural populations. They’re less likely to be able to stay at home, but they’re strongly migrating toward shopping for essential items and greater value.
- The disconnected and retired category includes individuals who are retired, over 65 years old, and have a lower income level than the “financially secure but anxious” segment. Predominantly from the Southern United States and suburban areas of the country, this group has not displayed significant changes in shopping behavior in one way or the other.
What Do These Changes in Consumer Shopping Mean for Small Businesses?
As independent retailers and other small businesses consider these fundamental changes in consumer behavior, they will need to modify their strategies and courses of action to adapt to the new norms.
With these things in mind, here are five recommendations for the continued success of small businesses:
- Go Digital: As an independent retailer, you simply can’t afford not to have a strong online presence. This involves having both a functioning, mobile-friendly website and consistently engaging with customers on the most appropriate social media platforms for your specific industry.
- Revamp Your Messaging to Sync with the Times: If you operate a business where the public is likely to gather, even if socially distanced, you must prioritize hygiene transparency and communicate your efforts clearly and often. As value is prized above almost everything else these days, you have to be able to offer great value to your customers – they’re counting on it!
- Maintain Product Availability: As much as possible, make sure that the products your customers are most in need of are readily available. Some of this is certainly out of your control, as supply chains have been and may likely continue to be interrupted. Talking to your customers to identify their needs will help you prioritize your merchandising.
- Manage Your Corporate Social Responsibility Efforts: Consumers are counting on your business to do its part to operate in ways that enhance society and the environment, instead of contributing negatively to them. This can be hard to maintain, especially if you’re in survival or recovery mode, but it could make all the difference to your ongoing success.
- Develop Practical, Actionable Online & Pickup Solutions: Customers expect to be able to shop remotely and receive goods in a way that makes them feel safe. Integrating ecommerce functions into your existing website and offering curbside pickup for online or call-in orders will encourage your customers to continue doing business with you, and not defect to your competitors.
At HighClick Media, our number one priority is your long-term success. If we can help you update your existing website, build a new website from scratch, outfit your business for ecommerce, or manage your social media communications, call us today at 252.814.2150 or drop us a line here!
Consumer Shopping Is Changing – Here’s Why Small Businesses Should Care A recent study by McKinsey & Company took an in-depth look at how the