The Shift in Consumer Shopping Behavior

COVID-19 has accelerated the shift in shopping behavior in such drastic ways that the retail industry is now at a turning point. A retailer’s success now hinges on whether they can adapt the way they do business to the new normal or if their antiquated practices will cause them to fall behind. We discuss what retailers need to do to respond to such industry changes in part 2 of this article: A Retailers Guide to the New Normal. In this article, we will dissect what consumers are doing differently to provide a broader perspective on 2020’s retail trends.  

It is not news that the retail industry has been one of the hardest-hit sectors along with the travel and hospitality industries. In April alone, there was a 16.5% decline in retail sales, the largest in a single month ever in U.S. history. Consumers, in general, are shopping less frequently than pre-COVID — about a 17% decrease in frequency — while 20% have stopped non-essential shopping altogether and 42% have become more selective in what they purchase (KPMG).

Unsurprisingly, shopping at brick and mortar stores has fallen dramatically, dropping by 39%, while large retailer websites have, contrastingly, experienced a 24% increase in use. Large online shopping services like Amazon jumped 35% in usage, higher than any other purchasing option. Regardless of these online gains, KPMG has predicted that net spending will be reduced by about 22% over the next 6-12 months, largely because 1 in 5 consumers say they are more inclined to stay home rather than go out and return to normal life.

As expected from increased traffic, spending has surged online, up 30% in the period of March to mid-April alone. Importantly, the coronavirus has triggered the growth of e-commerce by the equivalent of ten years in three months according to McKinsey, fundamentally shifting the way consumers shop. Motivated by the safety, convenience, speed, and general availability of shopping online, consumers have changed the way that they are buying, forcing retailers to shift their business models to fit the situation. According to the Boston Consulting Group (BCG), even those who had never shopped online jumped on the bandwagon as some “14% of US consumers bought fashion online for the first time during the pandemic.” Clearly, e-commerce will continue to be essential to retail at least until the pandemic is over.

Another frequently discussed shift from pre-pandemic norms is the consumer shock to brand loyalty. McKinsey found that 46% of U.S. consumers either tried new brands or switched brands completely. There are various reasons for this, chief among them was simply what was available and in stock, especially early in the pandemic. Consumers also based their purchases on how retailers supported their employees at the onset of the pandemic or if they repurposed their facilities to help with COVID-19 related initiatives.

This shock to loyalty has not been even however, in fact, it has overwhelmingly benefitted big brands that grew 50% during the pandemic. Private labels have also enjoyed a boost, though it may be more long-term than immediate. A McKinsey study found that “some 80 percent of consumers who started buying private-label products during the pandemic indicate that they intend to continue doing so even after the COVID-19 crisis subsides.” This emphasis on convenience and accessibility for consumers is not likely to dwindle during the pandemic as consumers continue to expect desired products to be immediately available.

Because of COVID, health and safety have also become a top-3 concern for consumers. A McKinsey study found that consumers now see safety as both critical and a basic expectation. At least 50% of survey respondents who are shopping in stores expect to see visible signs of cleaning and safety such as requiring masks in-store, hand sanitizer stations, plexiglass dividers where applicable, etc. Interestingly, consumers also emphasized the importance of quickly finding what they are looking for so as to spend as little time as possible around other people.

Finally, the ability for consumers to use technology to make their shopping experience more convenient and safer has risen in importance. McKinsey reports that mobile payments have moved up 80% in importance to consumers since the pandemic began. Additionally, services like mobile app orders have increased by 56% since the shutdowns started. Rather unfortunately though, many retailers have not caught up with this trend — 35% of respondents to McKinsey’s survey said that they had not seen any of the in-store technological options that are becoming popular. Despite retailer’s slow adoption of technology, tools such as pre-ordering online or digital screen browsing remain highly important.

Exploring the new shifts in consumer shopping habits will help brands and retailers determine which areas of their business need revisiting or beefing up. Addressing their online presence along with safety and technology in-store will help retailers stay competitive during, and after, the pandemic. With these in mind, our next article will turn to more specific measures brands need to consider in the upcoming months.