We are now almost at the close of 2020, a year that transformed the modern world in unprecedented ways. An EY article suggests that after enduring the pandemic for almost a year, we have transitioned from “peak Covid” to “Deep Covid” – a phase where people have accepted that they must learn to live with the pandemic and thus, changed their habits significantly to cope with the crisis.
Swift transition to digital channels for shopping has been a major impact of Covid. A latest study by EY finds that about 37% of global consumers believe their shopping methods will change in the long-term, while 39% say they will use online channels to shop for things that they would otherwise buy from stores. This monumental shift is fostering “multi-billion-dollar shifts across channels globally”.
Emergence of 4 distinct consumer segments
Due to the economic impact of the crisis, financial situation has changed for many consumers. This has drastically altered people’s spending habits, giving rise to four broad consumer segments, states an EY study. Developing an understanding of these four segments would be crucial for businesses to capitalize the progressive e-commerce opportunity.
Struggling and worried: 31% consumers fall in this segment out of which 47% are from the Gen Z or millennial generations. This the worst hit segment with most suffering financially and in terms of health. They are finding it hard to cope and feel they are not in full control of their lives. They are spending cautiously, if at all and expect the pandemic impact to last at least one year more.
Okay but adapting: 30% consumers constitute this segment, out of which 36% are Baby Boomers or older. These people have been impacted by the crisis but are coping well and their personal finances are returning to normal. Local economy is their focus of interest. Their behavior has been altered by the pandemic – they are avoiding store visits; curbing spends on non-essentials and prefer to buy locally sourced products.
Unaffected and unconcerned: 26% consumers feature in this segment, out of which 41% are Baby Boomers and 27% are retired. These people have been least affected by the pandemic and despite being at a higher risk of contracting the virus, due to their older age, they have not changed their behavior or values, too much. However, they have increased their focus on local economy.
Hit hard but optimistic: About 13% consumers constitute this segment, out of which 55% are Gen Z or Millennials, 32% are Gen X and about 13% are Baby Boomers or older. This segment of people is most concerned about changing their ways of living and thinking due to the impact of the pandemic. These people have most likely suffered losses due to the pandemic but are optimistic about a swift economic rebound and eager to imbibe long-term changes for a better tomorrow.
The online opportunity
Out of these four consumer segments, three segments plan to spend less and shift a majority of the spending to online channels. Usually such a shift in channel preference due to digital disruption would take years, may be a decade, giving businesses ample time to adjust to the change in consumer behavior.
But due to the Covid crisis this sudden incline towards e-commerce unfolded in a few months, denying businesses the required time to engineer the perfect response. To capitalize this influx of consumers to e-commerce and secure their share of sales from this move to online, businesses must first focus on the product categories that are most in demand and provide the required level of experience to win over the customers.
To find out which product categories would become online favorites and how to provide the right customer experience to win over consumers, read the second part of the article here.