Never has the word ‘unprecedented’ been used so much as to describe the change that has been experienced within the last 12 months. The pandemic has accelerated changes in consumer behaviour more than any other event in our lifetimes.
The retail, travel, automotive and hospitality sectors have been especially hard hit, with changing regulations to curb the spread of Covid-19 having a significant impact. Despite the closure of the high street through lockdowns, online retailers did not gain all the sales which had been lost.
Some online retailers have been quick to snap up brands that have failed on our high street (with Debenhams being bought by Boohoo and Topshop by Asos) and will continue to trade the brands digitally, but does this mean a permanent shift to online shopping, as suggested in Mintel’s UK Retail Ranking Report 2021?
Financially cautious consumers
Just as businesses have not been impacted equally, neither have consumers. Our research shows that younger families with children and high levels of outstanding mortgages (analysed using Experian’s segmentation tool, Mosaic, as ‘group H’), were most likely to report being put on furlough in YouGov surveys between April 2020 and March 2021. And with young, high-status city dwellers living in central city locations (Mosaic group A) the most likely to be made redundant, it truly highlights the differing impact that Covid-19 has had.
Household savings have soared in recent months, with consumers adding £17.1bn to bank deposits in February 2021, according to the Bank of England (BoE). This is well above the monthly average of £4.6bn seen in 2019. However, only 28% of households have accumulated additional savings due to the pandemic, according to a BoE survey conducted between 25 August and 15 September last year, and those on high income or retired were more likely to do so (42% and 36% respectively).
Furthermore, just 10% of those who have increased their savings (3% of households surveyed) planned to spend their savings, with the vast majority (70%) planning to continue to hold the savings within their accounts. Therefore, financial services are more likely to gain from these savings than those brands and business sectors that have struggled throughout this pandemic.
Resumption of retail and hospitality
Back in September, we saw that retired, well-off property owners in rural locations (Mosaic group C) were one of the most uncomfortable returning to the high street. In contrast, educated young people living in rented urban properties (Mosaic Group O) are the most comfortable heading back to stores, as well as to the hospitality sector.
Many of these young people have been living alone during the pandemic and traditionally spend 47% more than the UK average on alcohol within the hospitality sector. We expect that this group are likely to return to their pre-pandemic behaviours quickly, as the sector fully opens. This will clearly benefit those brands that swiftly resume business as usual, whilst others won’t be as lucky and will need to work harder to see the increased footfall for their physical locations, be that restaurants or shops.
Brands will need to diversify their messaging more than ever before, to ensure they address the concerns of certain customer groups. Alternatively, using the right offers and promotions to entice customers back could make a difference.
While we do not know what the ‘new normal’ will look like, what we do know is that data and insight needs to play a large part in how brands understand the evolving needs of consumers.
For home shopping, there were differing impacts across the sectors and the types of consumers purchasing. Immediately as the first lockdown started, gardening saw order values nearly double with all age groups increasing their spend.
High-value women’s clothing didn’t fare as well, with a sharp decline in order values across the months immediately following the first lockdown. However, there was a recovery in July when the lockdown eased and when people started to socialise again. As we again see restrictions lift, we are likely to see similar trends across home shopping, as people have shifted towards online shopping at a more rapid rate than previously.
A transformed high street
The UK high street changed markedly in 2020 with a 17% decline in the number of women’s clothing stores open compared to 2019. We also saw large declines in banks and betting shops. High streets are more likely to be filled with takeaways and beauty salons than in 2019. With a 10% increase in vacant square footage, there is now over 120 million sq ft of commercial space lying empty.
With the reduction of travelling for work purposes likely to be somewhat permanent, with large employers like Ernst and Young saying that their employees will be more home-based, there is a lasting impact on our city centres that needs to be addressed over the coming months.
Brands will need to consider their estate planning in a different way, in terms of both location and format, as fewer people will be our in city centres as regularly. Retail will also need to consider the product that it holds and the experience it gives. Brands’ distribution strategies rapidly moved towards ecommerce during the pandemic and, while these may see some further changes as the country reopens, the more dramatic consequences will be seen in bricks-and-mortar estates.
Differing impacts on communities
Given the sectors that have been impacted most by Covid-19, there has also been a regional bias in the financial resilience of the nation. For example, we saw a particular decline in Crawley from August to November 2020, according to the Experian Financial Resilience model. This can be attributed to the fact 17% of people employed in Crawley work in the transport industry with a further 8% working within the hospitality industry, largely at Gatwick airport, which saw passenger numbers drop from 46.6 million in 2019 to 10.2 million in 2020.
Understanding the impact of the pandemic at a local level will be key for all brands, to devise an informed evidence-led strategy for the future.
While we do not know what the ‘new normal’ will look like, what we do know is that data and insight needs to play a large part in how brands understand the evolving needs of consumers. For brands with first-party data, this is a great place to start. However, this alone will not give them the full picture and, now more than ever, a blend of first, second- and third-party data alongside the right skills for analytics and data storytelling are essential to business success.
For more insights on the post-pandemic consumer, watch Experian’s session from the Festival of Marketing, ‘How the ‘new normal’ is impacting brands’ marketing effectiveness, and what you can do about it’. Now available on demand.