Firstly, thank you again to all the retailers who continue to work so tirelessly to support our basic needs as we confine ourselves to our homes.
As the number of COVID-19 cases continue to grow, we are full force analyzing and monitoring how the virus is impacting our customers and the retail industry (we work with more than 20 clients globally) The impact of COVID-19 falls in to three phases, each one with its own unique dynamics and challenges for retailers.
Phase 1: Pantry Stocking
As the government communicates information, cautions, and begins to introduce various recommendations and restrictions, customers begin to increase their purchases of health specific products.
As restrictions get tighter, pantry loading and panic buying quickly follows. Retailers during this phase have taken heroic measures to keep products in stock and keep their customers and staff safe. Successful grocers have in turn, focused their advertising on conveying that they are open and ready to help rather than pricing and promotions.
Target reported that in March their overall store sales increased more than 20%, with sales in essentials like food and beverage surging more than 50%.
We have also seen that e-commerce sales and transaction volume has grown by several hundred per cent during this period. Different regions and countries have been affected by COVID-19 at different times but the customer buying behaviour has been very consistent. Toilet paper is the most well-known example but there is much more to the story as retailers carry 100,000 SKUs in brick-and-mortar stores, not to mention online.
Phase 2: Restricted Living
After the Pantry Stocking period and as customers start to gain trust in the grocery infrastructures, shoppers settle into a phase of Restricted Living.
A new mix of products including items beyond essentials quickly evolve. Concern around personal finance, the inability to shop many outlets combined with time to study who are offering the best deals drive the importance of advertising. Sales are still up in this phase relative to pre COVID-19 but starting to decline in both sales and transactions.
It is important that retailers should not let their guard down at this juncture as the competition for the customer comes very much back into play and the retailers who are out there with the right item, price and message are gaining new customers and share of wallet.
Phase 3: The New Normal
We obviously haven’t moved past COVID-19 at this point so predicting what the ‘new normal’ might be is a bit of conjecture, but based on common sense, history, the data and science, we can reasonably expect that:
- Retailers who can demonstrate efficient, clear health and safety protocols for customers while shopping in store will be preferred.
- More customers will go online as shown by the massive growth of delivery services like HelloFresh.
- Increased demand for click and collect.
- Retailers with a large geographic footprint will need to have different strategies by region and substantial implications for their supply chain.
- New products and innovations will quickly emerge.
- Customers and retailers will most likely be facing a recession and as a result promotions with the right price and product mix will be more important than ever.
- Reducing cost and increasing automation will be even a more important focus for retailers.
- Retailers leveraging science, data and AI will be a table stakes.
Over the next couple of months, I will be blogging about what the science and data is telling us about these and other topics relevant to retailers, so please continue to check in.
Daisy continues to support our clients from our virtual offices and homes. We are committed to continuing the same level of support and doing our part to help you navigate your businesses in these uncertain times.