The Supply Side: COVID-induced shopping trends could be new norm

COVID-19 continues to have a transitional impact on retailers and brands and reshape consumer behaviors. Amazon, Walmart and other retailers witnessed a massive acceleration of e-commerce sales and increased spending by consumers on food and fitness as they sheltered at home.

Jason Goldberg, chief commerce strategy officer at Publicis, said the pandemic did not create new behaviors — it accelerated trends already in place.

“Think of COVID-19 as a time machine,” he said.

Speaking virtually at the recent Retail Summit hosted by Texas A&M University, Goldberg outlined consumer behaviors that have staying power in a post-COVID world ranging from growth in digital sales to pet adoption and fleeing brand affinity.

DIGITAL GROWTH
Walmart estimates the rate of digital shopping adoption jumped ahead five years in five months. Before the pandemic, Goldberg said digital shopping was about 17% of all retail, and it was expected to grow to 21% by 2025. During the pandemic’s peak, it rose to 35% and has since receded to about 25% of sales.

The National Retail Federation reports on average, e-commerce sites grew 45% year-over-year through the second quarter (April through June). The biggest winners include Best Buy, which grew online sales by 250%, and Target, which reported a 195% growth. Walmart, already the second-largest e-commerce site, saw online sales nearly double in the period, as did Lowe’s and Home Depot.

Goldberg said even struggling sites like eBay posted healthy growth in the period as more shoppers ordered goods online. He said a whopping 70% of sales are now influenced by digital marketing, making the front door a digital touchpoint for retailers to consider. Before COVID-19, just 52% of all sales were digitally affected.

Digital grocery was ripe for disruption as the pandemic unfolded. Goldberg said just 2% of all grocery sales were bought online in 2019. During the pandemic, that has gone up more than 25% of total grocery sales. While there could be some contraction post-COVID, many analysts believe there is no going back.

Jan Kniffen, a retail consultant with J Rogers Kniffen Worldwide, said history has shown once a category gravitates online, it does not reverse. He said the COVID-19 impact was a unique catalyst, and it’s anybody’s guess where online grocery penetration will shake out post-pandemic.

Goldberg expects online grocery sales could normalize around 12%. He said COVID brought consumers to the digital space, but that has not automatically translated to higher profits. He said digital sales carry a higher cost, and much of the growth was around lower-margin food and consumables.

Goldberg said retailer profits would likely be challenged for several quarters.

FLEEING BRAND LOYALTY
Brand disloyalty also emerged from consumers shopping during COVID-19. Goldberg said some of this was due to product shortages for things like toilet paper.

“Before COVID, Charmin loyalists would never have considered buying another brand, but in the absence of many name brands, consumers adopted an ‘any-brand-will-do’ attitude,” he said.

Goldberg said Amazon saw a massive spike in its private brand toilet paper at the pandemic height, and it has remained elevated. Walmart and other retailers have instituted smart-substitution protocols using machine learning, which takes the guesswork away from personal shoppers and order pickers. When it works well, Goldberg said consumers are apt to try and adopt different brands. He said 21% of consumers said they had switched brands after the retailer made out-of-stock substitutions.

Research firm McKinsey reports that 75% of consumers have tried new brands during the pandemic, and 60% said they expect to integrate new brands in their post-COVID-19 lives.

RESTOCKING, NESTING & PETS
One pattern that emerged quickly at the pandemic onset was pantry stocking, which brought consumers back to brands like Kraft Mac & Cheese and canned soups. Goldberg said consumers filled carts with dried pasta (up 698%), canned foods (up 314%), and cases of Campbell’s soup (up more than 200%).

He said sales of fresh foods took a backseat to shelf-stable and frozen to the extent households had storage capacity. That pushed demand forward in several categories, which then created a vacuum for sales.

“When a family finds itself with a boatload of Kraft Mac & Cheese or toilet paper, there will be less need to buy it in the near future. This brings on a marketing challenge from brands to keep sales going. That’s why we are seeing Kraft advertise mac and cheese as a healthy breakfast with a glass of milk and a slice of orange. And why toilet paper makers are promoting using it for Halloween decor and other crafts,” he said.

Pantry stocking or panic buying was one of the three distinct behaviors Harvest Group consulting witnessed during the pandemic’s early stages. Mark Stamps, with omnichannel retail agency Harvest Group in Rogers, said during a recent webinar that the panic buying stage was followed by staying home and pulling back. He said that was followed with an attempt to regain some normalcy, but with recently rising COVID-19 cases, consumers are again restocking pantries.

The nesting behavior also took shape among consumers as stimulus checks began to hit their bank accounts this spring. Goldberg said “nesting” is another behavior that may remain post-pandemic. He said as consumers were forced to stay at home, they quickly learned how to work, educate and exercise at home and prepare more of their meals.

Walmart said nesting and exercise were visible in sales data through the summer. McMillon said fabric inventories were depleted as well as adult bicycles and fishing gear. Walmart estimates 10 million more people are equipped to fish this fall because of tackle purchased over the spring and summer.

Goldberg expects many consumers who are working from home will continue to do so long after the pandemic has passed. He said the pandemic is likely to have a long-term negative impact on convenience stores, fuel sales and even popular spots like Starbucks. He said the majority of ready-to-drink coffee is sold when consumers are out and about.

Goldberg said pets also became a priority during COVID-19, and there were more than 1 million pet adoptions early on during the pandemic. As consumers spent more time at home, they were open to pet adoption. This behavior’s upside is that there are 1.6 million new pet owners in the country to market to in the post-COVID world. He said the pet market grew its share of online sales by 10% through the summer.

“This is a brand new cohort that has learned how to buy their cat litter and dog food online,” he said.

HEALTH & SAFETY SCORES
Consumers remain cautious about their health, and that’s not likely to change. Goldberg said the need for retailers to offer safe shopping destinations became paramount this spring. Before COVID, retailers and consumers were most concerned about finding the products they needed and having a pleasant experience.

“The last thing on consumers’ minds pre-COVID was, ‘Will this trip to get groceries make me sick?’” Goldberg said.

He said this instantly changed priorities for retailers and consumers around protecting good health. The focus on protecting against COVID-19 impacted other industries regarding radical behavior changes that could persist post-pandemic. He said the banking industry saw a 32% decline in ATM usage for fear of touching the pin pad. The use of self-checkout also rose because consumers didn’t want to stand across from a cashier.

Other protocols at retail like one-way aisles proved unnecessary. Consumers did not follow the arrows, and store personnel did not have time to police them. Goldberg said he wonders if salad bars will return in a post-COVID world, as it’s more likely a robot could deliver salads to consumer tables in the future. He said 7-Eleven convenience stores are testing voice pay at the pump.

With all the innovation and tweaking retailers and restaurants have done amid COVID-19, a new rating service emerged in Shopsafely.org. This site rates retailers on their sanitation protocol. The service looks at 14 metrics, including contactless pickup, masks required for workers, masks required for customers and limited traffic.

Shopsafely.org scores Walmart an “A,” with negative notes about not checking customers’ temperatures and banning reusable bags. Kroger garnered a score of “A-” and was cited for not requiring customers or employees to wear masks, not taking shoppers’ temperatures and banning reusable bags. Target earned an “A+” and was cited only for lack of temperature checks for shoppers.

EDITOR’S NOTE: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.