Rip van Winkle
Do you remember the story of Rip van Winkle? Written by Washington Irvine in 1819, it tells the story of a Dutch-American peasant who escaped to the nearby woods from his wife. After meeting some strange characters, he drank too much beer, fell asleep and awoke 20 years later. The story went on to describe the new world that he encountered when he returned to his village.
As the world starts to wake up from our enforced slumber of the past year, things will never be the same again. To a degree, many of us had a handle on the pace, the volume and the complexity of change before the pandemic started. Consequently, while our forecasts might not always have been accurate, we developed skills to improvise, adapt and overcome obstacles.
This is different. We don’t have precedents to help us read the tea-leaves. So we have to take some guidance from recent surveys conducted by McKinsey. McKinsey embarked on a global consumer sentiment study a couple of months ago, and I was struck by some of the findings of the European version.
We know how polls at voting time can be so wrong. So don’t take these findings as gospel. I’d also add that like with all surveys, the core numbers are less important than the trends and movements from previous similar surveys.
The key findings from a recent European consumer sentiment survey
McKinsey has identified six fundamental shifts worth noting. Keep in mind that these findings reflect intentions, not actual behaviours. That’s the same as asking voters before they vote rather than afterwards. You should always make up your own mind as to whether the results feel right to you. And don’t underestimate what you yourself are hearing on the ground within your own circles.
- Overall optimism. There is an increase in the levels of optimism about a recovering economy. While it’s still only at 21%, it’s up from 16% in Q4 last year. At a general European level, this is skewed by a bigger increase in UK, who are way ahead of the rest of Europe with the vaccination rollout. We know too that retail reopened in UK recently. One of my clients was up 90% on the same day TWO years ago. So all of that is positive.
- Signs of spend recovery. 42% of consumers are keen to reward themselves with some form of a treat this year. That might be in products and/or experiential pursuits and it especially reflects the younger consumer.
- Spend by those taking the vaccine. While it’s early days yet, those that intend to or have already been vaccinated have a higher intention to spend than others that are less inclined. However, this is negated by a much lower percentage in UK, which is showing that having the vaccination is not a driver of spend. This one is too early to tell but it looks to me that you should not expect the vaccine in itself to be a driver. It will be the overall mood and progress that will make the difference.
- Stickiness of digital. Of those who currently spend online, 92% expect to continue to use that channel, especially in groceries. While this will not be a shock to you, I remain convinced that human beings favour physical contact and bricks and mortar shopping will return. Of course the percentage split of the overall mix of channels will definitely have swung to online forever. And as I’ve said previously in this column, bricks and mortar businesses will have to think very differently and focus on a different type of retailing.
I also believe that this is not just a retail issue. The migration to ecommerce will also grow in the world of B2B.
- Rebalancing of ‘homebody’ economy. In the past year, 29% of consumers have spent money enhancing their own homes. I know this to be true for two major retailers in Ireland. PC World/Curry’s is a home technology company. Its growth has been significant and I’m sure the senior folk there will be asking themselves if they need as many stores in the future. Another is Cash and Carry Kitchens which has had a bumper year too.
- Evolution of loyalty. Now this one is both a threat for some and opportunity for others. 67% have switched their allegiance from their old store or brand to an alternative. Being local is a big driver, which links with the warmth and sentiment of ‘we’re all in this together’. But don’t underestimate the importance of value for money and convenience, which have both escalated in the priority list, and are rated as being more important than being local.
The Last Word
This research is totally focused on consumers preferences, which directly impact the B2C market. However don’t forget that every business is influenced by what happens on the ground between consumers and direct service suppliers. While the timing of impacts might be different, regardless of how far upstream you are in the food chain, your business will be impacted by this too.
Alan O’Neill, author of “Culture Matters” is a Change Consultant and Keynote Speaker, specialising in strategy, culture and structure. Go to www.kara.ie to get support in growing your business.
© Copyright. Alan O’Neill. All rights reserved. 2021