10 minute read 21 Aug 2020
EY - Woman holding mask

US Future Consumer Index edition 4: Human needs in the consumer season

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 21 Aug 2020

Consumer shifts are here to stay. Companies need to meet these evolving human needs and less-than-forgiving consumer expectations.

In brief

  • The jump in consumer confidence from last month has leveled off as many states in the US renew stay-at-home and quarantine restrictions and parents await decisions on what school looks like for the fall.
  • Certain human needs have intensified with the crisis — clarity, assurance, accessibility and convenience — and will be the new expectation in the next and beyond.
  • Companies need to rethink the consumer end-to-end journey, from enabling digital solutions to reimagining the food system, to maximize growth.

August is here, which means retailers and brands are gearing up for the season of the consumer, starting with the return to school through the bustle of the holidays. But, how do the fall and winter months look amid a pandemic where many schools are staying completely or partially virtual, consumers are still being frugal and holiday gatherings may be limited?

We’ve been tracking the impact of COVID-19 since April to understand what consumer shifts are here to stay. Over time, consumers have gone from extreme spending cuts early on in the pandemic to accepting their current circumstances and showcasing a readiness to get back to normal.

In the fourth edition of the US Future Consumer Index, the jump in consumer confidence from last month has leveled off as many states in the US renew stay-at-home and quarantine restrictions and parents await decisions on what school looks like for the fall. What are US consumers’ main concerns this month that are an omen for the season of spending? Price, transparency, safety and service.

The now, next and beyond consumer

The impact on where consumers shopped, what they spent their money on and how they bought was immediate but also will last long after COVID-19 is in the rear-view mirror. That’s why we’ve looked at consumers in the three time horizons of the now; the next, or just after the pandemic; and the beyond, or the future.

In the now, trends from last month remain, but they did stabilize, as an almost equal number of consumers are currently stockpiling (32%) as they are staying calm (34%).

EY - In the now

The same is true for how consumers will show up in the next. These segments may be where we see the biggest indicator for the fall and winter months. The good news is that while we still see a quarter of consumers express some caution and anticipate continued frugality or more spending cuts, many are planning for a return to normal (43%). As we’ve said before, though, a post-COVID-19 normal is not the same normal we’re accustomed to.

EY - In the next

Beyond the pandemic, a majority of consumers will prioritize price and the health and safety of themselves and their families. The third edition of the Index outlines the preferences and behaviors of the beyond consumer segments in greater detail.

EY - Beyond the pandemic

Human needs define the way forward

The shifts in consumer behaviors and preferences have only exacerbated the challenges consumer-facing companies were already grappling with across supply and demand, sourcing, channels, prices and portfolios. This is highlighted by certain human needs that have intensified with the crisis — clarity, assurance, accessibility and convenience — and will be the new expectation in the next and beyond. How do these human needs translate for retailers and brands trying to meet them?

EY - Human needs
Convenience: Do you have the agility to get consumers what they need when they need it?

For some time now, consumers have accepted the impact of the current environment on such things as shipping times, the ability to make returns and out-of-stock issues, but how long will that last? How long will consumers be forgiving of retailers and brands for the unforeseen, unintended and sometimes uncontrollable consequences of a global pandemic?

As we embark on the seasons where many consumers do the bulk of their shopping and buying, perhaps some of the most interesting findings from the Index this month have called service levels into question.

Consumer behavior

21%

of consumers are currently forgiving brands and stores whose service has been disrupted by COVID-19.

Only 21% of consumers are currently forgiving brands and stores whose service has been disrupted by COVID-19. Another 43% say quality of service has become a bigger priority for them compared with a month ago. In other words, consumers are no longer accepting of the pandemic as an excuse. Alongside their own desire to get back to normal is the desire for the companies they interact with to do so as well. That same mentality applies to an unknown future as half (50%) will switch brands and stores if the service they deliver falls below their promise in the next one to two years.

Retailers’ systems have been fatigued by inventory challenges, disruptions in transportation and logistics networks, and the accelerated shift to online that has impacted their own operations and the operations of the companies in their value chains. To combat these challenges in an environment where the consumer is no longer forgiving, you have to think about the touch points across their end-to-end journey. Loyalty in this day and age is dependent on a seamless digitally enabled customer journey.

  • Digitally enabled customer journey

    A majority of consumers (59%) are spending more time online than pre-COVID-19, not just for shopping, but across the board. That means you have to understand their digital journey from start to finish, and back again, and meet them at each point within it. Specific to retail, 55% are visiting physical stores less, and 34% are ordering more products online than they were before. As retailers look to develop and deepen relationships with consumers amid an accelerated shift to online, how can they power a better orchestrated customer journey — one that takes into account touch points and channels, data, marketing and content, technology and the operating model shifts that must take place to support the journey and create shareholder value?

Accessibility: Do you have the right quality, assortment and supply at the right price to satisfy the next and beyond consumer?

In the aftermath of a crisis, whether that be health, economic or social, accessibility to basic needs becomes paramount. It’s no different today, and that accessibility in the current environment is dependent on price and availability of products. It’s evident in our beyond segments, where “Affordability first” is the priority for the future. And it’s evident in the 60% of consumers who say product availability is a bigger priority now compared with a month ago and the 52% who say the same about price — both higher than any other priority.

When it comes to price, consumers are making changes to more affordable options. In the US, we may see a shift away from brands toward private label. A majority of US consumers are willing to purchase store brand packaged food (61%), home and household items (56%), and fresh food (54%).

This month’s global Index point of view covers five considerations for consumer goods companies in the age of affordability and private label. Accessibility requires brands and retailers to take a hard look at their SKU rationalization, product assortment on the shelves, demand planning and pricing models to maximize growth.

  • Maximizing growth levers

    There’s both a vulnerability and an opportunity when it comes to consumers right now. It’s open season for winning the consumer as they battle for the best price and products that are actually available. But there’s limited spend to capture when consumers continue to be judicious with their money. In fact, while 64% of consumers are open to trying new brands and products as a result of the outbreak, an almost equal number (62%) are cutting back on unnecessary spending.

    When your source of growth is capturing the consumer, how do you do so? When consumers have high expectations of brands and it’s easier to lose their loyalty, how can you continue to grow? How do you think about your portfolio and rationalize your SKUs? How do you think about the organic and inorganic growth opportunities ahead of you?

Assurance: How can you instill confidence that your products, processes and footprint are safe?

Despite more consumers showing up in the “normal” now and next segments, there’s still a hesitance to do many pre-pandemic activities due to health and safety concerns. Today, more than half of consumers say they are still uncomfortable eating in a restaurant (53%), going to a mall (52%) and trying on clothes in a store (58%).

Safety will change how consumers engage with retailers and brands both in person and online.

Americans are not only looking to retailers and brands to provide a safe environment and safe products but also willing to do their part. In the long term, the changes consumers have made to maintain health and safety now will continue into the future:

  • 69% will be comfortable having their temperature taken to be able to go to a store.
  • 66% will be more cognizant of hygiene and sanitation when shopping.
  • 64% will be more aware and cautious about their physical health.
  • 45% will use contact-less delivery or cashless payments to avoid touching things while shopping.
Clarity: When consumers want to know where their products come from, can your value chain help you tell them?

Over the past four months, the Index has shown that trust and transparency are paramount. When asked about the most important factors when making a buying decision, authenticity and honesty (44%), clear labeling (44%), transparent source or product origin (32%) and guarantee of origin (32%) have been the top responses for four months running.

The actions required to maintain trust and transparency that I discussed in the second edition still ring true. Reinforce the authenticity of your message. Consider what parts of your value chain are brought near or onshore. Develop a shorter, more transparent and diversified supply chain. This becomes even more important in food, where consumers are hyperaware of their food sources and transitioning to buying more fresh food to eat at home.

  • Food system reimagined

    Fundamentally, consumers’ eating habits are changing — what they eat, where they eat and what they care about when it comes to their food. Today, 55% of consumers are cooking more meals at home, and, in the future, one in four (23%) expect the way that they shop for and prepare food to change. And we already know that transparent sourcing is important.

    This has created a marked difference in the way agriculture and food companies — from producers and growers, to manufacturers and grocers — think about their operations to best serve the consumer. It requires food companies across the value chain to reimagine the food system. In this environment, they must consider the implications of a knowledgeable and cautious consumer who wants to know their food’s journey from start to finish. How does a shorter supply chain enable this? How does a more connected and organic value chain give the consumer confidence and clarity?

In the looming season of the consumer, retailers and brands would be well served to continue to track consumer expectations in this new environment. Winning companies know that they need to figure out now how to meet the evolving and amplified human needs in the next and beyond, or sacrifice consumer loyalty in this less-than-forgiving time.

  • Methodology

    This fourth edition of the EY Future Consumer Index is based on a survey of respondents in the US, Canada, Brazil, the UK, France, Germany, Denmark, Sweden, Finland, Norway, India, UAE, Saudi Arabia, China, Indonesia, Japan, Australia and New Zealand during the week of 20 July 2020. Of those, the article above focuses on the 1,001 US respondents. The survey questionnaire covered current behaviors, sentiment and intent. The data reported here relates to US respondents only.

Summary

The shifts in consumer behaviors and preferences as a result of COVID-19 have only exacerbated the challenges consumer-facing companies were already grappling with across supply and demand, sourcing, channels, prices and portfolios. This is highlighted by certain human needs that have intensified with the crisis — clarity, assurance, accessibility and convenience — and will be the new expectation in the next and beyond. How do these human needs translate for retailers and brands trying to meet them?

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.