COVID-19 will change how consumers shop and what retailers must do to adapt

The rapid change in American’s lives due to social distancing orders amid the COVID-19 pandemic has resulted in a dramatic shift in shopping behaviors. Consumers are increasingly staying indoors as the pandemic progresses but are continuing to stock up on groceries and other basic supplies in response to the crisis. According to research from Brick Meets Click and ShopperKit, 31% of US households, or roughly 40 million consumers, used online grocery services including home delivery and pick up in March.

 

Availability has become the most immediate concern as consumers find items out of stock at their local stores. A survey by Shopkick found 85% of consumers surveyed in March note that brands do not matter during times like these. Consumers are turning to any retailer that can help fulfill their needs — including smaller direct-to-consumer brands. Small DTC brands are seeing an increase in business, particularly those who make and deliver bathroom tissue, health products, and household essentials. For example, Peach, which makes high-end, eco-friendly bathroom tissue saw new customers increase by 279% in the last two weeks of March as compared to the two weeks prior and hand sanitizer brand Touchland sold out of its products and have amassed a waiting list of over 10,000 orders.

CPG companies are facing an existential crisis as they risk losing control of the brand and product experience, increasingly relying on others to meet their consumers’ needs. Prior to the COVID-19 global crisis, traditional CPG companies were lagging in e-commerce. On average, large CPG companies have shares in physical stores that are 5-10% higher than online market shares.

To support the consumers that rely on them for basic essentials, CPG companies will need to accelerate toward a digital transformation, by opening new routes to market and better utilizing existing channels to meet these dramatic, and likely long-lasting shifts in consumer needs and behaviors. In order to have more control over their inventory and pricing across channels and not have so much reliance on big retailers, CPG companies should take a total commerce approach:

Help me find what I need

As findability and availability become the baseline for purchase, brand loyalty goes by the wayside. Brands can help retain consumer loyalty by becoming the go-to source for availability data. Adding a “where to buy” button to the brand’s website and strengthening search, both backed with real, or near-real time local inventory data will add reassurance and enable consumers to find what they need when they need it. Increasing the channel options beyond brick and mortar to include the retailer’s website, marketplaces and direct sales on the brand’s website can provide consumers with more options to purchase.

CPG companies can use AI and machine learning algorithms to optimize supply chain and dynamic inventory management to ensure products are on the physical and digital shelves with the most demand by leveraging consumer shopping behavior, search data and other dynamic demand predictors. For brands struggling to keep up with demand, offering replenishment timeframes or even an alternative product option, including a value brand or white label brand made by the manufacturer may result in diminished sales in the short-term, but can increase brand affinity in the long run.

Make it affordable

As consumers become more accustomed to the benefits of online shopping and delivery, the demand for this model will continue to increase, but economic strain will have consumers looking for value in the channel and cost-saving opportunities. Leveraging first-party consumer data, brands can tailor specific content, offers and experiences to individual consumers based on their specific needs. CPG companies who have control over their buying experience through their direct-to-consumer channels can implement predictive, dynamic pricing to optimize in surge moments and deliver value when consumers need it most.

Make it easy

As consumers continue to take less frequent trips to the store, stock up missions will become more of the norm with consumers looking for value and convenience. CPG companies can meet these new demands with direct-to-consumer subscription services customized to their behaviors and budgets. Many large companies have acquired or tested subscription-based brands already and can leverage and scale the existing capabilities across their portfolio offering a wider value to their consumers.

Launching and running a direct-to-consumer business can be challenging for CPG companies as consumers are more likely to go to a marketplace or multi-brand site than jump from site to site for all of their essential packaged goods. CPG companies can create a collaborative network of category adjacent partners, distributors and suppliers to design and deliver multi-brand platform solutions with speed and scale.

Make it safe

While the last decade has seen a shift toward healthy products across all consumer goods categories, COVID-19 is likely to add a new dimension to the needs related to product health and safety. While the pandemic has had fairly widespread global effects in its first round, future cases may be centralized in key hot spots. CPG companies can create trust and ease consumers concerns over the safety of their products, especially food product, with supply chain transparency, ingredient information and readily-available consumer support.

The world and its people will forever be impacted by this pandemic. New digitally-engaged consumers will bring a different set of expectations and new opportunities for brands. For many CPG companies, digital commerce has not been a primary driver of business and their existing digital channels and operations are not optimized for this shift in demand. Now is the time for the consumer goods companies to quickly seize the opportunity to become truly consumercentric and build a scalable total commerce presence.

Kristen Groh is group vice president, managing partner at Publicis Sapient.