As we continue to go through COVID-19 and now, a recession, it’s becoming more clear every week that things just keep changing at a very fast rate.
One of the most important things we can do to thoughtfully manage our companies while weighing risks and committing to next steps is understanding consumer behavior and sentiment evolution through the pandemic and recession.
Every week going forward for the foreseeable future, SIA, in partnership with the Channel Mastery podcast, will be providing an update on this for you, our valued members.
The reports and articles we’re pulling from are created for the broader business community. Know that we’re adding our “take” to ensure it’s specialty-focused and relevant to you. Please let us know if you are finding value in this, we want to create the best information possible for you to create a go-forward plan that you can ‘nimbly’ follow for your specialty business.
1. First up is a summary from a report published May 12 by McKinsey:
This report offers context on global consumer optimism; the higher the optimism, the higher the spending expectations:
- European consumers were the least optimistic about the prospects of their country’s economic recovery at the beginning of the crisis, consistent with these countries’ lower consumer sentiment measures before COVID-19.
- Optimism has remained low in recent weeks. Even Germany’s optimism—while higher than that of its European neighbors—has fallen slightly since late March.
- Optimism in other European countries, including Spain and Italy, ticked up slightly in the last survey.
- Optimism in Asian countries has held steady, with China and India remaining consistently more optimistic than the rest of the world and Korean and Japanese optimism remaining at low levels.
- Although U.S. consumers were more optimistic in the middle of March, optimism has continued to drop and is now 6 percentage points below its level in mid-April, despite the reopening of some parts of the country.
It’s no secret that consumer confidence is down, aligned with unemployment rates and pay cuts. The biggest issues we’re all facing include: no horizon line to the end of the pandemic; the global reach of both the pandemic and recession, travel stoppage, and the changing behaviors of consumers. We’ll be monitoring all going forward, and we’re preparing Town Halls to address the impact of travel and consumer confidence for the coming wintersports season, in the next couple of weeks. Overall, many leaders in specialty are continuing to plan for the worst, and hope for something a little better.
2. A peek into what our new consumer / shopper personas may look like, from Forbes, May 18
(Note, this article was written by a CMO in the Gen Z age group, it’s a great read):
- New Customer Personas:
- The pandemic is likely to produce two distinctive behavioral archetypes: people who have embraced a new lifestyle and those who have largely remained unchanged.
- The emergence of the new behavioral group is going to have a transformative impact on the future of brands. Inevitably, there will be winners and losers. Some brands will need to figure out how to win back old customers with new mindsets. Whereas, other brands will use the opportunity to steal market share by appealing to consumers newly formed lifestyles.
- Regardless, marketers should have these two distinct archetypes in mind when updating their customer segments.
This is a rally cry for all of us to get intimately connected with our own target shoppers, and work to understand how their online and physical decision journeys will continue to shape up within our categories of product, and with like-minded brands. The best way to do this is to ‘go to your audience.’ Round up your best customers and ask to have a conversation with them, and ask them if they’d be open to continuing to connect with you as you get closer to the 2020-21 winter season. Additionally, you can survey the most actively engaged segment of your email list, but keep in mind, a human connection is what specialty is known for, so working to get on an actual call with them (ZOOM of course) is a better choice. Also, it’s important to note that we can understand how consumers are being ‘trained’ by watching Amazon, Target, Nordstrom, and other major marketplaces and retailers right now.
3. A new EY Future Consumer Index report, published April 23, offers consumer segments viewed through the lens of the pandemic and recession:
- Four segments reflect how consumer behavior can relate to age groups, family or employment status:
- Cut deep: These consumers are mainly more than 45 years old and have seen the biggest impact on their employment status. Almost a quarter have seen their jobs suspended, either temporarily or permanently. Seventy-eight percent of them are shopping less frequently, while 64% are only buying essentials. Thirty-three percent feel that brands are far less important to them in the current climate.
- Stay calm, carry on: These consumers do not feel directly impacted by the pandemic and are not changing their spending habits. Just 21% of them are spending more on groceries, compared with 18% that are spending less.
- Save and stockpile: This segment shows particular concern for their families and the long-term outlook. More than a third (36%) are now spending more on groceries, while most are spending less on clothing (72%) and leisure (85%).
- Hibernate and spend: Primarily aged 18-44, these consumers are most concerned about the impact of the pandemic. However, only 40% of this segment say they are shopping less frequently. And while 42% say the products they buy have changed significantly, 46% of them say brands are now more important to them.
- This report also future-casts the segmentation through and post-COVID-19:
- “Keep cutting” (13.1%),
- “Stay frugal” (21.7%)
- “Get to normal” (31.4%)
- “Cautiously extravagant” (24.7%)
- “Back with a bang” (9.1%).
OUR TAKE: Make sure to read this Harvard Business Review article from April 2009, because a lot of this information sounds familiar. Point being, humans have tried and true responses to recessions and this article brings a modern view to that in the future casting segment. While this is all still ‘crystal ball’ we need to have a foundation of sorts to make decisions from. Just know that decisions today may very well need to be changed. Also, this episode of the Channel Mastery podcast covers human psychology and the pandemic and recession, from the COVID-19 content.