May 18, 2021, saw The Risk Institute’s most recent session, “Exploring the Change in Business & Consumer Behavior.” This “fireside chat” was hosted by Executive Director Phil Renaud and Risk Institute partners at CBUS Retail, David Cherry (Cherry Advisory) and Angela Thompson (Thompson Marketing and Consulting).
- Lara Koslow, Boston Consulting Group, Managing Director & Senior Partner
- Selin Malkoc, The Ohio State University, Fisher College of Business, Associate Professor, Marketing
- Chetan Kandhari, Nationwide, SVP, Chief Innovation & Digital Officer
- Joseph Goodman, The Ohio State University, Fisher College of Business, Associate Professor Chair, Marketing & Logistics
The Pandemic and Consumer Behavior
Renaud opened the conversation by asking panelists about their observations regarding changing behavior among consumers as it relates to COVID-19. How much is people’s concern affecting their activity and actions? How is this changing over time?
According to Koslow, when it comes to personal risk, about 20% of people fear actually contracting COVID-19, but the greater concern is how it will influence their lives and activities. Over the last few months we are seeing that people are generally more likely to feel more comfortable dining at a restaurant, attending an event, or visiting the store. But data indicates that to date, 14 months into the pandemic, approximately 40% of people still do not feel safe eating out or attending large events. Consequently, this change in behavior has a big impact.
Goodman adds that the issue is “perception of risk” that guides behavior. And despite the fact that we are seeing more cars on the road with multiple passengers, groups gathering in bars and restaurants, this perception of risk varies by individual, industry, and specific businesses. This perceived comfort level of “going back to normal” is a long way from being across the board.
From a business perspective we are seeing that historically successful market-leaders who relied on consistent behavior (and subsequent financial benefits) from their customers prior to the pandemic have not welcomed the disruption. By contrast, for companies that historically had a much smaller market share, this bounce-back is a huge opportunity, as consumers’ habits have been disrupted.
Take for example a small business here in central-Ohio that produces building materials out of reclaimed wood. The disruption has produced a massive increase in demand for their product, as prices for lumber at companies such as Lowe’s and Home Depot have skyrocketed (and product has become scarce).
Post-pandemic: Winners and Losers
Koslow identified five post-pandemic trends that impact retail –now and down the line:
- We’re seeing an uneven recovery: mid to high-income households have saved more and, in turn, have pent up demand to spend. These consumers are also more likely to have regained employment losses. On the other hand, lower-income households, who are more likely to have experienced (and continue to experience) employment and wage challenges and income insecurity, are likely to spend less.
- There has been a shift of time and money spent at and on the home. And while there will be a return to work, employers are likely to continue this hybrid work model.
- We have seen an E-commerce acceleration: consumers will partially return to brick and mortar, but there will be a permanent shift to more online and app-based shopping.
- With more of a focus on health, wellness, and mindfulness (as well as cleanliness), products and services related to those segments are seeing – and will continue to see – a boom.
- The pandemic has accelerated a population shift: housing demand and population is moving from dense, urban city centers to the suburbs (especially with the continuing work from home model). In turn, retailers will need to reexamine store footprints and retail trends based on these changes.
As we emerge from the pandemic, while there are a number of different archetypes, we are seeing certain “winners” and “losers” in retail.
Winners include E-commerce, electronics, and grocery – the industry has welcomed a shift from a decades-long decline on in-home food spend during the pandemic. Retailers in suburban areas (that are closer to home) are going to attract more consumers back than those in urban environments.
The fashion industry has seen a downshift that relates to people working from home. And we will see a decline in footfall at shopping centers and retail locations based near office buildings.
Moving forward, if companies want to succeed, they will have to be more creative and think about product innovation differently: shifting from more incremental changes to things outside their normal comfort zone. This could also mean reconsidering where companies decide to locate their business and how they operate as a whole.
Companies have been forced to pivot. We’re seeing an increase in omnichannel retail: buy online and pick up in-store or buy online and get the product delivered. Goodman says Home Depot (which struggled at first) and Target realized that consumers expect to access their purchases immediately. To meet this need, and avoid losing customers to more reactive competitors, these companies are changing their sales processes and utilizing geolocation as a tool.
Cherry believes that companies like Target, Walmart and Kohls, are better suited for this model. As opposed to smaller, strip mall-situated shops like Victoria’s Secret, where it’s harder logistically to make curbside work seamlessly for the consumer. With regards to footfall, Cherry uses the old adage “location, location, location.”
In the current climate, the topic of work/life balance is at the forefront of the conversation. But Malkoc says what people want and what makes them happy is not always the same.
For example, while people ask for flexibility, it can make the work/life balance harder by creating a conflict of choice: “do I work or do I relax?” When clearer boundaries are set, and, for example, people have to commute, there are perceived benefits in helping people transition from work-life to home-life and visa versa.
Cherry highlights a survey from Columbus Business First, where employees were asked whether they would prefer a $30k raise or permanent work from home. An astonishing 64% said they would choose permanent work from home. He notes that retail has been reinvented itself over the past 20 years; the workplace is now being reinvented, too.
The Risk Institute’s next session, to be held June 16, 2021, is “The Effects of the Wave of Bankruptcies and Consolidations.”
The Zoom webinar will feature guest speakers Ted Stenger, Managing Director, AlixPartners, and Karen Wruck, Professor of Finance, Fisher College of Business.
Further details and registration is available here.
Written by Jack Delahunty in association with The Risk Institute at Ohio State’s Fisher College of Business