8 minute read 17 Mar 2021
EY person making a payment on the beach friend in background

Future Consumer Index: four ways to make the most of consumers’ post-lockdown spending

Authors
Mona Bitar

UK&I Consumer Leader, Ernst & Young LLP

Experienced business advisor for over 25 years. Amateur poet and historian. Brings multi-cultural perspectives as a proud Palestinian Brit.

Silvia Rindone

EY UK&I Retail Leader

Strategic mind with a pragmatic spin. Intellectually curious. Mother of two. Passion for art, food and travel.

8 minute read 17 Mar 2021

The EY Future Consumer Index shows a holiday, a haircut and a day out top the wishlist as long-term confidence to spend returns.

In brief: 

  • Vaccine rollout, lockdown roadmap and increased financial confidence means pent-up demand, with increased spend expected across nearly half of categories.
  • A year on from the major shift online, consumers are no longer tolerant of a poor online experience, with previous niggles now full-blown pain points.
  • Don’t under-estimate the power of the store and instead look to maximise the opportunity of social experience, as well as the store’s role in online purchases. 

Although nervous in the here and now, a combination of the roadmap announcement and the vaccine rollout means consumers are starting to envisage a more positive future. Although shopping behaviours have changed for good, the return to physical stores may well be more significant than retailers expect.

The latest EY Future Consumer Index shows that a feeling of optimism and anticipation about the future is emerging. There has been a fundamental shift to e-commerce, and consumer tolerance with the online experience is falling. A poor offering is no longer accepted as consumer expectations around delivery, functionality and other factors rise. And, as they yearn for human engagement, consumers miss the in-store experiences too, providing a golden opportunity for retailers to engage customers with store events and activities post-vaccination.

The desire for a return to normality will see consumers focus on three main needs as they look to reconnect with friends and family – they want a holiday, a haircut and a day out.

The consumer is hesitant now but optimistic for the future

A combination of a surge in cases, the emergence of new variants and the imposing of the latest lockdown – second in its severity only to the original – means that consumer anxiety has hit some of its highest levels.

The number of consumers who say they are unaffected and unconcerned by the pandemic has plummeted – down from 23% in October to 6% now. Meanwhile, those who say they are struggling and worried has risen, up from 36% in October to 43% now.

Consumers are worried about both their own health (33% are extremely concerned) and that of their family (43% are extremely concerned). Such concerns are at the highest level since June 2020, when the first lockdown was in place. Comfort in everyday activities, such as going to the grocery store, has dropped, falling back to June/July 2020 levels.

Vaccination provides hope, but the expected retail splurge may be delayed

Consumers want a return to normal life and see vaccinations as the best route, with 87% of consumers planning on having the vaccine, once they are able. One-third believe that once they have the vaccine, life will be better than before the pandemic; however, there is a note of caution, with more than half (55%) believing that the virus will only stop impacting their lives after most of the population is vaccinated.

This last point is crucial, as it suggests that the big change in consumer behaviour will come later in the summer when the majority of the vaccination programme is due to be completed and restrictions lifted, rather than as soon as lockdown begins to ease.

In the meantime, consumers want safety and hygiene factors to remain in place and for retailers to adopt whatever further precautionary measures may be introduced, such as vaccine passports. More than half (56%) say they are more likely to use retailers that make it mandatory to be vaccinated and 70% are happy to carry proof of vaccination.

A greater positivity around financial health

Although consumers are anxious about their health and surrounding environment, their willingness to indulge themselves in the longer term is high. In nearly half of categories (45%), more consumers are planning to increase their spending over pre-pandemic levels than are considering cutting back below pre-pandemic levels. This compares with 29% of categories in October.

This repressed demand is partly the result of greater positivity around finances. More than half (55%) are trying to save more than in the past, perhaps mindful of the initial impact the pandemic had. More than a third (38%) are in a better financial position because there is less to spend on.

UK consumers

33%

say they are extremely concerned about their own health.

UK consumers

55%

believe that the virus will only stop impacting their lives after most of the population is vaccinated.

Consumers plan to spend more

45%

of categories will see an increase in spending compared to pre-pandemic levels.

The recent Budget announcement, with news of extended furlough and further financial support, will have provided consumers with even more certainty around their present and future finances. 30% of consumers believe that they will be better off financially in a year, even before the Budget was announced, and those who think they will be worse off is now at its lowest level (17%) since the pandemic began.

Three basic needs - a holiday, a haircut and a day out

Consumers want a return to normal and are likely to focus their initial spending on three basic needs – a holiday, a haircut and a day out. 43% plan on spending more on a holiday post-COVID-19, up from 31% in October. 29% plan on spending more on personal care services, nearly double the October figure of 17%. And 37% are planning on spending more on out-of-home recreational services (versus 26% in October).

It’s not just what they want to buy but also where that spend takes place that must be considered. Consumers are increasingly looking forward to a return to store. The proportion of consumers planning to shop online for items they previously bought in-store has fallen: from its peak of 46% in June 2020 to 38% in February 2021.

A need to improve the online experience

Part of this is due to the desire to return to the social aspect of shopping in-store. But the fall is also born of increasing frustration with the online experience and the fact that it doesn’t offer the immediacy and control of physical stores.

This is critical for retailers to acknowledge. Customers have shifted online, and behaviours have changed for good, but tolerance of the challenges of online ordering that were evident at the start of the pandemic has since diminished.

What were niggles are now full-blown pain points. 50% of consumers say that they are frustrated with expensive deliveries, 28% by slow deliveries and 25% by not being able to easily find what they are after.

These frustrations are particularly evident in the grocery sector where almost half (49%) of consumers say they don’t shop online because they have less control over purchases, and only just over 1 in 10 (11%) believe grocery websites are better than physical stores.

The omnichannel experience will continue to be critical

The balance of store and online will continue to be important for shoppers that research and buy across channels, although its importance varies according to category. For example, 43% of beauty and cosmetics consumers who buy online will have browsed in-store first, while 57% of consumers who buy technology in-store have researched online first. This means that making it easy for consumers to browse on one channel and purchase in another channel will be critical to success.

Price remains key but growth is expected across several categories

We have already seen some of the main categories where consumers are looking to spend; holidays, personal care and days out. Sectors that complement these activities are also expected to perform strongly, with around one in five consumers expecting to spend more on clothing and beauty.

But consumers are also revamping lifestyles and looking to get healthier, with plans to reduce their spend on alcohol and tobacco and increase spend on fresh food and non-alcoholic beverages.

Two other strong trends emerged during the pandemic and are expected to continue. The first, spend on the home, as consumers revamped gardens and interiors when they were confined to their homes; this is expected to continue to rise with 19% saying they will spend more.

Secondly, with the increase in pet ownership during lockdown, 14% of consumers plan to spend more on pet supplies.

But price will remain important, returning as the most important purchasing criteria across all categories. This is supported by a greater willingness to shift to store brands or private labels than previously, with 20% of consumers switching brands to reduce costs.

What you must do

The latest EY Index holds much promise for retailers but it’s important to acknowledge that the challenges of the pandemic will continue. Anxiety about hygiene will remain, retailers must continue to practise and promote the in-store hygiene measures that have been were adopted during the height of the pandemic, as well as embraceing any new operational measures that might be suggested.

Online, they must continue to improve their offer, ensuring that all elements of the online experience satisfy increased customer expectations. Retailers must not underestimate the desire of consumers to re-engage in the social aspect of shopping too. Events and in-store experiences will be more important than ever to engage customers as restrictions ease and provide a great opportunity to encourage the customer back to store.

Consumers are ready to spend, and retailers must be prepared for the opportunities across several categories, but particularly those related to their social life, as they reconnect with loved ones in person.

Four ways to make the most of consumers’ increased desire to spend
  1. Harness the power of the store and leverage the consumer desire to re-engage with the social aspect of shopping; design a post-lockdown programme of in-store experiences for customers.
  2. Ensure the online experience and offer continues to evolve as  consumer expectations rise, competition intensifies and the economics of omnichannel shift.
  3. Adapt the proposition to ensure you have the right range to anticipate consumer trends that translate into relevant ranges to take advantage of category growth.
  4. Understand the importance of the value equation and critical roles played by brands, own brands and private label in giving consumers the right mix.
  • Methodology

    We surveyed 14,483 consumers across the US, Canada, Brazil, the UK, France, Italy, Germany, Spain, Denmark, Sweden, Finland, Norway, India, the UAE, Saudi Arabia, China, Indonesia, Japan, Australia and New Zealand from 25 January to 4 February, 2021. Of those, this article focuses on 1,000 UK respondents. The survey questionnaire covered current behaviours, sentiment and intent.

Summary

In the short term, consumers remain nervous, but longer-term confidence is returning and there is a pent-up demand to spend across several categories. However, to take advantage, retailers not only need to ensure a great online experience but must maximise opportunities to draw customers back in-store too, making the most of the consumer desire for social experience and engagement.

About this article

Authors
Mona Bitar

UK&I Consumer Leader, Ernst & Young LLP

Experienced business advisor for over 25 years. Amateur poet and historian. Brings multi-cultural perspectives as a proud Palestinian Brit.

Silvia Rindone

EY UK&I Retail Leader

Strategic mind with a pragmatic spin. Intellectually curious. Mother of two. Passion for art, food and travel.