How COVID Rebalanced Consumers' Value Equation

"Penny-pinching and Pelotons" is how The Conference Board characterizes the COVID-19-era consumer: cost-conscious and more attuned to their spending than before the pandemic, but willing to pay a premium for items they see as wellness-promoting—or offering brief moments of indulgence. At the grocery store, it's private-label frozen veggies in the basket with premium liquor. 

What consumers will and won't be willing to pay for when it comes to buying groceries post-pandemic is in focus for traditional grocery retailers and startup services alike, and while the bets that they're making on consumer behavior differ, The Conference Board sees three overall consumer trends emerging.

In a new report, the nonpartisan think tank asserts that digitally enabled convenience; wellness, health and self-care; and frugality and value-seeking will define consumers' priorities and demands post-pandemic. "The most successful brands will be those that address these needs, ideally offering solutions for consumers that don’t force trade-offs but rather balance these three at-times divergent priorities," said Denise Dahlhoff, a senior researcher at The Conference Board and the report's author. 

On the digital-convenience front, grocery retailers must "remove friction points" from the online grocery ordering experience, Dahlhoff said in emailed comments to Winsight Grocery Business.

"This starts with user-friendly browsing and ordering features, including filtering systems and tools that facilitate decision-making, for example, by providing item comparisons," she said. "It should also allow convenient repeat orders of past shopping lists and an easy checkout experience."

Beyond ensuring this fundamental functionality for their e-commerce offerings, grocery retailers can look to advanced shopper analytics to provide true time-saving convenience and a more tailored shopping experience for customers. "AI can provide personalized suggestions for grocery and beverage items complementing a customer’s shopping cart and products that might be of interest based on a shopper’s profile and past purchases," Dahlhoff added.

This has implications in-store as well, Dahlhoff noted. Consumers who have come to expect a streamlined and at least semipersonalized shopping experience online want to find similar time-savers and simplified basket-building features in-store—whether that's self-checkout and contactless payment or a single display featuring everything needed to make a particular meal. 

"Grocery stores can consider how digital real-time information such as product ingredients, their sourcing, suitability for certain diets, complementary items, and customer reviews can be delivered in stores—e.g., through QR codes on shelves that can be read by mobile phones," she said.

An increased consumer focus on the wellness-promoting aspects of products bought throughout the store is another top trend emerging from the pandemic, the report suggested. Amid the stresses of the past year, many consumers turned to what The Conference Board called "familiar coping mechanisms," including less-healthful eating, alcohol and drug use, and gambling. But forced time away from regular activities and the continued blurring of work and home lives has also spurred greater public conversation about self-care, the report noted. That has driven sharply higher sales in products ranging from fresh produce to skin care. 

Almost 40% of female U.S. consumers were using more skin-care products than pre-pandemic, the report stated, citing a 2020 NPD Group survey—for supermarkets, that can have meaningful impact both on category assortment and promotional planning. "The interest in and need for self-care will benefit goods and services focused on exercise, diet, beauty and mental healthcare, among others—all offering opportunities for innovation," the report suggested.

At the same time, consumers remain cost-conscious. The overall U.S. unemployment rate had drifted down to 6.2% in February from its double-digit heights last spring, but it remains well above the immediately prepandemic level of 3.5%. At the pandemic's peak, 64% of U.S. consumers said they were actively cutting back on spending, a Conference Board consumer confidence survey found, and while that share dipped in late 2020, it increased to 62% in the first quarter of 2021.

"Frugality will continue to reign for many consumers, especially if the jobs recovery remains sluggish if and when government fiscal support recedes," a news release on the report noted. Overall, 32% of U.S. households reported experiencing difficulty covering their expenses in the previous seven days as of January 2021, up slightly from the 31% who said the same in August 2020.

Moreover, 46% percent of Black and Hispanic households, 44% of multiracial households, 30% of Asian households and 26% of white households said it was somewhat or very difficult to pay for usual household expenses in January, an increase across the board from those who said the same in August.

Retailers looking to win consumer loyalty while remaining sensitive to price concerns can find success by playing up the value of their private-label brands and through promotions targeting consistent shopping behaviors and basket size rather than absolute discounting, the report suggested. Almost one-fifth of 2,000 U.S. grocery shoppers surveyed in September said they were buying more private-label brands during the pandemic than before, and historically, "the switch to private labels in downturns is faster than the rebound to national brands when the economy improves," the report noted.