Post-COVID Era: Consumer Behavior Shift in Retail & E-Commerce Sector

The Covid-19 pandemic has changed the way we work, shop, and communicate with people causing disruption in the recent past. There have been shockwaves along with the global economy in the wake of the pandemic affecting the individual financial security. Worldwide lockdowns and other containment measures are taking a serious toll on jobs and earnings. Increasing numbers of households are bracing-up for a dip in income.

Concerns about their financial well-being have changed the value equation for many consumers in their discretionary spending. Many consumers are facing new personal situations, like changes in income and leisure time, which are influencing attitudes and behaviors in all areas including their shopping behavior. Many of them feel ‘financially-squeezed’, with less disposable income compared to before the crisis and are shopping more cost consciously.

Families are welcoming the opportunity to spend more time together, and new ways of socializing are gaining popularity as people are connecting virtually. With more time spent at home, consumers are engaging in new or renewed activities during their spare time. Trying new recipes, home improvements, and embarking on new skills or online education, to name a few.

With the switch in many cases to working from home, employees have embraced their new environments and many expect to continue or increase their time spent at home working in the future. As more people start working from home, they are sticking to basics, stepping outside only to buy essentials.

Consumers are also worried about the risks of getting infected in crowded places like malls and supermarkets & preferring to avoid long queues in crowded physical stores. Hygiene and safety concerns in physical stores are accelerating the hold of digital connectivity in day to day lives of people. Two major shifts are observed in customer behavior — the reluctance to mingle in crowded public places and a higher propensity for digital adoption.

Industry Impact

Consumers are living through a pandemic that will change them, maybe forever. As consumption behavior shifts, companies should offer tailored products and services accordingly. As the community is moving beyond survival mode, some of the more radical and drastic changes are happening in consumer behavior.

A shift in Spending Patterns- Grocery

A fair section of consumers doesn’t rule out the possibility of a global recession after the pandemic. Groceries, household supplies, personal care products, health and wellness products, and other essentials are witnessing great demand for an extended period of lockdown. Another category of consumer packaged goods that is booming is shelf-stable items. Products like shelf-stable milk, milk substitutes, and ready to make foods are also facing a surge in demand.

During lockdown Surge in demand is observed due to stockpile sufficient supplies of grocery & hygiene-related products like hand sanitizer and masks and household essentials. After stockpiling of essentials, there could be a temporary slump in their sales & customer choice functionality over a brand name in short supply scenarios. People are turning to more immunity-boosting, personal hygiene, and nutrition products, as well as wellness foods, in the post-COVID-19 world.

Luxury and durable goods like apparel were more affected than daily necessities like food and beverages. As the traditional street-side business has completely shut down, people are taking their business online. Somehow, the sales in some sectors have gone up leading to a shortage of several products.

A lot of retailers selling non-essentials like jewelry, clothes, and footwear have faced a huge loss. This is likely to have a long term impact on them. So, to bear this, retailers have started to sell essential goods. They are using technology to get back in the game. This may seem tough but there is still a ray of hope. Since the attitude of buyers is changing, the retail industry is also expecting a change in the nearby future.

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E-commerce

A spike in B2C e-commerce has been observed in India, given the coronavirus outbreak and the lockdown imposed by the Government. There has been a rise in the number of FTUs or first-time-e commerce-users, who had been so far inhibited to shop online. It consists of perhaps two more segments apart from the one that buys online regularly,- A segment that did not shop online, and another segment that up till now was either ignorant about online shopping or did not have a device or data plan.

The change is more striking among consumers living in Tier-II and III cities than Tier-I. Even Small town buyers are more inclined towards e-commerce in the post-COVID world. The inclination towards online buying for consumers in Tier-II and III cities is almost 2x more current vis-à-vis pre-COVID.

People are switching from malls and supermarkets to e-commerce for everyday commodities, the sales of companies like BigBasket and Grofers have gone up and will continue to be that way in the coming time as well. Big-Basket, Gofers, Amazon even faced a temporary breakdown or capacity shortage due to a steep increase in demand. A Major demand surge was observed in essentials such as household staples, packaged food, health care, hygiene, personal safety, and other high priority products.

Omni Channel Services

Consumers have also increased their use of Omni-channel services like providing home delivery, contactless payment, social commerce, and virtual consultations.

Retailers with an online presence are capitalizing on the recovery trends by introducing innovative ways of fulfilling orders — be it establishing an Online-to-Offline(O2O) platform or building sophisticated digital logistics and payment reconciliation capabilities to be in the lead in this race to recovery.

In these times of crisis, retailers are increasingly using physical stores as fulfillment centers to turn inventory over quickly and cut losses. This “New Normal” could force every retailer to embrace the Omni-channel ecosystem innovatively utilizing their physical store spaces for the operations of their online and offline stores.

Kirana shops digitizing and starting to deliver online, people are finding it even more convenient to have everything online. Local shops are now restricted to a radius of a few kilometers in which they can deliver. They are offering contactless deliveries along with sanitization of the goods that one has ordered. People looking for alternatives find it crucial so that they don’t have to be in contact with anyone.

Other Services

Digital and contactless payments experienced an unprecedented boost ever since the start of the pandemic, seen by consumers as a safer and cleaner way to pay for goods. Consumers are also trying out new payment methods while they’re purchasing from online stores, and favor methods that have the strongest protection from scams and frauds.

E-commerce sites specializing in books and toys are also experiencing more visits and transactions, almost double the total increase since the beginning of the pandemic. As parents around the world contemplate on weeks and even months of homeschooling and indoor play, they’re preparing to equip their homes to make the transition as seamless as possible.

Sports retailers are also seeing a 30% increase in their transactions. As physical distancing and self-isolation have limited people’s ability to take part in group sports or go to the gym, consumers are making sure they can keep up with their fitness regime at home by purchasing the right equipment.

Conclusion

Even after the crisis is contained and we move back to normalcy, a strain of apprehensiveness in crowded places is going to have a lasting impact on everyone’s life. While some of these changes are no doubt temporary, others will be permanent, like e-commerce & the digital-adoption is likely to carry forward and become a permanent part of the new normal.

Also, Convenience offered by online shopping schemes & continued social distancing due to the risk of a pandemic blowback reinforcing shifts in consumer behavior in the longer term.

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