Consumer optimism remains muted, focused on value and essentials

09 September 2020 4 min. read
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Even as countries have lifted many pandemic restrictions, consumer optimism remains muted and spending intent is still below pre-crisis levels, according to a report from McKinsey & Company. The consulting firm has been surveying 45 countries on a weekly to monthly basis to track the impact of Covid-19 on consumer sentiment and behavior.

The surveys have found five themes evident across global consumers: a shift to value and essentials; flight to digital and omnichannel; shock to loyalty; health and “caring” economy; and homebody economy.

Shift to value and essentials

With many consumers expecting the pandemic to negatively affect their finances for at least another four months, many are trading down to cheaper products. Forty percent of US respondents said they are more mindful of where they spend their money, and 31% said they are changing to less expensive products.

Consumers are broadly shifting their spending to essentials such as groceries and cutting back on discretionary categories like apparel and travel. US consumers intend to spend up to 14% more on groceries, household products, and home entertainment, and expect to decrease spending by 30% to 49% on restaurants, jewelry and accessories, furnishing and appliances, consumer electronics, vehicle purchases, hotel stays, and flights.

Consumers in Korea, India, and China expect increased spending on a greater number of categories than their counterparts in Western countries, including gasoline, skin care & makeup, and fitness & wellness.

There has been a shift to mindful shopping including some trading down for value

Flight to digital and omnichannel

Most categories have seen more than 10% growth in online customer based during the pandemic, and many expect to continue shopping for these products online after the pandemic ends. US consumers reported 30% to 49% growth in online purchases for groceries, alcohol, household supplies, personal care products, furnishing & appliances, and over-the-counter medicine.

Digital and contactless services such as curbside pickup, delivery, and drive-through have also grown in usage during the pandemic. These solutions are also likely to be adopted for the long-term, according to the McKinsey report.

Shock to loyalty

Supply chain disruptions and empty shelves have caused many consumers to try a different brand or shop at a different retailer. Over 60% of global consumers have changed their shopping behavior, with value, availability, and quality serving as the primary drivers for switching. Seventy-five percent of US consumers tried a new shopping behavior, compared to 91% in India, and 33% in Japan (where lockdowns weren’t imposed).

Consumers have started caring about healthy and hygienic packaging

Health and 'caring' economy

Global consumers have been increasingly seeking out retailers with visible safety measures and brands that show care and concern for their employees. US respondents were most concerned about how companies take care of the safety of their employees (26%), followed by the usage of hygienic packaging (21%). Respondents in India were most likely to change their purchases based on how companies were safeguarding their employees (51%) and whether they had hygienic packaging (45%).

Homebody economy

The McKinsey research notes that more than 70% of respondents don’t feel comfortable resuming their normal out-of-home activities. Most consumers are waiting for measures beyond simple restriction loosening – such as clear guidance from medical authorities and the development of a vaccine and/or effective treatments.

However, consumers are more willing to do some out-of-home activities than others. In mid-June, more than eighty percent of US consumers said they would shop for groceries and necessities in the next two weeks, while more than 60% said they would do so for non-necessities. Less than 19% said they intended to travel by plane, attend a large event, go to the gym, or use public transit.