Much has been written and debated about whether consumer habits have been permanently altered due to the covid pandemic.
Online commerce has been accelerated due to circumstance but what will be the lasting impact of this months-long shift in enforced behaviour?
In part 2 of our series looking into the future of UK retail, we continue our chat with Paul Martin, head of retail at global business advisers KPMG, to discuss all things customer.
Paul begins with detailing the findings derived from customer research carried out across the world and discusses the growing importance of purpose-driven commerce.
“At KPMG we wanted to understand what type of consumer behaviours had changed and what we will potentially revert to in a post-lockdown world so we undertook research across 12 different markets.
“That was really key for us to understand if there are different nuances if we look at China versus the UK versus Germany, the US, Brazil etc and in that context it also allowed us to look at different maturity levels of where the virus is and how that is impacting consumer behavior.”
As a result, KPMG produced the extensive covid-19 pulse survey report which maps the six key drivers of consumption.
Driver #1: Value
“Number one is value. That has been highlighted across the world as the most important consumer driver going forward, specifically if we embark on economically uncertain times.
“Price will be king and that will be really key and we have seen in the past that discount, value-driven retail businesses really benefit which will lead to some of the mid-market retail businesses having to seriously consider their business model.”
Driver #2: Convenience
“The second key point is convenience and convenience really falls into two key components. Number one is online which of course is the utmost convenience but the other really interesting point I reference is that local dimension of convenience so shopping on your local high street if you don’t want to travel.
“But what we’ve also found which was really interesting – and consumers across multiple countries told us this – is they’re looking at locally sourced products.
“They’re nervous about certain countries of origin; they’re also nervous about products going through multiple hands in the supply chain so they want to know it’s come from comparatively close by, which if you are a global brand may have implications on your sourcing but also on your brand strategy. The same if you’re a retailer.”
Driver #3: Experience
“The third key point is experience, which is really interesting because I’ve always been quite cynical about the experience point.
“Many commentators have highlighted it’s the salvation of physical retail which I’ve never believed because I think putting a coffee bar in the middle of your store doesn’t mean that’s an experience.
“But, really interesting, this is what consumers are telling us and this goes to the sort of omnichannel point. Experience is pivoting to ease and consumers want it to be simple: a seamlessly integrated approach to doing things which is really key.
“If I think specifically at the mid-market, which has used experience to try and compete against price, that is not going to work going forward and in that context I do believe business models are going to have to be addressed but what’s also interesting is many commentators have highlighted online is transactional.
“There is no experience connected with online now but you don’t need to look far: go to China, go to South Korea and look at social commerce, look at live streaming and how, during the height of the pandemic, even in grocery categories where fresh produce, where meat and fish products were brought to life via the online channel.
“I think there’s a great opportunity. If you think of Instagram and Facebook commerce and how that has taken off in some of the non-food categories – and I don’t agree that everything is replicable from markets in Asia to the UK or to some other western European markets – some of these points will come and will stick going forward.”
Driver #4: Choice
“Then there’s choice and the range rationalisation. I was privileged to be asked by a number of the crisis response teams, hosted by the Government and some of the trade bodies, to give my input at the beginning of the crisis and one of the large UK multiples highlighted that pre-covid they had 16 different pack sizes of milk. They now only have two pack sizes.
“It’s made things from an operational perspective an awful lot easier and goes towards that range reduction. Speaking to a lot of manufacturers 17 different size pack sizes of toilet paper we all know what happened with toilet paper during the first weeks if you look at all of the pictures that were posted in the media so there’s a real opportunity around choice here.”
Driver #5: Purpose
“The fifth point is all around purpose, which is a key driver and that will be here to stay. I am fundamentally convinced that this will remain a key topic.
“The purpose-led agenda is only going to increase in size and in noise over the next months and years and not just in this time of cost-cutting and time of crisis.
“This is not a luxury and this is going to be the interesting balancing act. If you look at some of the value-based players, and we’ve had a number of scandals in that context, they understand that this is a key driver of consumption.
“A lot of cynics will always say ‘how many consumers will say this and actually do it’ and, yes, they have a point. In countries like the UK, pre-covid, only 10 per cent of consumers would then actually follow through with basing that purchase decision on what they said, as in does this brand match my values, my key principles.
“That 10 per cent does sound low but it’s growing by about 20 to 30 per cent per annum and if you roll the video forwards and you look five years ahead, suddenly a third of all consumers, if not a half of all consumers – and they are all age groups so this is not just the millennials generation – are increasingly looking to understand ‘do my values match the values of businesses’.
“For businesses that would have been deemed to have been sort of proverbially ‘on the naughty step’ during covid there will be a time of reckoning in a post-covid world.”
Driver #6: Privacy
“And the sixth point, I think, is a really big point. We spoke in the 2010s about online versus offline. Well, that ship has sailed. The 2020s is going to be privacy versus convenience: will I trust an organisation, to a degree, to hand over more of my personal details to get higher degrees of convenience, specifically in the online space.
“Can those organisations safeguard my privacy will be a really key question but what’s also come to the forefront is safety. Not just safety of data but also safety in the physical environment.”