How the ‘new normal’ will impact different markets

Euromonitor's latest report looks at how consumer landscapes and buying behaviour is going to be impacted across categories.
Retail, shopping, consumers

Consumer expenditure is expected to fall by 5.2% this year, and not return to 2019 levels until 2022, according to a new report by strategic market research organization Euromonitor International.

And that is coming with changing consumer attitudes towards sustainability, entertainment, wellness and innovation.

Prior to the pandemic, Euromonitor was predicting retail sales to grow in nearly every product category, except for packaged food. Now, it is expecting sales in luxury goods, apparel, accessories, personal care and consumer electronics to decline year-over-year. In the remaining categories, growth is expected to be significantly lower than previously anticipated; the only categories where spending is expected to go up is packaged foods, fresh foods and home care.

When it comes to sustainability and purpose, the report notes that, although businesses had been doing this prior to COVID-19, the pandemic has “increased momentum” behind these kinds of efforts. Consumers’ attitudes when it comes to sustainability topics are evolving, and companies are “putting purpose first” in response to the pandemic, while protecting the bottom line.

“The idea of sustainability has evolved beyond the inclusion of ethical credentials and environmental concerns, such as plastic pollution and climate change, to a more holistic approach that aims to create social, environmental and economic value,” the report states.

The report notes that brands in the health, beauty and fashion sectors, in particular, must achieve that higher purpose by invest in more in locally produced goods and concentrating on their brand heritage, transparency and safety. But when it comes to the food sector, issues such as food waste, animal welfare and food security “will be front-lined,” while package sustainability and sustainable sourcing will “lose out.” For home and technology products, issues like energy usage and sea plastic will have to co-exist with factors like hygiene and serving consumers during economic hardship.

Consumers have been redefining and adapting their daily routines as they spend a greater amount of time at home, “reinforcing many of the pre-COVID-19 trends” in digital experiences and “hometainment.” This creates strategic opportunities across products and services such as personalized exclusive luxury, wellness routines, gourmet experiences and the further digitalization of education and entertainment. Beauty has already capitalized one this with technology like AR, while food brands are putting out content to help people become better home cooks, but alcohol brands can capitalize by helping consumers create beverages and cocktails at home to replicate the bar experience.

“The trend towards digital education and pastimes is further enhanced, including further growth of gaming and online e-sports events that compensate for the lack of regular sporting events,” the report says.

The pandemic has accelerated trends such as the increase in online shopping, click and collect, frictionless retail and DTC. The report says more DTC opportunities could emerge when it comes to food and nutrition, as e-commerce and that consumer wants for meal kits are increasing. However, this is “tempered” by a negative impact on impulse channels, as consumers are less inclined to “pop in to buy a single chocolate bar from their local convenience store.” Alcohol will have a harder road back, given the slow recovery time for bar and foodservice, and in-home channels will have to be emphasized for some time. Beauty, which is already established in the DTC space, will be further pushed away from over-reliance on retail and wholesale and to more well-developed ecommerce.

The report notes that the wellness movement is anticipated to see another “paradigm shift” due to the pandemic, resulting in leaders rethinking tactics and ideas “through a renewed lens” that emphasizes “optimal health, health in its purest form and the adoption of a holistic approach.” Eating and vitamin habits are transitioning to naturally healthy and functional options, with an emphasis on a strong body and mind. Aspects such as at-home therapy, home hygiene and healthy cooking practices “take higher precedence,” the report notes, as the home becomes a “health hub.”

Tech-enabled and digital self-care solutions are gaining further prominence in preventative health, as well as products with de-stressing and immune-boosting product credentials. This further plays into concepts such as the “home as health hub,” whereby consumers increase their at-home cleaning and hygiene routines, such as “the management of air quality, translating  into demand for air purifiers,” and more innovation related to disinfecting qualities, to surface cleaning and wellness routines.

The report also predicts trends in disruption of drinking occasions that began pre-pandemic will continue, and consumers will be less inclined to spend discretionary income on alcohol or post about it on social media; that will be diverted to things that make them healthy, first and foremost. Because of consumers being choosier about discretionary income, tech companies that have low-cost strategies will likely be the ones to come out ahead, except in the case of brands like Apple, which have established and dedicated followings.