The Roman God Janus and COVID-19

COVID19 is first and foremost a global humanitarian crisis that has overstretched healthcare systems, challenged governments and made lives and livelihoods difficult for all.  

As retailers learn to survive, revive and thrive as the pandemic continues it has also become clear that the crisis has ushered in a new reality for customers; some are permanent changes, some are ones that will be here for a short time.

There are several major changes that retailers need to adapt to quickly:

2020 has seen Digital adoption as the biggest change.

2021 will see an economic recession like no other we have seen.

In 10 months we have vaulted forward 10 years in UK digital penetration. Immersed in the convenience, immediacy and safety of digital experiences during ‘lockdown 1’, consumers have reset their expectations and preferences and the retailers that have been nimble enough to adapt have seen consumers reward them with their shopping. Tesco doubled their delivery slots, as did Asda and Sainsburys, and M&S’s link up to Ocado looks like a strategic masterstroke.

Add in an economic recession in 2021 and the McKinsey evidence that shows in past recessions companies that invest in and deliver superior customer experience during a downturn emerge far stronger than their peers once the economy rebounds.

What has happened in 2020?

Shift in Loyalty

Evidence from Kantar consumer panel in the UK and around the world shows that retailers have grown penetration as hospitality closed its doors and, in grocery, many brands have been COVID winners. This has tended to be larger BIG Brands and Own Brand with the second tier brands being squeezed in the middle. Many consumers are trying new brands or made new purchases in a retailer as well as trying new retailers as their shopping changes due to location.

Surprisingly, in a time of great uncertainty, rather than sticking to what they know, consumers have done the opposite. This had a lot to do with store location or availability of delivery slots, what was in stock, what could be delivered in time and how brands responded during lockdown.

Retaining all these new customers will be the challenge for 2021

Higher expectations from E-Commerce and great on-line experience

We’ve seen a massive increase in e-commerce adoption. Grocery Home shopping jumped from 10% to 15% and adoption of Click and Collect or self scan shopping in store has accelerated

Free Delivery and return remain important as well as fast delivery but other areas have become important: informative product information and clear product images at a time when consumers can no longer see, touch or feel in a store. Quick websites became critical; as shoppers spend more time online they become more critical of poor, slow sites and take good sites for granted.

Safety and convenience critical for in-store experience

As we go through the COVID Crisis many people have entirely new concerns about safety and hygiene. Consumers say they want stores to follow guidelines that will keep colleagues and consumers safe e.g. installing Perspex screens at the checkout, using masks and availability of sanitisers.

More importantly, finding what they are looking for is a critical feature. Well organised and easy to navigate stores are even more appealing as people want to spend as little time as possible mingling with others in public spaces.

Safe, social interaction with helpful and knowledgeable colleagues is a way stores can compete with online only channels.

In-store technology acceleration

We have seen an explosion of technology adoption out of store but more adoption of technology will happen in focused, limited ways linked to safety and convenience.

The ability to do self-checkout: the use of contactless payment and debit card/ apple pay rose significantly and use of contactless mobile apps accelerated with M&S, Coop, Asda, Sainsburys all accelerating rollout and growth.

Mobile payment and scan and shop will grow but other technology that doesn’t drive convenience will not probably have widespread adoption.

What do we think will happen in 2021?

  1. Digital adoption will continue as customers get used to the convenience it brings.  This will be seen in online deliveries, Click and Collect and Scan and Shop tools in store.
  2. Recession or fear of recession will hit in the first few quarters of 2021.

Recessionary Playbook

Past experience of trading through recessions shows that customers will be looking to manage their budgets and spend with a heightened sense of value and will reset the quality/ price equation.

The Food Playbook where there are frequent shopping trips in a year (250 trips p/a for food) is different to Non-Food clothing / non-food shopping (on average 50 trips per annum).

In Food retailing:  Consumers buy the same amount of food, just seek out ways that deliver value. Consumers tend to shop at the same stores; what varies is the frequency of shopping across the year / quarter/ month or week amongst their repertoire of shops.  

Consumers will look for retailers they can trust to deliver value with a good value equation (quality/price) on categories and brands that are important.

The development of a good/ better/best own brand and branded tiering allows customers to trade down whilst shopping in one retailer.

Wasting less food is an important way to save money, either shopping more frequently or buying products with longer shelf life or simply just throwing less away (consumers freeze more leftovers).

Promotions on categories and lines that are important in store choice and ensuring availability of lines when customers shop will be critical (no one wants to make two trips).

Availability of things ‘I want to buy’, will always be important, but in a recession, ‘not running out of what I want and forcing me to make another trip’ will become more important.

Reset Value vs eating out / delivery – M&S dine in for £10 established value in their ready meals by benchmarking vs restaurants / takeaways.

Reset Value vs other services: hair dyes will increase as consumers DIY vs visiting the hairdresser as regularly.

In past recessions, in Non Food retailing, consumers buy fewer items, as well as shopping less frequently. Consumers have a repertoire of retailers they use and one retailer drops off the repertoire. In lower frequency categories it’s critical to keep your brand in consumers’ repertoire with relevant products.

Where do you place your bets to Survive Revive and Thrive?

Retail is a series of trade offs that you have to make. Where to place limited resource to drive customer visits? Invest in price or quality? Invest in service? Invest in colleagues? Which categories lead investment? Making a decision, when every stakeholder has an opinion, is difficult.  

Retailers, more than ever, need to really understand the relative importance of drivers of store choice and how they have changed in the last 10 months and how they may change in the future.  Consumers have been wrestling with uncertainty through COVID-19 but their expectations for their retail experience (both online and instore) continues to be high. Retailers have to adapt and be nimble – understanding where to place their bets – as always and those retailers that can adapt will be well positioned when the recovery comes.

At North Bailey we bring fresh perspective and critical thinking along with a wealth of knowledge to identify and solve your business problems.  We are provocative, challenge convention, ask the difficult questions and allow you to see your business from a different perspective.

To find out more how we can help you identify and prioritise your trade-offs contact www.NorthBailey.com

Published by Andrew Mann

Managing Partner at NorthBailey. Having had senior marketing & insight roles at Tesco, Sainsbury's, Asda, Coop and M&S, I'm now using my experience & network to solve strategic marketing problems for NorthBailey clients

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