The Pandemic Pantry: How Consumer Behaviors are Impacting Food Retailers

Author: Miya Knights, Head of Industry Insight, Eagle Eye Solutions Ltd

As governments across the globe ease lockdown restrictions, consumer behaviors are rapidly evolving to reflect the longer-term impact of Covid-19.

In the pandemic’s early days, a hoarding mentality fueled grocery purchases and left shelves empty. Consumers stockpiled essentials fearing food and product shortages. In the US, strict social distancing rules have led to like-for-like grocery sales increasing 79% from 2019, while consumer spending on non-essential items, such as travel, apparel, and electronics, have experienced sharp declines.

While stockpiling has eased, as countries shift to a cautious relaxation of lockdown rules, consumer behaviors are fragmenting. According to the EY. Future Consumer Index, the emergence of five core consumer types is underway:

1. Save and stockpile: 31% will quickly revert to regular spending habits
2. Cut deep: a quarter, those in mid-to-high income brackets, will shell out on cautious extravagances
3. Stay calm, carry on: 22% will remain frugal amid ongoing financial insecurities
4. Keep cutting: 13% will slash spend significantly as finances significantly affected
5. Back with a bang: 9%, typically younger consumers, will bounce back quickly with renewed optimism. This group is also more likely to try new products if their usual brands are not available.

For each of these consumer types, grocers, food, and mass retailers will need to understand customers’ different motivators and attitudes. Several overarching themes, however, are emerging.

Anxiety will remain a driving force

Despite the reopening of businesses and cities and fewer travel restrictions, concerns abound for the majority of consumers. According to Accenture, 88% of US consumers are worried about the economic future, while 64% are concerned about their job security. These concerns will see different shopping behaviors forged: prioritizing essentials, greater interest in local produce, and a preference for shopping at a safe distance.

Addressing these anxieties will require grocers and food retailers to invest in the digital communication channels they’ve nurtured amid lockdowns. By taking advantage of increased usage of grocery delivery apps and online grocery ordering, retailers must regularly communicate precautions, promotions, and any alterations to services to maintain and continue building relationships with customers. Those digital interactions will also be critical for understanding consumer buying patterns and shifting preferences – and not least for the impact such data can have on more efficient demand forecasting and planning, and fewer disruptions in the food supply chain.

With a solid digital presence and digital promotions across communications platforms that consumers use and have become even more comfortable with during Covid-19, grocers can develop a clear picture of their customers and their needs, and build more effective omnichannel marketing strategies.

Stockpiling will give way to penny pinching

The earlier stockpiling spikes in grocery sales have given way to more frugal shopping behaviors. The shift is less marked for grocery, according to a study by US and Danish economists. But across all categories, the initial spending peaks have been closely followed by steep declines. Penny pinching will become the norm for many consumers as the longer-term economic impact of Covid-19 wears on.

A May 2020 report released by UK grocer Waitrose highlights how the frugal mindset is already influencing cooking and shopping habits. Reducing household food waste, getting creative with existing pantry and cupboard items to prepare meals, and more efficient weekly shopping planning all signal shifting ‘pandemic pantry’ trends.

In response, grocers will need to focus on understanding these changing values in their promotional campaigns, merchandising and product availability, and ensure they can communicate timely and relevant offers that reflect current market conditions consistently across the digital channels their customers are using.  

Ecommerce will continue to play a significant role

Once restrictions are fully lifted, a fifth of shoppers anticipate using brick-and-mortar stores less often than before the pandemic.

The rush to buy groceries online amid full and partial lockdowns – with online grocery sales reaching $5.3 billion in April, up 32% from the previous month – will leave a lasting impact on grocery ecommerce, which has trailed behind other sectors in terms of penetration and growth. Right now, shoppers are growing accustomed to the ease, safety, and convenience of contactless grocery delivery, as well as pick-up services. The stakes are high for grocers to get this right – already 1 in 5 shoppers have switched grocery stores during the pandemic, citing frustrations with product availability and other ecommerce friction points as their main concerns.

It will be essential for retailers to double-down after this period of accelerated growth and use data gleaned on customers’ shifting buying habits to provide an enhanced omnichannel shopping experience. They can use this insight to create more successful promotions aligned with availability, frequency and buying preferences They can also use aggregated sales data from digital and physical channels to optimise supply and incentivise the behavior they seek, using bonus points or rewards. This more joined-up view of customer shopping habits across channels can even make it possible to manage changes brought about by social distancing measures. For example, customers can build shopping lists online that they can use to navigate one-way systems instore via app-based wayfinding.

To protect growth specialty food operators will need to build emotional connections

With consumers confined to their homes, the pandemic has also proved a catalyst for some specialist grocery businesses. Meal kit and recipe box suppliers have reported triple-digit sales increases as consumers look to inject variety and convenience into their cooking, particularly where securing delivery slots with overwhelmed online grocery delivery services, has been a challenge.

As food and produce availability recalibrates, these specialty operators will need to find ongoing ways to convert lockdown loyalty – where consumers return to a brand or service out of necessity – to brand affinity cemented by an emotional connection. Woolworths learned quickly and pivoted to offering its ‘Basic Box’ of ambient goods to vulnerable and elderly customers for a flat-rate AUS $80 fee, inclusive of delivery. Doing so will require sensitively reflecting consumers’ changing needs as they adjust to a new reality.

For all the stresses placed on the food supply chain and inventory management, the early stages of changing consumer behaviors were, in many ways, easier to predict. Emerging from the crisis will be a lot more challenging for grocery and food retailers without digitally enabled and data-driven customer connections, as they will be unable to track evolving demand, and quickly adapt to meet it – whatever that might be.