10 minute read 26 Jun 2020
Old couple looking at plastic card

Future Consumer Index edition 3: getting US consumers beyond the pandemic

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.

10 minute read 26 Jun 2020

As Americans settle into new routines, how can retailers and brands prepare for what they can’t predict?

Despite the expectation of a second wave of COVID-19 in the coming months, Americans seem to finally be settling into a new routine. The burning question now is: what will consumers think, feel and do when the pandemic is behind us? And how urgent is it for retailers and brands to move past responding to current pandemic reactions and onto addressing the lasting transformation of the consumer as we know it?

Consumers have certainly changed in a short amount of time. They’ve learned new ways to shop, taken a hard look at what they buy, grown accustomed to life from home and leaned into an entirely new mindset around safety. And as uncertainty persists, there could be more fundamental changes to come, but organizations can’t wait for certainty to adapt.

That’s why the third edition of the EY Future Consumer Index (the Index) focuses not only on the now and next, but also on the world beyond COVID-19. If we can begin to define who the future US consumer will be, companies can start to build the agility they need to face a second wave, a shift away from urbanization or any other major changes that might still be ahead.

One thing is certain — there is no going back to “the way things were” pre-pandemic, and only those organizations that strive to go beyond business as usual and become better will succeed no matter what tomorrow brings.

New priorities for a new now

We know that we can’t put 100% stock in people accurately predicting what they’ll do in the future, but over the course of the past three months, we sought to connect intent to actual behavior to determine what’s going to stick and how companies must respond.

The first edition of the Index uncovered four distinct segments that define consumers’ in-the-moment reactions to the COVID-19 pandemic and the five segments we can anticipate just after. The second edition mapped those same consumers as they relaxed into their shelter-in-place orders and adjusted to life during a global pandemic.

Over time, we saw fewer consumers defaulting to the more extreme reactions of excess cutting or spending. That same pattern of behavior is true this month — and much more pronounced.

As all states are in some form of lifting restrictions, we see even more movement toward stability. In our segments that describe how consumers are responding now, we’ve seen a dramatic shift in current behavior toward comfort and increased spending across the board. In fact, the “stay calm, carry on” segment overtook all others to become the largest by a considerable margin and “hibernate and spend” also saw a jump.

Similarly, as consumers assess their behaviors just after the pandemic, the “get to normal” segment increased nearly 20% to encompass almost half (48%) of respondents, much higher than any of the other four “next” segments.

Now segmentation numbers
Next segmentation numbers

Further emphasizing consumers’ readiness to get on with their lives, in April, the vast majority said it would be months or years until they were comfortable doing normal pre-pandemic activities. However, those numbers have changed drastically in just over a one-month period.

Fifty percent are now comfortable dining at a restaurant, 51% are okay with going to a clothing store, 60% would go to a hair salon and 62% are comfortable going back to work in just days or weeks. In fact, in stark contrast to April, the only activities that the majority of Americans aren’t comfortable doing for months or years are traveling on an airplane (75%) and going on a cruise (83%).

This reflects a rapid shift in comfort levels as states and cities reopen, which could be attributed to the fact that these activities look much different than they used to, appear much safer than they used to, and consumers are ready to establish a new routine in this world.

What priorities will persist well beyond the pandemic?

At Ernst & Young LLP, we think in three time horizons — now (current state), next (immediately following the pandemic) and beyond (future). When we think about the consumer, we’ve seen the now, we’ve anticipated the next, but what happens in the years when the pandemic is a memory? We asked. Beyond the pandemic, five new consumer segments emerge, each with unique priorities for the future. The five segments are: affordability first, health first, planet first, society first and experience first. Organizations would be wise to pay particular attention to where consumers are placing their trust, money and time.

  • Health first

    The largest segment of the future US consumer will make choices that protect their health and that of their family before anything else. They will choose brands and products they trust to be safe, and thus transparent. When it comes to online, this segment of shopper will stick to ecommerce as they look to minimize unnecessary risks and do their research on the products and companies that are safest.

  • Affordability first

    Tied for the largest, this segment is comprised of price-conscious consumers. Their main concern is to live within their means. “Affordability first” consumers will not buy things they don’t really need but when they do need something, they will look out for the best deals. This means they are less brand loyal and will shop more online because of their ability to price compare. For this segment, price transparency will be pivotal.

  • Society first

    “Society first” consumers are purpose-driven, led by the strong belief that we should work together for the greater good. Honesty and transparency will be paramount to reach this segment. They will want proof that retailers and brands are putting the needs of society and the community on par with or above profits.

  • Planet first

    These consumers are also purpose-driven, but they’re led by concern for their impact on the world. They will do what they can to cut waste and reduce their environmental footprint. “Planet first” consumers will own less, and they won’t mind having fewer choices for what they buy, if it means they’re doing the right thing for future generations. For brands, alignment to planet-first beliefs about the environment is the way to reach them.

  • Experience first

    In contrast to the externally focused “society first” and “planet first” segments, the smallest segment of consumers lives for the moments that will enrich their personal lives. When it comes to what they buy, they will enjoy trying new things. These are the consumers likely heading back to the store first. As they look for products and services they feel are made just for them, personalization for this segment will be key.

The commonality between all these future segments is the importance of meeting their needs regardless of the channel they choose. And the largest two segments will continue to accelerate the shift to online.

Omnichannel as the only channel

Omnichannel is certainly not a new concept, but there are few who’ve mastered it. While many organizations predicted that the digitally enabled customer journey was the future of the industry, they also thought they had years to perfect it. The widespread acceptance of online shopping for everything from discretionary items to everyday essentials is here, both for seasoned and “new to digital” consumers. And with it, so is the pressure to get the digital experience right … now.

There is no doubt that the absolute number one priority right now is online.

Consider this: pre-COVID-19, less than 10% of all food sales were running online. Today, we see more than 45% online. That’s a dramatic shift — not in months and years, but in days and weeks. There is no doubt that the absolute number one priority right now is online. With consumer spending normalizing, the time to successfully build out a seamless shopper journey and build new brand loyalty is growing short.

Channel of the future

43%

of Americans say they would shop more online for products they previously bought in stores.

Online volumes will only continue to increase, especially if the second wave of COVID-19 comes as expected and consumers have even more time to get engrained in e-commerce. If companies haven’t already started to reconfigure their business for this shift in channel, how much further behind will they be? E-commerce and direct-to-consumer should be viewed as foundational capabilities now. The digitally enabled customer journey is the future of that capability.

The digitally enabled customer journey powered by transparency

A core component of a seamless shopper journey? Trust. Trust in the experience. Trust in the retailer or brand. Trust in price. Trust in the safety of the products and services. Trust in sourcing.

In April, we focused on trust as the new currency and that hasn’t changed. In fact, it’s become more apparent as authenticity and honesty, clear labeling and transparent origin or product source remain the top three most important influences on purchasing behavior. Can consumers trust the brand and retailer to sell them a safe product, a product that was authentic? Can the consumer trust them to provide a safe environment to shop, live or play? The importance of trust will be a cornerstone of long-term shareholder value for brands.

Core component

87%

of consumers say transparent source is important when making a purchase decision.

Build trust by bridging transparency with a seamless shopping experience that speaks to the future consumer segments looking for brands that prioritize their “first.” So, how can retailers and brands provide what the digitally led “affordability first” or “health first” consumer is demanding?

  • Use data as an accelerant

    Consumers want to know the journey of their products, start to finish, from the manufacturing line to the delivery at their door. Sharing data across the value chain can accelerate your ability to build trust and reinforce transparency. When a consumer can track and trace from source to consumption, it makes them feel better both about the product and the company, and ultimately builds loyalty across channels. This data-sharing is much simpler with a shorter supply chain.

  • Future-proof your supply chain by shortening it

    For the last decade, the industry has been lengthening and leaning out their supply chains — but the consumer is pushing back. Long supply chains disconnect transparency because they introduce complexity, opaqueness and multiple players. In turn, this makes data-sharing across the value chain, which fuels transparency, a challenge. With a shorter, more secure supply chain, organizations in turn build implicit trust with consumers.

  • Consider price as a core capability

    Now, more than ever, every consumer is one click away from comparing the price of a good at multiple retailers or direct from the brand. And with the largest future segment of consumers so focused on price, companies can’t afford to let their pricing strategy be anything but a top priority. Price is inextricably linked to the digital experience, and retailers and brands can easily erode loyalty if they don’t consider price as a value-driver and relationship-builder.

  • Model the future scenarios and segments

    As the consumer continues to change, companies must understand how those future segments impact their operating model. Scenario modeling allows retailers and brands to build guardrails as they transform for the future and for the better. This drives assortment and SKU rationalization, choices around your supply chain and sourcing, strategies for pricing and how to maximize growth levers in the long term. Most importantly, scenario modeling helps identify the key capabilities needed to create a digitally enabled customer journey where consumers trust the retailer whether they buy online and return in store; whether they seek out a personalized product or service; whether they come back once or many times.

While consumers may be settling into the new now, the pandemic has upended their priorities for the long term. Companies who want to survive beyond the pandemic must focus on how to serve the future segments of consumers by focusing on building trust through a seamless omnichannel shopper journey powered by honesty and transparency. And with consumers more willing to spend money and adjusting to online shopping, there’s no time to waste. 

  • Methodology

    We surveyed 14,074 consumers across the US, Canada, Brazil, UK, France, Germany, Denmark, Sweden, Finland, Norway, India, United Arab Emirates, Saudi Arabia, China, Indonesia, Japan, Australia and New Zealand during the week of 8 June 2020. Of those, the article above focuses on the 1,005 US respondents. The survey questionnaire covered current behaviors, sentiment and intent. The data reported here relates to US respondents only.

Summary

Despite the expectation of a second wave of COVID-19 in the coming months, Americans seem to finally be settling into a new routine. The burning question now is: what will consumers think, feel and do when the pandemic is behind us? And how urgent is it for retailers and brands to move past responding to current pandemic reactions and onto addressing the lasting transformation of the consumer as we know it?

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.