U.S. commerce has experienced an unprecedented level of disruption since the COVID-19 pandemic began. Our modern global economy has never faced anything quite like it, and we’re still unraveling which industries will sink or float in a post-COVID world.
While sheltering in place just a short time ago, many rushed to stock up on food and basic household essentials, driving a boom for a select number of brands. In stark contrast, a growing number of consumer and retail categories have taken a devastating hit, including already-struggling department stores, which have been crippled due to the pandemic.
This month marks the reopening of many nonessential retail stores in the U.S. While retail sales have jumped more than 17 percent from April to May as businesses reopened, purchases are still down 6 percent from 2019. And then there are the retailers and small businesses that may never get the opportunity to reopen as they face bankruptcies and permanent closures.
On the consumer side, the distinction between a "need" and a "want" is more sharply defined these days. Consumers will be much more cautious with their spending.
However, it’s not all doom and gloom for retail. A recent survey of 2,000 U.S. consumers found that 40 percent shopped a new website during the pandemic, and 45 percent of these shoppers will continue to shop that site following a positive experience. Not surprisingly, buy online and pick up in-store (BOPIS) orders have increased 248 percent for the week of May 25-31. Consumers have had time to reflect on what's most important to them — family, acceptance and connection.
One major (and presumably permanent) shift is clear: shopping is much more digital now than it was before COVID-19, and some of the innovations we’re seeing in the consumer packaged goods (CPG) sphere reflect that.
Tech-Enabled Shopping Experiences
Working from home has cornered many people into navigating video collaboration, online grocery shopping, and other web-based technologies that serve as an alternative for activities normally relegated to "real life." In step with that shift, brands and consumers alike are now embracing technologies that enhance the possibilities for digital commerce. Many of these technologies were waiting in the wings, but the COVID-19 outbreak has accelerated their adoption.
According to a new report, 32.8 percent of shoppers are buying retail goods as much as they did before the coronavirus outbreak, but are now making their purchases online. Not surprisingly, subscription models remain strong. In addition, virtual try-on options are taking off across numerous channels where makeup, hair color, clothing, and even home furnishings can now be tried on (or tried out) before checkout. Madison Reed, for instance, allows users to “try on” a new hair color. The brand specializes in salon-quality hair treatments, so those who would normally be out and about for routine beauty appointments this spring are suddenly exploring Madison Reed's products as an alternative. The easy-to-use try-on tools are part of the "how." In the same vein, L’Oreal’s partnership with Perfect Corp’s YouCam app allows virtual makeup testing. Recreational spending will invariably be down during this economic storm, but smart companies are exploring high-tech ways to engage still-standing consumers.
While the beauty industry was an early adopter of virtual reality pre-COVID-19, I predict we're now moving into more widespread use of these and other retail engagement digital offerings. Direct-to-consumer (D-to-C) companies have been betting the conversion needle can move and have been allocating increased resources to help customers make purchasing decisions.
Lower-Priced Luxury Goods
Consumers who frequently purchase prestige cosmetic products or luxury designer items may adjust their buying habits, including purchasing at lower price points. In a recessionary environment, we typically see consumers tighten their budgets. Perhaps secondhand marketplaces selling luxury goods, like The Real Real, will see an uptick. Or we may see consumers “trade down” from heritage designer handbags, for example, to an up-and-coming brand with similar quality (such as SENREVE).
Skincare regimes may step back from the ever-increasing price point of beauty creams. (Have you tried Guerlain’s Orchidee Imperiale Black the Cream that retails for over $1,300? Me neither.) And with D-to-C brands that have gone omnichannel, some of the distinctions between prestige and mainstream products are bound to blur.
Despite what certainly can look like a bleak forecast for many suffering companies, there are priceless lessons to be learned during uncertain times. While continuing “business as usual” is familiar and comfortable, of course, the opportunities for a different kind of growth amid this pandemic are real. Flexibility, creativity, resourcefulness and compassion should be honed by entrepreneurs and their teams as guiding principles as they move through this challenging time. And the strengthening of these qualities doesn’t negate economic survival. For the latter, we have a few tips:
Tips for Surviving and Thriving
Consumer behaviors have been forced to change. Some of these new behaviors will stick with us long after this public health and economic crisis are over. In the meantime, companies need to ensure they can survive and thrive on the other side of this disruption.
Making sure distribution centers stay up and running with smaller shift sizes is crucial. This includes adjusting hourly wages and salaries dynamically to ensure that companies can physically and monetarily ride this wave to the best of their ability.
There’s less pressure to develop new product lines this year. Until there's more certainty, it won’t make sense to invest heavily in launching new product marketing campaigns. It does make sense, however, to stay engaged with your customers via content that resonates, educates and entertains.
Now, more than ever, consumers expect brands and CEOs to use their platforms to lead with empathy and integrity while fighting for social justice and equality. A recent study by Dynata reported that more than 62 percent of respondents under 35 said they will be “doing more research on brands and their inclusivity practices before purchasing, in light of recent events.” A similar study from Morning Consult revealed that 69 percent of adults say that the response to the Black Lives Matter movement by CEOs will permanently affect their decision to buy from the company, and 68 percent of Americans say it’s important for CEOs to address racial inequality.
Consumers will be more discerning regarding how and where they spend their money. Therefore, it’s important for brands to get this moment right, continue to monitor current events, and communicate compassionately and effectively with their audiences. This could not only strengthen the customer-business bond, but it could give companies a refined, real-time sense of what their buyers need and want.
This will also be a time of heightened creativity. Beyond social media and listening to your customers via those channels, brands could consider starting a podcast, like the founder of Vuori did. Provide how-to videos and demonstrations as Wine Access has. Launch a blog to share your views and behind-the-scenes photos. Whatever your outlet, creativity drives innovation, and all businesses need to be innovative right now.
Finally, connection is a two-way street. Use this time to engage in conversations and listen to the consumers who are active. When possible, find ways for them to feel like they can be part of doing good. Your outreach right now should be focused on community and solidarity rather than transaction. After all, your best influencers are the ones who recommend your brand without even being asked to. This starts with a great product or service, of course, but what truly builds that kind of brand loyalty is connection.
Related story: 4 Retailer To-Dos to Boost Customer Loyalty Right Now