Mon 18th May 2020
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Last week the government updated its public guidance to control the outbreak of COVID-19 and it provided a roadmap of its plans to restart the economy and return the UK to a more normal way of life.
While there remain many unknowns, these updates do provide further information that will help us plan more effectively.
Here we assess some of the key changes in guidance and consider the implications for brands and retailers trying to navigate their way through the coming months.
We will continue to spend a lot of time at home in the short-term
While the government has changed its core ‘Stay at Home’ message to ‘Be Alert’, in the short-term people will continue to spend a lot of time at home compared to the long-term average. As such we expect behaviours such as online shopping, home delivery, scratch cooking, video calling and a heightened awareness of local communities to remain at high levels, at least for the next couple of months.
We find that shoppers are becoming acclimatised to a new way of life, in particular spending more time at home and establishing new routines. As well as seeking inspiration and ideas to keep entertained and busy, we are starting to see people become increasingly welcoming of more traditional brand comms, advertising and promotions – including more light hearted and amusing content that might have been viewed as inappropriate a few weeks ago.
Sport and outdoor activities will benefit as restrictions on exercise are eased
Perhaps the greatest immediate change in guidance is the loosening of restrictions on the amount of time we can spend outside of the home, with people now allowed to take as much exercise as they wish. In addition, people are now allowed to play sport with one other person. Ironically, despite Wimbledon being cancelled this June, we expect participation of tennis this summer could reach new heights.
With the summer approaching, we expect families to engage more in outdoor leisure and sport. We also expect a jump in demand for fitness clothing, shoes and accessories as people expand their exercise regimes, particularly while gyms remain closed.
Food-to-go, convenience channel and fuel retailers start recovery as many return to work
The revised advice encourages those that can’t work from home to return to work, including many in manufacturing and construction. A steady increase in people working will drive demand for food-to-go, especially in convenience stores while café and other foodservice businesses remain shut. We also expect the fuel forecourt channel to experience a sales uplift over the next few weeks as many people return to work and road traffic increases.
Restrictions on public transport use looks set to increase levels of cycling, walking and running to work. As such, promotions and other marketing activity relating to these areas are expected to attract greater interest.
Early planning will unlock back to school opportunity
The government is planning to start schools back up on a limited basis in June, subject to the infection level remaining under control. This move itself is unlikely to present a significant opportunity for retailers or brands. First, only reception, year one and year six are to return to school. Also the government is not going enforce the return, so actual pupil numbers are likely to remain low. What is more significant however, is that it increases the likelihood that schools will reopen on a significantly greater scale in September. This means that retailers and brands need to start to prepare for ‘back to school’ now.
There are a few major points to bear in mind.
First, budgeting will be front of mind. We know that budgeting is always a major priority for shoppers during back to school, however we expect it will be elevated this year, with shoppers’ financial concerns elevated. As well as offering great value, we suggest collector and loyalty schemes have a role to play during summer to help ease the financial burden. We also expect that many shoppers will welcome the early introduction of back to school ranges to help spread the cost.
Second, convenience will be especially important this year. As well as substantially scaled up online ranges and capacity, supported with buying guides, click and collect is likely to be more popular. We suggest upweighted focus on social channels and other digital channels to inspire shoppers while at home, and social posts should be shoppable to improve convenience and drive conversion. The in-store experience should be adjusted to give shoppers easy access to essentials and high selling lines, including the introduction of more comprehensive ‘shop-in-shop’ store layouts.
Finally, we suggest back to school plans and promotions are flexible and can be adapted if the return to schools is delayed. Digital based solutions and innovations should be the focus of campaigns and initiatives to ensure maximum flexibility.
New challenges when non-essential shops to reopen
We have already seen the reopening of garden centres, which will increase shoppers’ focus on their garden and outdoor activities over the next few weeks into summer. We expect more time spent in gardens will lead to a growing interest in BBQ this year – indeed we could see shoppers become more adventurous in their BBQ skills, from cooking techniques to making marinades, following the trends seek in the kitchen over the past few weeks.
In addition, we are already starting to see a steady reopening of many retail businesses that had chosen to close, but could have stayed opened legally. Many DIY stores, for example, have reopened, and we’ve seen some food-to-go businesses re-open for takeaway, including select Greggs and Subway outlets. This trend is likely to continue as more businesses feel confident that they can meet necessary social distancing rules. This is likely to rejuvenate the embattled food-to-go market in particular.
Step two of the government’s plan, which is likely to start in June, will lead to a more substantial reopening of the retail sector. As well as helping increase demand, this phase is likely also to negatively affect sales of supermarkets, who are currently benefiting from these closures. It may also lead to a decline in overall online sales, though we expect they will remain well above the pre-COVID base line as shoppers choose to avoid public places, and as a result of what we believe will be a long-term shift towards online shopping.
The broader reopening of retail will come with significant challenges. Of course many insights can be gained from analysis of supermarkets’ tried and tested solutions to social distancing, contactless payment and protection from colleagues. However, sectors like clothing will need to consider that trying on clothes will probably not be possible. Smaller stores may find social distancing measures exceedingly difficult to implement. They also need to face the reality that, even when they reopen, many shoppers will still prefer to buy online, the financial implications will continue to be damaging for physical retailers and shopping centre owners/landlords.
The economy remains the greatest influence of shopper behaviour
As Savvy has previously stressed that it will be the economy which will have the greatest impact on shoppers’ spending habits and behaviours over the coming months. Recent data from the ONS shows that the economy shrank by 2.1% in the first quarter of the year, and economists widely expect a deeper decline in Q2. We have also seen a substantial fall in consumer confidence since the start of the COVID-19 outbreak.
However, the recent loosening of restrictions, in particularly the encouragement of people to return to work, will help restart economic activity and may help improve consumer confidence a little.
News that the furlough scheme has been extended should help steady confidence. However, as we have previously highlighted, the scheme is acting a safety blanket and, in the medium term, it is likely that unemployment will increase significantly.
Given uncertainty shoppers are anticipated to remain cautious in their spending habits for the foreseeable future, especially when considering higher-ticket and premium purchases.
In food, drink and grocery, we expect demand will continue to return to normal over the next few weeks. Problems following panic buying are now largely resolved, and we expect improvements in the food-to-go market over the next few weeks. Supermarkets will continue to benefit from additional meals being eaten at home while restaurants and cafes remain closed.
We remain firmly of the view that recessionary shopping behaviours, such as use of coupons, shopping around and budgeting will all increase this year and into 2021. We also expect that online and larger supermarkets will gain market share as shoppers try to budget more effectively, and shoppers avoid unnecessary shopping trips
The shopper’s perspective
Over the next couple of weeks Savvy will be running its latest Shopper Panel research. As well as gaining an up-to-date view of shoppers’ attitudes, priorities and concerns, we will be analysing the findings in the context of new government and retailer developments, to gain fresh shopper insights and a revised forecast of future behaviours. We look forward to sharing findings over the coming weeks.
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