Retail Matters - July 2020

How will COVID-19 change shopping behaviours long-term?

At what point does the 'new normal' just become normal? When COVID-19 first hit, many companies hunkered down and hoped business as usual would quickly resume. It's become clear this isn't a viable approach. This isn't just because the impact of coronavirus has been far greater and long lasting than some might have expected. It's the fact that people have adapted quickly to the restrictions that it has placed upon their daily lives. Recently a McKinsey survey found that more than 70% of UK shoppers expect their routines to be impacted by COVID-19 for more than four months. Four months is a long time to adopt new behaviours and patterns. It's long enough for these behaviours to become habit - for the 'new normal' to become the normal. As such, retailers need to be aware of how shopping behaviours may be shaped long-term by COVID-19.

Ecommerce will to continue to grow

One of the side-effects of coronavirus is that ecommerce uptake has increased hugely. This is an example of COVID-19 accelerating trends that were already in play. Ecommerce's share of the retail market has been growing year on year, but coronavirus has fast forwarded this as lockdown has necessitated a mass shift to online. Sainsbury's has reported that it took 25 years for it to get online sales to be 7% of total sales, but COVID-19 saw this rise to 15% in just seven weeks. AO.com's chief executive has said that the pandemic has seen five years' worth of online shopping behaviour take place in only five weeks. This shift isn't just among those who already shopped online to some degree. COVID-19 has also given those who have never shopped online before a push to do so. Now that they've done the hard part of setting up accounts, learning how to place an order, setting up payments and so on, it's likely that many of these new shoppers will continue to opt for online for some of their shopping needs. A recent KPMG survey reports that 47% of UK customers plan on shopping as they are now - even after the pandemic is over. The longer it goes on for, the more ingrained customer shopping habits will become. As such, retailers can't rely on these ecommerce journeys to shift back to offline stores. They need to incorporate this growth into their long-term strategies.

Working from home may change impulse shopping

Working from home has become the norm during the pandemic, but it might also be the future. Barclays' chief executive Jes Staley and WPP's chief executive Mark Read have both said that they anticipate offices in the future will be less crowded with flexible working part of the new normal. Meanwhile, tech giants like Google have extended their work from home policies until at least the end of 2020. Facebook and Twitter have said that staff can continue to work from home permanently if they wish. If working from home becomes commonplace, then we can expect it to impact shopping behaviours. Fewer people commuting means that retailers will miss out on the impulse purchases made throughout the course of a working day. This might be the morning coffee on the way into the office or grabbing a sandwich at lunchtime. Likewise, pre-Covid a lot of workers would drop into supermarkets on their way home to buy ingredients for dinner. These journeys disappear if they are no longer travelling to work. There's already evidence of this in action. John Lewis reported that single, meal-focused shops at Waitrose are down over 70% on last year. Kantar has shared data that shows that visits to supermarkets have dropped but average basket size was higher than ever. While past data would highlight transport hubs and sites with a high density of nearby workplaces as ideal locations for retailers, a shift to working from home may make these places less desirable. Therefore, retailers may need to re-examine their portfolios to find new ways to bring customers into stores, rather than relying on proximity. This might be the addition of services from personal shopping, to click and collect, or via events and experiences. The flipside of this is that shoppers will be more intentional with their shopping. Rather than passing by a store on their lunchbreak or commute and popping into grab a birthday card or something for dinner, shoppers will have to plan those journeys. As such, retailers need to focus on finding ways to fulfil those needs.

More conscious shopping decisions

Intentional shopping won't just be about planning shopping journeys in advance. Shoppers are also becoming more conscious about what they buy as a result of the pandemic. One of the earliest impacts of COVID-19 on the retail industry was the division of it into essential and non-essential. Essential retail was classified as the things we truly need such as food, household staples and healthcare. The ability to move around was also included with companies like Halfords and local bike shops remaining open. The concept of essential retail even extended to Amazon with the company restricting non-essential products at its warehouses as it tried to keep up with demand. Elsewhere, retailers were arguing the case for everything from video games to books as being essential goods. This essential/non-essential debate has made many people reassess their buying habits and how 'essential' many of their purchases actually are. The result is that many have pledged to be more conscious in their shopping and to not just keep buying things because they can. Conscious consumerism also means that shoppers are increasingly choosing to shop locally. While this is in part driven by the fact that people are only meant to travel if essential, which means many are restricted to the stores in walking distance, consumers are also aware that supporting local businesses keeps them in business. Equally, consumers have been keeping a close eye on how different businesses have responded to the coronavirus crisis. Those who are considered to have not 'done well' may find that the effect on their reputation has long lasting consequences. With customers reassessing what they buy and where they buy it from, retailers are going to have to work harder than ever to convince them of the value of their offering. As such, services and other interactions that aren't focused on purchasing something may become key to retaining customer loyalty.

Customer behaviour isn't static

One thing COVID-19 has made clear is that customer behaviour isn't static. It's constantly evolving based on changes to the world around us. The current pandemic has thrown this into sharp relief by causing sudden changes en masse. Retailers have done an admirable job in adapting to the situation, but it's clear these aren't short-term changes. Not only that, but the current changes in behaviour won't necessarily reflect the way customers shop in five years' time. As we've seen with coronavirus, we can't predict the future except to say that it will be different. The retailers who learn from the impact COVID-19 has had on customer behaviour and ensure they keep adapting going forward, are the ones who will be around to see it.

Top tips

• With 'window' shopping and impulse purchases unlikely to return to the pre-COVID 19 levels for some time, it will be important to consider new ways to drive footfall in-store, such as- Customer experiences;- Sharing your space with other brands that complement your offering; or- Changing part of the store to click and collect
• It will be important to stay close to customer preferences, seeking feedback where possible and continuing to learn about their behaviour(s) to help you align your business accordingly
• Consider how you can tailor your offering to these new behaviours - we've seen clothes shops now offering a 'working from home' range to help stay relevant to customers during lockdown
• Use social media platforms to engage, promote and strengthen your brand, whilst also learning more about your customers and what competitors are doing in the market