The evolving consumer: How COVID-19 is changing the way we shop

The ongoing COVID-19 crisis has altered how, when, and where we shop and what we buy. Digital has become more important than ever, brand loyalty has been shaken, and spending levels and are still below precrisis levels. During a McKinsey Live webinar, partner Kelsey Robinson and senior expert Tamara Charm discussed today’s trends in US consumer spending—and which ones are most likely to stick.

Flight to digital: Digital adoption across sectors has increased dramatically in the past few months. Over the course of just 15 days, virtual appointments multiplied by ten. In five months, Disney+ built a subscription base that had taken Netflix seven years to achieve. Remote working, learning, and shopping likewise have surged. Reliance on digital was growing before the pandemic began, and a meaningful amount of this online penetration is expected to persist after the pandemic is over.

Shift to value: The increase in digital shopping hasn’t compensated for the decrease in consumer spending overall. One-third of Americans have reported a decrease in their household income during the crisis, and 40 percent say they are spending more carefully. Indeed, consumers expect to spend less in discretionary categories, such as apparel, vehicles, and travel, while more on essentials such as groceries and household supplies.

Shock to loyalty: Since the crisis began, three-quarters of US consumers have changed something about the way they shop, including one-third who have tried a new shopping method such as delivery or curbside pickup and nearly one-third who have tried a different retailer. Value—which might entail lower prices, promotions, larger package sizes, or less expensive shipping—is the primary reason for this unexpected shift to different brands. There has been a move to products that are less expensive.

Homebody economy: Only about a third of US consumers are engaging in normal out-of-home activities, and 80 percent say they’re concerned when they leave home. Spending reflects this shift, with more consumers spending money on at-home activities such as gardening as well as software and electronics for working—or learning—from home. When consumers do venture out, it’s most often to shop for groceries and other necessities.

New holiday outlook: Only 19 percent of Americans are optimistic about the prospect of a fast economic rebound in the United States. It’s therefore not surprising that 42 percent of US consumers intend to spend less on holiday shopping this year than last year, and roughly half, across multiple generations, expect to do more shopping online. In keeping with the renewed focus on value, it’s also likely that more consumers will pursue blockbuster holiday sales this year.

Questions and answers from the webinar

1. What are your thoughts about how global markets compare with the US data?
   Across many countries, including the United States, Brazil, Mexico, and much of Europe, our five themes—flight to digital, shift to value, shock to loyalty, homebody economy, and new holiday outlook—hold to varying degrees. Asia looks notably different. In China, consumers are no longer ensconced in a homebody economy, as they regularly venture out for day-to-day activities. In Japan, the shock to loyalty was notably smaller: while in all other countries, more than half of consumers made a change, in Japan only about a third of consumers did. In India, there is positive spend momentum among the consumer class as consumers prepare for the holidays.
2. Do you see a bifurcation with consumer perception of value? Are some consumers buying less but buying better, while other consumers are price shopping more often?
   While consumers across the board are looking for value in what they buy, lower-income consumers are trading down more than higher-income consumers are. In the higher-income bands, we’re also seeing consumers more likely to prioritize quality of goods and purpose-driven brands as reasons to try new brands or new places to shop, although the search for value is dominant.
3. How do you think firms can create value during holiday season, especially for online shopping?
   For the holiday season, firms should think about the following:
   
   • Provide consumers with multiple options to fulfill orders (e.g., buying online, in-store pickup, and curbside pickup). Consumers have shown us that they will change retailers during COVID-19 as they adapt to a redefined sense of convenience. It will be important to provide consumers the products they want, when and where they want to buy them.
   • Motivate holiday shopping now. Given the rush to online shopping and anticipated fulfillment challenges, retailers have already begun to “pull demand forward”—through early product availability, surgical promotions or offers, and direct communications to shoppers.
   • Invest in digital infrastructure and operation logistics. Given the expected heightened traffic on websites and mobile apps, retailers should ensure that their digital/mobile storefronts and operational backbone can support the increase in volume. This also means upping warehousing and customer support (e.g., chat functions).
   • Build the basket. With less opportunity for consumers to explore and touch and feel products in stores, retailers will need to focus on personalizing the best assortment for each shopper, building baskets based on known customer characteristics, preferences, and categories, and SKUs with tailwinds this holiday season.

For more on this topic, please watch the webinar recording and read the article “Consumer sentiment and behavior continue to reflect the uncertainty of the COVID-19 crisis.”