Fri Apr 24 2020
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For all the trends and changes that are emerging, there is little doubt that the economic fallout of COVID-19 will have the greatest impact on shopper behaviour over the next few years.
Before this crisis we were already reporting the rise of recessionary-like shopping behaviours, including the growing use of discounters, increasing own-label participation and caution in trading up. In January we also highlighted a deterioration in our outlook for restaurants, bars and pubs as shoppers reported plans to cut back on eating and drinking out.
Since then we have seen consumer confidence collapse. Latest figures from the GfK Consumer Confidence Barometer showed its headline measure falling by 27 points in a single month.
Unfortunately, things are likely to get significantly worse before they get better, in part because at the moment the economy is being shielded by the government’s furlough scheme and the deferral of mortgage payments by those unable to meet their monthly obligations.
These measures will not last forever, however, and in time we will start to understand the true economic impact of COVID-19. Even the most optimistic forecasts factor in the inevitability of rising unemployment, a recession and, in the medium-to-long-term, higher levels of taxation.
Shopper’s finances, already strained, will come under severe pressure.
Re-evaluation of value
The changing economic environment is already leading many shoppers’ to reframe their perceptions of value and we expect that trend to intensify over the months ahead.
Shoppers feel under threat and will become more risk averse in their attitudes and behaviours. Budgeting and money saving initiatives will become the primary influences in decision making.
For younger shoppers this reframing of value will be most pronounced. For millennials and gen Z, this crisis is their first economic shock – their only adult experience of recession and rising unemployment.
Wants versus needs
Another value consideration relates to shoppers’ changing perceptions of what is essential and what is not.
In the past few weeks many shoppers have become fully aware of how little they can spend, from realising how much eating and drinking out had cost, to people reviewing their monthly direct debits to decide what should stay and what should go.
The boundary between what is viewed
as essential and
non-essential expenditure continues to shift.
Changing dynamics on the supply side will also alter shoppers’ balance of the value equation.
Inflation, particularly on many imported goods, will push up prices. We may, for example, start to see greater focus on seasonal produce
Also, we have already seen how supermarkets have substantially reduced promotional participation in recent weeks. How quickly and to what extent will promotions be reintroduced?
The financial implications will be wide reaching and, in many cases, difficult to accurately predict. However, Savvy’s initial view of the financial implications include:
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