- Get to normal are the least affected and most resilient segment. Their age profile is on the older side and their main focus is to minimise changes and disruption to their daily lives. Nearly half (45%) have suffered no interruption to their employment during the pandemic and they are the least willing segment to pay a premium.
- Cautiously extravagant consumers have seen the outbreak impact their ability to travel and socialise but are optimistic about what the future holds. Mainly in the middle-income bracket, they understand that financial stability may take years to return to normal but still expect to spend more when the outbreak ends. They score highest for caring: over two-thirds (up to 72%) would be more likely to purchase from a company that cares for its staff, takes measures to fight the outbreak or supports the community.
- Stay frugal consumers are typically middle income and are wary of the longer-term impacts of the outbreak. They expect to continue to focus on price and will not be increasing their discretionary spending any time soon.
- Keep cutting consumers have seen the deepest economic impact and are most worried about the future. Half of them plan on prioritising and re-evaluating their finances when the outbreak is over and many will continue to tighten their belts in anticipation of a sustained recession. Over two-thirds (71%) currently only purchase essentials and expect to cut back more, particularly on discretionary items.
- Back with a bang consumers are itching to get back out and spend money on socialising and shopping. 60% will prioritise catching up on leisure activities once the outbreak is over and 63% plan on shopping in stores as they reopen. They are the youngest and the smallest segment but could be highly influential in driving sales. Individuals are spending more on groceries, ordering more from food delivery services and purchasing more online than any other segment.
Discretionary spending – the emerging pattern
Since lockdown, consumers have understandably focussed their spending on essentials such as food, household and personal care. Discretionary purchases on beauty, clothing and footwear and big-ticket items have significantly reduced and are expected to remain low as the lockdown continues.
However, consumers are thinking about spending more in all three discretionary categories post-COVID-19, driven by pent-up demand. Clothing and footwear lead the way, with 21% expected to increase spending followed by beauty and cosmetics (15%) and big tickets items expected to be the slowest to pick up post-COVID-19, with just 12% of consumers expecting to spend more in this area.
What does this mean for you?
The COVID-19 pandemic is changing daily life for UK consumers. In response, companies will need to adjust their business strategy and operating model.
Here we identify four overarching trends and how consumer-facing organisations can begin to address them.
1. The shift to value
Companies will need to revisit their cost and operating model to deal with increasingly price-sensitive consumers after COVID-19.
UK consumers are more sensitive about price than their global counterparts – driven in part by their pessimistic outlook – with 65% expecting a post-COVID-19 global recession, compared with France (57%) and US (53%). UK shoppers are also more downbeat about the impact of COVID-19 on their spend and the economy.
Companies are less likely to be able to demand higher prices for domestic goods. Just 26% of UK consumers would pay a premium for local products post-COVID-19, compared with 34% globally.
But there could be an opportunity to improve pricing by addressing broader consumer concerns. 63% of UK respondents cite product availability and nearly half (49%) name availability of delivery and product shelf life as being more important since lockdown. This highlights the role of the supply chain in satisfying a range of consumer concerns, from availability to ethics.
Overall, companies must examine how to serve new consumer expectations at a cost they can afford. Products or brands will need to successfully differentiate beyond price.
2. Health and wellbeing front of mind
UK retailers need to evolve their proposition as health and wellbeing considerations and accessibility drive consumers’ decision-making processes.
COVID-19 has highlighted the importance of many areas of life we tend to take for granted. This is evidenced by UK consumers’ growing focus on health and wellbeing – two-fifths (40%) believe that it will be one of their three most important post-COVID-19 purchase criteria, compared with 37% globally. The proportion is even greater for the free-spending Back with a bang and Cautiously extravagant segments.
This offers consumer companies a chance to create value by communicating the healthy qualities of their products or aligning product development with this shifting consumer focus.
3. Changing channels
Building online capabilities will be critical to prepare for a structural channel shift, but the degree of long-term impact remains as yet unclear.
During lockdown, all age groups are buying more online, but once we factor in future sentiment the path diverges: only 12% of older consumers (Silent Generation, Baby Boomer and Gen X) say they will shop more online in the next 1-2 years, compared with 27% for younger age groups (Millennial and Gen Z). As a result of the outbreak, UK consumers are using household voice activated assistants to buy more goods and services. This, along with the disruption caused by panic buying, could accelerate both auto replenishment and direct to consumer channels.
Although a significant amount of shopping has shifted online out of necessity, companies must be careful about making any assumptions that it will continue and be aware of the needs of different segments.