Lars Fiedler, Partner and Senior Solution Leader of Marketing Solutions at Periscope By McKinsey, looks at how changes in consumer behavior during COVID-19 are forcing a re-imagining of retail.
As the response and recovery to the COVID-19 pandemic continues, it has become clear that the crisis has ushered in a new reality for consumers and retail sector.
The blow has been swift and vast, upending lives and livelihoods and upsetting economies. Some of the most dramatic effects have been to consumer behavior—how people buy, what they buy, and where they buy it.
Colleagues at McKinsey revealed that, in a matter of 90 days, we vaulted forward ten years in US ecommerce penetration, with similar effects being seen across the globe.
Immersed almost exclusively in the immediacy, convenience, availability and safety of digital experiences during lockdown, consumers reset their expectations and preferences, and forced retailers to change their trajectory, priorities, and operating model.
Yet even as an economic downturn has put increased pressure on retailers, this generation- shaping event has opened up entirely new fronts in the competition for customers.
McKinsey research has shown that in past recessions, companies that invest in and deliver superior customer experience during a downturn emerge far stronger than their peers once the economy rebounds, producing shareholder returns three times larger than average.
Ecommerce spending has surged during the shutdowns, as the appetite for digital and contactless ways of shopping has intensified.
To better understand how the changes taking place in consumer behavior and priorities might impact retailers and the approaches taken by marketers charged with promoting those brands, Periscope By McKinsey surveyed more than 2,500 consumers in the US, the UK, France, and Germany to understand how consumer behavior is changing.
Conducted both prior to and during the shutdowns, it looked at what changed and what trends will likely stick in the coming months. The subsequent report “Retail reimagined: The new era for customer experience” shows several core themes have become evident among consumers.
Rather than sticking to familiar patterns and brands, consumers have embraced change amid great uncertainty. In the four countries surveyed, 40 percent of consumers said they tried new brands or made purchases with a new retailer between March and June 2020.
Loyalty was particularly vulnerable in the US, where 46 percent of consumers made the switch, followed by 44 percent of their UK counterparts.
Consumers’ top reasons for making the switch across all four markets included competitive pricing and empathetic retailers that support their employees during the pandemic with initiatives such as increasing wages, giving extra sick leave, or paying for lost wages.
New concerns such as safety and hygiene are now top of mind.
More than 50 percent of respondents say they want stores to follow guidelines to help keep shoppers and employees safe, such as the installation of plexiglass at the checkout, the use of masks, and availability of hand sanitizers, while 59 percent say it’s important for stores not to be too crowded.
Also, frictionless experience is now even more important. Consumers being able to find what they’re looking for quickly and easily has increased in importance in every country (by 14 percent in the UK, 11 percent in the US, 10 percent in Germany, and 7 percent in France) since March, and was ranked among their top three browsing priorities.
This ability was especially valued by 65 percent of US consumers, 59 percent of UK consumers, 52 percent of German consumers, and 47 percent of French consumers.
Additionally, 52 percent of shoppers questioned in early June stated that fast checkout was an important part of a great purchasing experience.
Whether it’s digital tools such as screen browsing, easy mobile payments, or ordering online with seamless curbside or in-store pickup, shoppers clearly want technology to elevate their in-store experience. The flight to digital and increased customer expectations have created new challenges for how retailers serve their customers.
Yet, in the first run of our survey, more than 35 percent of shoppers reported zero exposure to even the most talked-about or basic in-store technologies such as digital screen browsing and mobile or contactless payments.
In the second run of the research in June, consumers were then asked which forms of communication/experience they would like to see offered by retailers in the near future.
The top three findings in each market revealed a clear difference in cultural preferences:
As leaders plot how they will bounce back, they also need to look beyond the immediate challenges and issues. Now is the time to engage in critical long-term planning to quickly recover revenue and accelerate future growth.
Key considerations for marketers include:
With customers eager to try other brands and stores, this is a once-in-a-generation chance for retailers to recapture and win back customers. To create dynamic loyalty programs:
This is a real moment not only of changing loyalties and a shifting leaderboard, but an opportunity to really connect with consumers in new ways as they reformulate their habits and decision journeys.
While disruption and fierce competition are certainly nothing new for retailers, the pace and intensity of COVID-19-related change and their effect on consumers is unprecedented.
This is a pivotal time where we’re seeing not only changing loyalties and a shifting leader board, but an opportunity to really connect with consumers in new ways as they reformulate their habits and decision journeys.
As retail leaders plot how they will bounce back, they also need to look beyond the immediate challenges and issues. In parallel to quickly recovering revenue, it is critical to engage in long-term planning and accelerate future growth.
Retailers and their marketers need to be able to move at speed, and those able to will be well-positioned to take advantage of a re-imagined world of retail when the recovery comes.
