Knock-on Effects Of COVID-19 On Consumer Behavior And How Businesses Can Prepare For Them
COVID-19 has taken the world by a storm. Financial markets and vulnerable industries such as manufacturing, services, and tourism have been hit hard. According to WTTC, tourism accounts for 10% of the global GDP and with 195 million jobs at risk worldwide, this industry (along with others) will face severe consequences when the pandemic is over.
It can be said that COVID-19 has changed the way we work, communicate, and shop more than any other disruption in this decade. As a result, some key changes in consumer behavior have been noted. All over the world, people are working from home and stepping out only for buying essentials. Moreover, consumers have drastically reduced their spending on discretionary purchases, mainly due to the uncertainty regarding job security and the future overall.
By observing the shopping patterns in countries like China that have witnessed both the pre- and post-peak period of COVID-19, one can clearly see that consumption in industries dealing in luxury items, such as the apparel and dining industries, has still not picked up significantly, and this goes in line with consumers’ expectations that they will have to wait for several months - if not years - for routines to go back to normal. Many households are also expecting their incomes to be negatively affected post-COVID-19 outbreak.
On the bright side, there has been a noteworthy increase in online shopping. Now that retail stores are closed, consumers are relying more on digital mediums for their purchases. According to a survey, consumers are 30.6% more likely to purchases online in 2020 than they were in 2019, including both essentials and luxury items. A recent study by McKinsey in China also showed that consumers are more likely to continue shopping online, especially essentials and personal care, even after the outbreak ends. This shows how the consumer behavior paradigm is shifting from shopping in outlets to online shopping now more quickly than ever.
So how can businesses prepare for the post-COVID-19 period? We know that jumping back up from its lowest point won’t be easy for any business, but it is the need of the time. Business owners and the management needs to keep in mind that while some of these changes are temporary, others are here to stay. The shift to digital mediums caused by two key changes in consumer behavior - the reluctance to visit crowded places and a higher propensity for digital adoption - is likely to become more popular and hence permanent in the long-run.
It can be said that the retail industry is at an inflection point, which is the beginning of a new phase that will change how consumers shop and how the retail industry operates. Retailers need to quickly adapt to this new phase since brands that miss the inflection point are not able to survive beyond this point (as we can see from Nokia and Kodak’s current condition). It can be said that this change is inevitable. Retailers cannot totally rely on their offline presence even after the outbreak ends. If they want to stay relevant, they will have to adjust to the new norms. Not doing so will result in huge losses in revenues.
More importantly, companies need to realize that traditional business models are now incompatible with the challenges that they face nowadays, with the biggest one being this pandemic. Entrepreneurs and business owners now need to think about creating flexible business models that will enable them to quickly remodel and adapt to the changing trends in their respective industries and consumer behaviors, which is the key to success in today’s world.