Consumer Behavior Changes and Impact on Consumer Products & Services Retailers

Zadar Agency

The Covid-19 pandemic has accelerated digitalization, forcing both consumers and retailers to adopt digital channels.

Retailers with established online presence and e-commerce infrastructures have reaped the most benefits from this forced shift. This is reflected in e-commerce taking a much bigger share of the total retail market during Q2 and Q3 of 2020, a 44.5% jump from Q2 of 2019.

Before the current crisis, growing and maintaining a digital presence was established across certain industries, and customers were well versed in interacting with brands online, but it was not a necessity. Today, with the decrease in footfall, businesses without a solid digital presence are losing both revenues and market share to competitors.

To explore the impact of changes in consumer behavior retailers, and opportunities they are bringing retailers, we asked two questions:

  • How is consumer behavior changing, and what are the implications for retailers?
  • What can retailers do to stay relevant and sustain growth?

What we analyzed

This briefing summarizes a study including data from 8 countries (UK, US, Italy, France, Germany, Spain,  Australia, China) and 6 languages. Survey data includes ~120k interviews per country using programmatic sampling via mobile phones.

Social data includes ~763 million posts from blogs, forums, Reddit, and social media platforms that appeared between February 19 and August 23. News has been excluded to better isolate consumer opinion but media engagement metrics have been included.

How is consumer behavior changing?

Rise of fear over financial security. 50% of consumers rank financial security in there top 3 priorities, after personal health and health of family and friends,

Decreased retail footfall.

The way consumers get information has changed. Consumers are accelerating the adoption of digital channels; Most first-time customers (~86%) are satisfied/very satisfied with digital adoption and the majority (~75%) plan to continue using digital post-COVID.

Online shopping will stick. A majority of respondents expect to shop online more after COVID-19 than they did before.

High-income spending has recovered. High-income earners are in the lead when it comes to shopping online.

Shift to mindful shopping. Budgets will be reduced this year – 54% of consumers are shopping more cost consciously and likely to continue doing so.

Loyalty shake-up. Consumers are forced to try new things with a preference for value.

Consumers have high expectations for businesses. 67% of consumers agree or significantly agree that – Companies will ‘build back better’ by investing in longer-term, sustainable, and fair solutions.

What does this shift mean for retailers?

Rise in online competition. Platforms such as Shopify and BigCommerce lowered the barrier of entry to e-commerce, leading to an explosion of small brands and e-marketplaces

COVID-19 will likely trigger a recession. Currently, 65% of European consumers surveyed said they were very or extremely concerned about the economy.

Rising competition for deals and discounts to attract consumers.

Reduction in consumer demand.

Negative cash flow and revenue losses due to decreases in sales volumes.

Loss of market share due to a weak online presence or value proposition.

Potential business closures. 43% of businesses had temporarily closed, and nearly all of these closures were due to the effects of COVID-19.

What can retailers do to stay relevant and sustain growth?

Rethinking channels and ecosystems. 169% is the expected future increase in e-commerce purchases from new or low-frequency users (The huge shift to e-commerce is likely to continue).

Creating visibility into a fast-changing environment. Consumer media consumption has increased considerably and preference for socializing virtually as increased across age groups with a focus on social media and digital channels.

Staying in front of consumers. Some companies are signaling that they will maintain their pre-crisis ad spending and communication activities in response to COVID-19, but they may be in the minority. Recent industry surveys indicate that most brands intend to cut their media budgets, and some will even go quiet until the crisis ends.

Reimagining services to meet evolving customer needs. Demand for local products – and local brands – is growing. The ability to quickly tailor existing offerings to consumer needs will be essential.

Establishing a nimble operating model. Because behaviors are evolving, customer treatment strategies, messaging, and offers must also change.

Predicting consumer demand. Data and analytics have become more critical than ever to accurately forecast demand patterns.

Zadar Agency is a demand generation and conversion optimization agency focused on helping retailers solve industry-defining challenges in; marketing, sales, strategy, and technology to drive better results.

This report aims to give a brief overview of our findings regarding consumer behavior changes and their impacts on consumer products & services retailers. We believe that digitalization and the implementation of new approaches will lead to better business results.

We welcome opportunities to work with like-minded organizations in the pursuit of this goal, and requests regarding this document should be directed to [email protected].