Opinion: COVID-19 and Clearing the Path for New Trends in Brand Selection
Jed Meyer, Managing Director, North America
Tuesday, May 26, 2020
As we move past the mitigation phase of COVID-19 and embark on reopening strategies, smart retailers and brands will learn from the early lessons we can draw from the unfolding crisis. The past several weeks and months have brought more disruption than almost any other series of events in recent American history. Previous disruptions, ranging from 9/11 to the ’08 economic recession, have brutally cleared the way for new behaviors to emerge. Across the retail environment, consumer behaviors will shift to meet a new reality, and brands must adapt to stay ahead of the curve.
The pandemic has introduced many factors to force shifts in brand preferences, including availability, supply chain issues, and recessionary pressures. During the ‘08 economic recession, IRI Resources highlighted increases in private-label sales and price sensitivity, coupled with declines in organic food sales. Consumers searched for deals and took advantage of promotions, with shoppers migrating to value channels. As consumers sought affordable luxuries, general merchandise, beauty, and personal care categories took a hit, with brand loyalty also suffering.
During the 2008 recession, supercenters and dollar stores gained penetration at the expense of outlets. Since then, value retailers like ALDI and Lidl have expanded and are likely to capture more of the grocery dollar ahead. Given the announced job cuts and furloughs caused by COVID-19, we can expect similar economic headwinds in the coming months. This time, recessionary trends and pressures on household income have coalesced with unprecedented shelter-in-place directives, temporarily restricting consumer choice and mobility.
E-commerce and food delivery services have experienced surges of growth during the pandemic, but the long-term impact on consumer behavior remains unknown. Recent data from Morning Consult shows that, across demographics, most Americans are spending less than usual since the pandemic, with high-income respondents most likely to decrease spending. Despite decreases in overall spending, online purchases have remained more or less consistent — but 34 percent are spending more. While e-commerce growth will likely prove durable, people are social animals. Malls and nonessential retail channels already have begun to tentatively come back to life after weeks — and, in some cases, months — of closure. As consumers balance personal safety concerns with new norms on limiting interpersonal contact, brick-and-mortar stores will return to play a crucial role in the performance of most existing retail businesses.
In the months ahead, seamless omnichannel integration of customer touchpoints will prove critical.
Throughout the pandemic, category captains like P&G and McDonald’s have led the way by continuing to remind consumers of core product benefits and company values. McDonald’s launched Thank You meals across national TV, online, email, in-app and in-store, and recognized first responders by providing them free meals. Creative execution, reach and timing are all key for maximizing effectiveness, whether it be to online or offline channels.
We can learn great lessons from one of the oldest of retail outlets: grocery stores. Grocers have made the best of a tough situation, wherein workers risk their health on the front lines of the pandemic and partners work to keep shelves stocked. Many stores have adapted the shopping environment with personal protective equipment (PPE) and protective Plexiglass for employees, special hours for senior citizens, and one-way aisles to promote social distancing. My local chain, Stop & Shop, has effectively adapted its advertising messaging to reflect this new environment, thanking employees and partners in each ad.
Macy’s has charted a strong course for re-opening by adjusting stores to offer contactless beauty counters, fewer fitting rooms, and placing hand sanitizer stations throughout its stores. The department store chain will also hold items that have been tried or returned for 24 hours before being placed back on the floor. Brands can borrow from this playbook by adapting to be there for customers when the chips are down. In doing so, they can build long-term relationships and brand equity.
The American consumer is resilient and experiencing numerous emotional, financial and health-related strains in the era of COVID-19. Some of this activity will translate to new consumption patterns, while others will fall away once we reach a new equilibrium. During the downturn, smart brands need to continue reinforcing their message to consumers to retain awareness. To understand impact, marketers must ensure they have holistic measurement in place that captures the full reach and contribution of all channels. Those insights will remain central as brick-and-mortar sales return to the retail landscape — with social distancing measures in place — as a step toward rebuilding the broader economy.
This article was featured in TotalRetail.