Two things are certain. First, the COVID-19 crisis will eventually come to an end. Second, humanity will forever be changed by this pandemic. Nowhere will this be more evident than in the way people consume goods and services.
According to a consumer behavior study conducted by the Nielsen Consulting Group, the new normal, post-COVID-19, will be marked by people having a renewed consciousness about health and well-being and extreme meticulousness about hygiene. As we move forward, the origins of products and their hygienic conditions will become a deciding factor whether certain products are patronized or not. Preferences will shift from mass produced food products to organic foodstuff even if they are sold at a premium. A partiality for locally grown and locally manufactured products will emerge. E-commerce will hit the mainstream and home shopping will become the norm.
China was the first to feel the full impact of the COVID-19 pandemic and the first to get out of it. Life in Chinese communities is gradually going back to normal. McKinsey & Company, a global think tank and consulting firm, conducted a survey in key Chinese cities to quantify the shift in consumer habits after the COVID crisis. The results were insightful and should be useful not only for regular consumers but more so for those involved in fast moving consumer goods, retail, and hospitality.
Bear in mind that the survey was conducted in the 3rd week of March, hence, things are still subject to change. Nevertheless, the results give us an indication of the trends that are emerging for us in the Philippines.
For ease in understanding, let me present the results in bullet point form.
About 55% are likely to permanently purchase their groceries online after the crisis.
About 25% have shifted away from their primary stores (or usual vendors) of which 50% have no intention of going back to their old vendors.
About 10% will visit local farmers markets more frequently, post COVID-19, than they did before the crisis.
ON CONSUMER GOODS:
About 33% have switched brands of consumer goods during the course of the crisis of which 20% have no intention of switching back to their original brands.
Only 85% will consume the same amount of skincare, personal care, and cosmetic products as they did before the COVID-19 crisis. The rest will reduce consumption.
Only 84% will consume the same amount of basic food products as they did before the COVID crisis. The rest will reduce consumption.
Only 79% will consume the same amount of snack food products as they did before the COVID crisis. The rest will reduce consumption.
Only 82% will consume the same amount of alcoholic beverages as they did before the COVID crisis. The rest will reduce consumption.
About 35% will consume the same amount of dairy products, 52% will consume more while 13% will consume less.
About 41% will consume the same amount of deli meat products, 39% will consume more while 20% will consume less.
About 40% will consume the same amount of frozen food, 45% will consume more while 15% will consume less.
About 15% have no intention to eat out as frequently as they did before the crisis.
About 25% of pre-COVID-19 walk-in volume is the rate restaurateurs can expect immediately after the lockdown.
About 99% of take-out and delivery transactions will return to normal immediately after the crisis.
About 15% increase in sales for pre-packed and ready-to-eat food will be realized.
In summary, a decline in demand was noted across all consumer product categories surveyed except for sanitary, medical, and cleaning products.
The strong hold of leading brands have been broken, opening the way for trial usage of alternative brands. New brands that deliver on their promise will grab market share from the market leaders.
For restaurants, dine-in sales is seen to drop by 75% in the first month following the lifting of the lockdown, versus usual volume. Online sales for delivery will be the new source of customer traffic. Moreover, frozen food for home consumption will be an emerging category that is seen to increase over time.
The question on everyone’s mind is — how long before consumer habits revert back to their pre-COVID-19 levels?
Unfortunately, there is no precedent to this. The closest thing I could find was the length of time it took stock markets to recover after a major crash. While not an exact historical comparison, I argue that a correlation exists between consumer habits, corporate earnings and investor’ appetite for investments. So lets see at how long it took markets to recover after these crashes.
The Spanish Flu was a pandemic that occurred in 1918, stock markets across the globe crashed by 20% and recovered after seven months
The Great Depression occurred in 1929 and caused stock markets to spiral down by 89%. It took 26 months for markets to recover from their lowest point.
When Germany invaded France in 1940, stock markets worldwide plunged by 25.5%. It took only one month for stock prices to bounce back.
In 1987’s Black Monday, stock prices slid by 22.6%. Prices recovered after one month.
The Doctcom Bubble burst in 2002 and saw stock prices across the globe contract by 45%. It took 25 months before prices fully recovered
The Subprime Crisis of 2008 saw stock prices tumble by 53.7%. It took 16 months for stocks to regain their post-crisis values.
The COVID-19 crisis caused the average value of stock prices worldwide to plummet by between 25% to 41% so far.
Experts believe that markets, as with consumer habits, will begin their upswing when two events occur: 1. When the number of people that are infected by the virus begins to decline; and, 2. When people are allowed to go back to their daily work routine and the economy begins to hum again. If China is to serve as an example, it took two months for these two events to happen.
However, only when a vaccine is developed will consumer habits and stock market prices reach their pre-crisis levels again. According to the Cooper Academy of Investments, this could take 18 months to two years.
The business world will go through major changes after this crisis. While we are on quarantine, it will be wise to spend the time planning how we can benefit most from the new world order.
Andrew J. Masigan is an economist.