The Pandemic Permanently Changed Consumer Behavior. Top 3 Retail Lessons for 2022.
A year ago, we expected an eventual “return to normal,” but as we near 24 months since the onset of the pandemic, one thing is certain: a permanent shift in consumer behavior has taken place. In fact, according to the EY US Future Consumer Index, which has been tracking changing consumer sentiment since the start of COVID-19, 54 percent of Americans agree that the new behaviors adopted during the pandemic now feel normal, and 49 percent believe that their lives will remain significantly changed in a post-pandemic world.
Since May 2020, purchase criteria around price, product availability and quality of service have increased significantly in importance — resulting from supply chain disruption, pricing increases from inflation, and labor shortages that have caused companies to run short-staffed and scale back hours and services offered. By all accounts, these macro challenges are transient, yet they've forced consumers to not only adapt, but to permanently adopt how they shop and what they buy.
We're finding ourselves in an environment where the consumer doesn’t always decide what’s important, but rather the market forces consumers to make new choices about what’s important. The future of retail is all about the consumer, and that requires an in-depth look at what's shaping consumer changes in the first place.
As we think about 2022, we need to give special attention to the following three consumer trends from the past year that will shape a new normal in the industry:
Consumers Reveal a Different Mentality on Finance
In the short and long term, price reigns king as a key purchasing criterion. Between the financial troubles that many faced as a result of the pandemic and the current inflationary pressures, consumers have adopted a new way of thinking about money. This “always on emergency” mindset is not only a result of living during the pandemic. The geopolitical and economic landscape continues to drive tensions, and concerns around climate change have become a top priority.
As a result, consumers are owning fewer goods, buying private labels, and generally are more concerned about their savings than they were pre-pandemic. Ownership no longer confers status; 53 percent say that they're more likely to repair something than replace it if they can. And in the U.S., 57 percent are trying to save more now than in the past, and 60 percent are more cautious on spending.
Adaptability Takes Center Stage
Forty-five percent of today’s consumers note that they don’t want to go back to living exactly like they did before. Consumers now buy groceries online and, aside from picking out which specific produce item they want, they're comfortable with it. We’ve learned that consumers can adjust quickly to short-term impacts, but those impacts can also leave a lasting impression, turning what may not have mattered before into a top priority that companies are required to now address. Take e-commerce for example. In the first iteration of the EY US Future Consumer Index, 93 percent of American consumers said that shopping in stores once they reopen will be important to them once the pandemic is over. In October 2021, 49 percent say that they expect to shop solely online during the next big shopping/sales event.
Price, Product Availability and Quality of Service Increases in Importance
Today’s consumers faced totally new market dynamics. On top of that, consumers are setting new priorities around how and when they use their money and time, which translates directly into their shopping habits.
Consumers are starting to save more and are being conscious of their spending, forcing retailers to think creatively about how to get consumers to commit to purchasing today. For example, retailers are making shopping easy and convenient through various channels. Consumers are becoming more channel agnostic and expecting seamless experiences, be it through online or in-store shopping or delivery expectations.
Consumers will shop wherever they can find the product they want — and from whoever can get it to them the fastest and without considerable shipping costs. That’s why product availability has increased in importance by 58 percent since before the pandemic, and quality of service has increased by more than 46 percent during the same period. Consumers are looking to incorporate brands into their lives that give them flexibility, whether they're working, shopping or looking for entertainment, and are willing to forego loyalty to brands that aren't able to meet their demands.
2021 was a year of consumers planning ahead with their purchases and a willingness to accept price. The question retailers need to ask themselves is this: For how long?
The views expressed by the author are not necessarily those of Ernst & Young LLP or other members of the global EY organization.
Tony Ward is principal, retail leader at Ernst & Young, a company that provides consulting, assurance, tax and transaction services that help solve our client's toughest challenges and build a better working world for all.
Tony Ward is a leader within the Retail practice at Ernst & Young, a global management consulting firm. An experienced executive with expertise and strategic leadership in global supply chain management, omnichannel fulfillment, customer experience, digital, integrated logistics, transportation, sourcing, and enabling technologies. Extensive experience in assisting companies across multiple industry sectors in defining and structuring initiatives, evaluating business case potential, and managing the deployment of complex transformations. Over 28 years of experience with Retail, Consumer Products, Distribution, QSR, and Hospitality/Gaming companies. Over 15 years of extensive experience in Asia, Europe, and South America
During his career, he has served as a trusted advisor to some of the biggest brands in the world, assisting with their global supply chain needs and helping them achieve significant business gains.
Mr. Ward has spoken at CSCMP, RILA, Shoptalk, Groceryshop, WERC, and many other forums. He has been featured in more than 40 articles, and is a contributing author to several books.