Although history, for the most part, advances predictably, occasionally events, like the COVID-19 pandemic, come along to reset history’s course. Some analysts refer to this as a paradigm shift. When such a reset occurs, people start asking a lot of important questions. For example, Anil Kaul (@anil_kaul), co-founder and CEO of Absolutdata, asks two fundamental business questions: “What will consumer behavior and profiles look like in the new normal? What will the demand pattern look like going forward?”[1] He adds, “To put it another way, you need to know what people will buy, where they will buy it, how they’ll buy, what quantities they’ll buy and how often they’ll buy. Prior to the pandemic, historical data provided some guidance. Now, all that manufacturing, logistics, pricing, customer engagement and general commerce data is obsolete.” Gary Drenik (@gdrenik), CEO of Prosper Business Development, writes, “In the early days of the pandemic, the consumer-packaged goods (CPG) industry was operating in uncharted territory as it scrambled to keep supply chains running in the face of drastically shifting consumer behavior.”[2] Given the paradigm shift in consumer behavior, brands and retailers need to understand how the consumer landscape has changed and what they can do to succeed in this new environment.
Changing consumer behavior
Drenik believes we are beginning to see a crystallization of consumer behavior. He drew that conclusion from recent surveys and an interview with Shalabh Shalabh, Chief Growth Officer at LatentView Analytics. Shalabh told him, “We’re starting to see three very clear patterns emerge that we think have long-term implications.” Those trends are:
1. Consumers are using new channels. “The first [trend],” Shalabh states, “is that a large consumer block is buying the same products but using new channels. We’re seeing accelerated usage of omnichannel retail, pickup and home delivery is prospering, social influencers are growing in importance as is live eCommerce, subscription services are on the rise, and there’s a growing desire for smart ‘touchless’ solutions.”
2. Consumers are finding product substitutes and learning home skills. “The second [trend], Shalabh states, “is that a large consumer block is finding product substitutes and developing new skills that allow them to cut discretionary spending while still leveraging new channels. Consumers are reskilling to color and cut their own hair, they’re adopting product try-ons to enjoy retail-like experiences at home, they’re becoming more brand-agnostic and price conscious, they’re embracing comfort foods, and they’re becoming more focused on tracking and treating mental health in their spending.”
3. Fear-motivated consumerism. “Finally,” Shalabh states, “there’s a large block that has moved towards fear-triggered conscious consumerism. Fear-based behavior that started during the pandemic will persist long after, and these consumers will prefer bulk purchases, hyper-localization, healthy and functional foods, product transparency, and preventative masstige products.”
Thomai Serdari, a professor of luxury marketing and branding at New York University’s Stern School of Business, predicts there will be a “pent-up demand, but possibly tempered by a new appreciation for consuming less, especially as a recession bears down.”[3] She explains, “I think that a lot of people are going to realize that they don’t need as much — we have missed [months] already that we’re never going to get back. And people are pressured financially because they’re losing their jobs and preparing for a recession. On the other hand, the social distancing and deprivation is really intense — perhaps the restaurants and bars will be the first to recover. We will all be craving a bit of entertainment, which is what shopping has always been.” Consumer behavior will continue to change as vaccines are made available and a new normal is established. To keep up with these changes, brands and retailers can leverage cognitive technologies. Kaul insists, “Consumer packaged goods companies who use artificial intelligence are finding a shortcut to the new normal.”
At Enterra Solutions® we found ourselves supporting clients faced with lots of questions about consumer behavior. As a result, we found new ways to combine and analyze data in the Enterra Global Insights and Optimization System™ to help find answers. As Kaul notes, “CPGs are building AI models to help them predict general demand curves. AI can evaluate multiple data sources, such as internal company data and publicly available information like anonymized mobile or text data. That way, it can predict when significant changes are imminent, such as accelerating or decelerating movement in regional infection rates that might trigger a shutdown or a reopening that could affect supply chains, production or demand.”
How best to respond
Michael Badwi believes the events of 2020 will have a greater impact on younger generations than older ones, because the pandemic is unfolding during their formative years. He adds, “2020’s events and disruptions will have an enduring impact on society long after lock-down ends. Despite the disruption of major global events in the 21st century — 9/11, the Iraq invasion, the financial crisis of 2008 and the Arab spring afterwards — the difference is that those all had regional epicenters.”[4] He goes on to explain, “New ideas, behaviors and technology ordinarily take years (if not decades) to reach critical mass. But during Covid-chaos we are experiencing years of change, packed into a few short months. Early adopters of supply chain technology are delighted, but reluctant retailers, big and small, are scrambling to catch up with radical changes in consumer behavior.”
The subject matter experts cited above all believe consumers are reevaluating their shopping and consumption behavior. Badwi believes brands and retailers also need to reevaluate their business positions. He explains, “This is a unique moment in history when brands — and their relevant supply chains — can play a constructive role in society. In a time of economic hardship, consumers will either choose companies based on price point and utility, or shared values and beliefs. Against this backdrop, brands can no longer buy attention like they used to in the old advertising model: they must earn it. This can be done by being honest, transparent and reliable, first as a company and also in their messaging, but primarily in giving consumers the right product, at the right time, efficiently and in high-quality presentation. This rests on the shoulders of your supply chain, with sourcing, shipping, safety, efficiency, quality and in some cases, freshness.” Of course, in order to provide consumers “the right product, at the right time,” brands and retailers need to gather and analyze data. Cognitive technologies, like the Enterra Shopper Marketing and Consumer Insights Intelligence System™, can leverage all types of consumer data to provide high-dimensional consumer, retailer, and marketing insights.
Concluding thoughts
Like Kaul, Badwi asserts, “The current pandemic has no real comparison point in modern history, so much of our historical data is at best incomplete, at worse irrelevant.” That means manufacturers and retailers must rely on the latest consumer data to remain relevant and make necessary course corrections. Badwi concludes, “What we do know is that moments of crisis often reshape our cultural values and individual psyche: from a retail perspective, most brands will need to rip up their old playbook and radically update their omnichannel supply systems, embracing smart and efficient warehouses to gravitate towards new customer personas and their expectations.”
Footnotes
[1] Anil Kaul, “Using AI as a Shortcut to the New Normal,” Path to Purchase IQ, 30 June 2020.
[2] Gary Drenik, “Post-Pandemic Consumer Behavior Is Crystallizing. What Does That Mean For CPG Brands?” Forbes, 8 September 2020.
[3] Daphne Howland, “The consumer after COVID-19,” Retail Dive, 8 April 2020.
[4] Michael Badwi, “Consumer Behaviour and Supply Chains Beyond 2020: Are You Prepared?” Supply Chain Junction, 7 September 2020.
