9 minute read 29 May 2020
Multi generation family eating outside together

US Future Consumer Index edition 2: considering the outcome of easing restriction

By Kathy Gramling

EY Americas Consumer Industry Markets Leader

25-year consumer products and retail veteran. Integration and teaming advocate. Passionate mentor and transformative leader. Wine enthusiast.

9 minute read 29 May 2020

As US consumers emerge from lockdown, companies look to bridge the gap between today and the way forward

As daily life for Americans continues to evolve, some parts of the country are easing shelter-in-place restrictions, while others are extending lockdowns into the summer months. With some Americans able to return to stores, restaurants and entertainment venues, will people fall back into old habits? Or will skepticism and safety concerns persist, creating an entirely new reality for consumers and companies?

The EY Future Consumer Index (the Index) tracks comfort levels, priorities and concerns across the country, and in the varying levels of lockdown, to provide insight into how the world might look in the months and years to come.

The second edition of the Index shows that as consumers get back to some semblance of normalcy, many are still very uncomfortable engaging in their pre-pandemic activities. It suggests that trust may play a big factor in this mentality.

As more states relax restrictions, companies must think about how they can anticipate and meet the needs of consumers who likely will never return to the lifestyle we knew before COVID-19. 

Despite uncertainty, consumers settle into new normal

The first wave of our Index data uncovered four distinct consumer segments emerging out of the COVID-19 pandemic. With the second set of data tracking how consumer behavior and sentiment are changing over time, an interesting reality emerged: those consumers who were most pessimistic about the pandemic may be settling into the current reality.

While two of the four current consumer segments stayed the same from month to month, the Cut deep segment shrunk from 23% to 19%, with those respondents moving into the less pessimistic Save and stockpile segment. 

The same is true when you look at the segments US consumers might move into next. This month, you see consumers’ expectations of their post-COVID-19 behaviors start to level out from the extremes of cutting or overspending.

Despite consumers’ sense of acceptance and settling into what’s happening, there’s still an indication that it is and will be a very different normal, with anticipation of the next outbreak in the not-so-distant future and more skepticism about how long returning to normal will really take since last month. 

The majority of US consumers (78%) think there will be another outbreak within one year, and 53% of them think it’ll be within the next one to six months. In April, consumers were more likely to report it would take days or weeks for the way they shop (51%) and the way they dine out (48%) to return to normal. However, according to the latest data, consumers now feel that recovery will take place further out. Now, just 47% expect shopping to return to normal in the coming days or weeks, and 35% say the same about going to restaurants, bars and pubs.

As consumers accept that the current reality might press on for some time, how will retailers and brands shift their business models to follow suit? It starts with addressing the consumers’ increased preferences for staying home, using digital and relying on trusted relationships. 

Our global point of view explores how Chinese consumers, who have been out of lockdown longest, compare with consumers from the rest of the world and what US companies can learn from this as we move into a post-COVID-19 reality.

Will stay-at-home be the choice when it’s not the requirement?

As many states transition to their reopening plans, this month’s data tracked consumer sentiment based on their lockdown status, including full lockdown (52%), partial lockdown (26%), eased restrictions (18%) and no restrictions (4%). 

Perhaps the most interesting indicator of what’s to come is US consumers’ reported comfort level around engaging in the activities they pursued prior to the outbreak. 

In line with how long they expect it will take for things to return to normal, the majority of respondents reported that it would be months or years for them to feel comfortable (or that perhaps they never would feel comfortable) flying on a plane (80%), going to bars and pubs (75%), exercising in fitness clubs (74%) and going to restaurants (61%). Is this an indicator that even when we all no longer have to stay home, we’ll still do so anyway?

What’s more, this doesn’t change much regardless of the level of restrictions. Consumers in cities and states that are now partially or fully reopened are just as likely to feel this discomfort as those still in lockdown. And it shows, with more than half of those under eased restrictions still visiting physical stores less (75%) and cooking at home (59%).

Even for consumers seeing restrictions eased, they’re still shopping from home with a digital-first mentality. Over the next month, nearly 9 in 10 respondents reported that the frequency of shopping at online retailers and using grocery delivery would stay the same or increase. This points to a new reality that even when stores are open for business, consumers will default to digital.

Despite the fact that many now can go out, it seems consumers don’t want to do so. The real question is — why? Our data points to trust.

Is trust the new currency?

With the exception of health care providers, the vast majority of US consumers lack trust in all major institutions. In fact, only 18% of respondents said they fully trust the national government, and 30% said they fully trust state and local governments. This consumer distrust extends to brands as well – only 21% said they trust brands, and 20% fully trust retailers. Each of these response rates have dropped since April.

When consumers don’t know who or where to look for answers and guidance amid uncertainty, how can they know when it’s time to return to normal?

When it comes to their trust in the future, 64% of consumers in the US say that in the next one to two years, they’ll prioritize brands they’ve purchased from before. And of the possible influences on purchasing behavior, authenticity; honest, clear labeling; and transparent origin or product source are among the most important.

Retailers and brands would be wise to turn their attention to areas where consumers are placing their trust and value now.

  • Reinforce the authenticity of your message

    Expectations around the sourcing and quality of our products – what they are, how they’re made, where they come from and how they get to us – have only intensified as a result of the pandemic. Consumers want to know what’s happening behind the curtain and understand the values of the companies they buy from, as well as what products they make and sell. With trust as the cornerstone of relationships with consumers, the time is now to double down on how you build trust with your customers. 

  • Consider what parts of your value chain should be local or domestic

    Consumer also trust what’s close to home. Forty-eight percent of respondents said that over the next one to two years, they’d prefer to buy domestic brands produced within the US, and 47% said they’d prefer local and independent brands produced by businesses in their community. Companies should consider bringing all or part of their value chain stateside to accelerate time to market, provide consumers with greater transparency and create more resilience with less reliance on foreign markets.

  • Develop a shorter, more transparent supply chain

    Food may be the product category most scrutinized moving forward. Food manufacturers and grocers should focus on shortening the supply chain to get consumers closer to their food. 

Can digital to bridge the gap between today and tomorrow?

The data is clear that even with easing restrictions, the escalated transition to digital platforms isn’t slowing down anytime soon. 

Thirty-eight percent say their shopping frequency will increase at online retailers in the next month.

Even consumers who prefer the in-store experience are using digital platforms first. But there’s a symbiotic relationship between physical and digital. We know that physical stores lead to a gain in overall traffic to a retailer’s website and increase its share of web traffic within the market – a phenomenon called the “halo effect.” But in the past month alone, there’s been a triple-digit increase in buy online, pick up in store (BOPIS) frequency, proving that the value of digital retail is growing exponentially, and the role of the physical store is shifting.

When physical options are less available, what should companies consider to use digital to their advantage? 

  • Evaluate the profitability of online channels

    With the profitability of e-commerce less than that of in-store options, efforts to increase basket size are essential. Companies also should consider the new consumer segments that may not have been their target previously. How do you capture the loyalty of a consumer who is used to shopping in store or has lost that alternative because the brands they were loyal to are now nonexistent, and keep them coming back online?

  • Weigh operating model implications

    A key focus around the increase in volume on the digital channel is the processes that must be in place not to erode margin. We talked about supply chain in our first Index point of view, but another key question is whether you can maintain and improve BOPIS and buy online, return in store (BORIS) experiences. Does your inventory, warehousing and distribution picture look different than it did before?

  • Consider the physical implications of digital operations

    Just because consumers are shopping more online, doesn’t mean the human element goes away. The omnichannel implications of initiatives like BORIS and BOPIS introduce the store to the online experience. But also, with an increase in digital retail comes an increase in reverse logistics. Retailers will need to be able to quarantine returned products and be prepared for these added costs. 

In the coming months, we’ll explore how consumer-focused companies can reach their audience digitally under evolving circumstances and the changing importance of brand, as well as other insights and actions, as we continue to track the impact of the pandemic on the US consumer each month.

  • Methodology

    This second edition of the EY Future Consumer Index is based on a survey of 12,843 consumers across the US, Canada, the UK, France, Germany, China, Brazil, Japan, Australia, New Zealand, India, the United Arab Emirates and Saudi Arabia in early May 2020. Of those, the article above focuses on the 1,022 US respondents. The survey questionnaire covered current behaviors, sentiment and intent. The data reported here relates to US respondents only.

Summary

As daily life for Americans continues to evolve, some parts of the country are easing shelter-in-place restrictions, while others are extending lockdowns into the summer months. With some Americans able to return to stores, restaurants and entertainment venues, will people fall back into old habits? Or will skepticism and safety concerns persist, creating an entirely new reality for consumers and companies? 

About this article

By Kathy Gramling

EY Americas Consumer Industry Markets Leader

25-year consumer products and retail veteran. Integration and teaming advocate. Passionate mentor and transformative leader. Wine enthusiast.