Online purchases have risen across geographies, with increases of six to 10 percentage points in most product categories by June 2020 versus the outbreak of COVID-19, according to a survey by UNCTAD and Netcomm Suisse eCommerce Association. The increase was stronger in emerging markets, reflecting consumers’ lower familiarity with online channels pre-pandemic than in advanced markets.
COVID-19 has accelerated the scope and reach of the shift to digital, from shopping and eating to entertainment, financial services, fitness, education, and more. In a survey this year, 58% of US consumers indicated that they were spending more money online; 27% had subscribed to at least one new digital streaming service and 42% had purchased more via mobile devices. Downloads of apps for business and video conferencing have increased sharply. In Spain for example, downloads of the Houseparty app for March 2020 were 2,360 times the weekly average in Q4 of 2019. Grocery ordering apps have been similarly popular.
Online purchases have risen across geographies, with increases of six to 10 percentage points in most product categories by June 2020 versus the outbreak of COVID-19, according to a survey by UNCTAD and Netcomm Suisse eCommerce Association. The increase was stronger in emerging markets, reflecting consumers’ lower familiarity with online channels pre-pandemic than in advanced markets. In China, orders at Alibaba’s online supermarket Hema increased by 220% in February 2020 compared to the previous year.
All age groups have begun to adopt a “millennial mindset” in which they rely on friends and digital channels to learn and buy, rather than traditional information sources.
`Digital adoption is no longer age-related but has become mainstream across generations. A recent report on the impact of Covid-19 on consumer sentiment and behavior by Mckinsey & Co, which was surveyed in 12 countries, said that 91 percent of Indians changed their shopping behavior due to the crisis. Many urban consumers are moving online for their shopping needs increasingly working from home and reluctant to deal with crowded public places.
We expect digital adoption to accelerate as ongoing constraints on mobility incentivize people to learn and more extensively use these channels. A recent survey in China found that the majority of consumers who used digital channels intended to continue even after COVID-19. Changes will probably be permanent among younger generations. The UNCTAD survey indicated that younger age groups (16–44 years) had a stronger preference to continue digital habits adopted during COVID-19 than older generations.
However, digital adoption is no longer age-related but has become mainstream across generations. All age groups have begun to adopt a “millennial mindset” in which they rely on friends and digital channels to learn and buy, rather than traditional information sources. Falling incomes along with low optimism about the economy are making Indian consumers spend more on essentials, such as grocery and household supplies, and reducing spending on categories like apparel, footwear, and travel.
The survey indicated that about 61 percent of Indians are more mindful of where they spend their money, and 45 percent are shifting to less expensive products. Globally, one in five consumers who ordered their last groceries online did so for the first time.
There are noticeable changes in consumers’ purchasing behavior in addition to the shift online. Surveys have found consumers in several regions worldwide shifting more to value-based purchasing, which prioritizes obtaining maximum value for the consumer for the money spent. Consumers have focused on essentials and reduced discretionary spending. However, consumers in China have increased their spending on travel, while consumers in India increased spending during the festive and wedding seasons. Another observation is the shock to loyalty. Consumers try out new brands when their normal purchasing pattern is disrupted, and if these yield better value there is a high chance that they will stay with a new brand. Finally, there has been higher love for local observed: a desire to shop local reflected in both products bought (for example, locally sourced, artisanal) and how consumers shop (for example, supporting community stores).
Finally, consumer views about retail space cleanliness and employee and co-shopper hygiene are likely to play on retail shoppers’ minds for some time to come. Stepping into a mall lift will be a mental challenge for many. Mall managers would have to ensure that such fears do not persist for long by constantly making health and hygiene assurances.
To summarize, the following lifestyle changes have become prominent:
- Increased digital adoption: people shifting to digital platforms for day-to-day needs.
- Change in mobility patterns: less use of public transport, more remote working, etc.
- Change in purchasing behavior: move to value-based purchasing and online shopping.
- Increased awareness of health: wearing masks, increased hygiene, healthy eating, etc.
- Changes in interpersonal behavior: increased divorce, increased pet adoption, etc.
Will this spell the end of Offline Retail?
As much as we claim that the New World Order will be ruled by online buying patterns, we also realize being innovative with different store formats can become a differentiator for brands competing in similar categories.
Omnichannel retail is a multichannel approach to sales that focuses on providing a seamless customer experience. For instance, an omnichannel retailer can differentiate itself from online aggregators by transforming a few of the stores into experience zones to offer an experiential buying experience. We will see more of such strategies being deployed by brands on the lines of omnichannel furniture retailers like Urban Ladder and Pepperfry, but in more diverse sectors.
In these times of crisis, retailers are increasingly using physical stores as fulfillment centers to turn inventory over quickly and cut losses. Omnichannel retailers, who innovatively utilize their physical store space will inevitably be the winners of this new world order.
To sum it up, we all knew the world was turning digital. A new order was being established. But for all we know, the pace has suddenly increased exponentially. It is at our doors, knocking down the traditional walls right now, as opposed to by 2030 as we all were expecting. This New Order will require a paradigm shift in strategy from brands. Only the agile ones will survive. Only the ‘Truly Omnichannel’ ones will prosper.