Half truth of slow sales: Changing shopping trends amid coronavirus is not all bad news

Updated: Jun 30, 2020 4:28 PM

Consumers are trading down (and Up!) 50% of urban consumers are looking to reduce spends over the next few months, but, growth prospects are there in other categories.

FMCG sector saw a 34% decline in April driven primarily by traditional channelsFMCG sector saw a 34% decline in April driven primarily by traditional channels.

By Kanika Sanghi, Nimisha Jain

“Every truth has two sides – it is as well to look at both, before we commit ourselves to either” — Aesop. Have consumers developed new habits and behaviors in this crisis? The answer we all know is a resounding yes. Changing habits is hard and painstakingly slow – but, the current combination of an enormous health scare combined with economic uncertainty has forced significant changes in consumer behavior. There are many “obvious” trends being spoken about – consumers will trade down, they will go online, they will spend on health. And while all of these are true – when one digs deeper, one realises that this is only half the truth. There is an other half of these trends which is equally important to recognize and understand in order to draw the right implications.

Consumers are trading down (and Up!) 50% of urban consumers are looking to reduce spends over the next few months – they will reduce purchases, postpone spends and trade down to lower priced offerings. But what this hides, is that there are categories where consumers are still trading up and buying better products and brands. Household care is a great example. Komal, 38 year old home maker in Indore, said that earlier when the maid used to wash vessels, she used to use Vim bar. But now that she is doing it herself, she wanted something better for her hands and has therefore moved to using Vim liquid. Staples is another category where we have seen large proportion of consumers (30%) saying that they are looking to buy better products than earlier primarily driven by greater need for health and quality assurance.

Consumers are going online (and to their local stores) COVID has given a huge boost to e-commerce. BCG’s survey suggests that 50% consumers are likely to increase online shopping in the coming months. However, what is also true is that consumers are equally flocking to local stores for some categories. They are avoiding large format stores and malls, but the volumes at small stores are showing much greater resilience. In our survey, 30% of consumers said that they will increase their spends at local stores whereas over 50% said that they will cut down spends at malls. In many categories e-commerce will certainly grow exponentially – but in some others, where touch and feel, familiarity and immediate gratification are key needs, local stores perform much better than online.

This is an opportunity for e-commerce models to evolve to meet these needs – but if they are unable to, the local store may be the ultimate winner. Consumers have stopped sharing (but will look for alternate models). The shared economy was one of the biggest pre-covid consumer trends – across many categories including mobility, living, and even extending (as rentals) to apparel, furniture, appliances. In 2019, 17% of urban consumers had rented a product instead of buying it and a lot more were willing to try “sharing” in the future as per our consumer survey. Given the concerns on hygiene and the need for social distancing, there has been a significant negative impact on this. But before we write it off, it makes sense to rethink. The fundamental driving force behind the shared economy was the economic rationale for the consumer – it provided access to a product or service at a much lower cost. That need is much more accelerated in the current scenario. Payal, 32 year old technophile from Bangalore, says that she is more willing to consider taking a smartphone on rent as it will allow her to see if she really likes it before making the purchase. As consumers look to find more pocket friendly options in the future, sharing/ rental models with adequate measures to ensure hygiene may still find many takers.

Consumers will fly to trusted brands (both big and small!) In times of crisis, consumers become more risk averse and lean on trusted brands. Often we consider size and popularity as an indicator of trust, implying that larger and more well-known brands are better placed in the current scenario.

On the contrary, our work with consumers show that the correlation between brand trust and popularity is not that strong. Irrespective of the scale of brand, there is an opportunity for brands to connect with consumers on things that matter in these times, win their trust and thereby a share of their wallets. In fact, a lot of small brands are actively using this opportunity to engage much more deeply with consumers in these times.

Psychologists say that when crises strike and shake our existing schemas – then habits change, and consumers are more willing than ever before to try new products and brands. This crisis is an opportunity like never before – to capitalize on this disruption in consumer schemas and habits. But looking at just one side of this change may lead one to wrong answers. Brands will need to look at both sides of the truth to truly identify the real opportunities to succeed.

Kanika Sanghi is Partner and Associate Director, India Leader – Center for Customer Insight and Nimisha Jain is Managing Director and Partner, Asia-Pacific Leader – Marketing, Sales and Pricing Practice, BCG. Views expressed are the authors’ own.

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