With the COVID-19 pandemic stretching into its eighth month across APAC, there has been a deep impact on the way consumers have changed and cut their spending in the region. As jobs have vanished, incomes diminished and people retreated indoors, they have had to hastily reconsider their consumption and spending patterns. Marketers, in turn, have had to rethink the way they approach these constrained consumers.
Here's how some industry watchers think this will evolve:
A Nielsen study indicates that the news cycle related to COVID-19 transmission no longer influences trends on the FMCG market in Southeast Asia. Instead, new socio-economic and behavioural patterns will shape the future state of the industry. The basket reset, homebody reset, rationale reset and affordability reset, underpinned by worsening unemployment situations and uncertain financial prospects in Southeast Asia, are the new drivers of consumption patterns.
The study shows how responses could differ according to the circumstances and level of personal impact the pandemic has had on consumers. Predictions are made across the spectrum of two, polarised consumer groups: insulated spenders and constrained spenders. Across Asia, nearly two out of every five consumers (38%) said they have been impacted by Covid-19, versus 32% consumers globally.
These factors will likely impact consumer confidence in these ways:
Basket reset. Nielsen anticipates that consumers will start to re-prioritise what goes into their baskets.
- Across measured markets, key FMCG categories like alcohol (-9%), health care (-3%), personal care (-5%), and beverages (-8%) are seeing sales declines in the year-to-date period ended in June.
- In Vietnam, non-essential categories such as beer, non-alcoholic beverages and cigarettes also witnessed sales degrowth (-12.6%, -9.6% and -7.4% respectively) in the same period.
- However, marketers would take note that stockpiling behaviour hasn't persisted to the extent of March and April, signaling the basket composition is being reset, and consumers focusing more on basket decisions moving forward.
Homebody reset. Nielsen predicts a shift in routines of consumers at home. ‘Do-it-yourself’ (DIY) behaviours and demand for in-home branded experiences have persisted even beyond living restrictions and store re-openings in many Southeast Asian markets.
- In the Philippines 24% consumers switched pack size, suggesting that they are seeking FMCG that suit homebound lifestyle.
- Across Southeast Asia consumers continued to demonstrate a focus on in-home consumption, where food and dairy saw strong uptake in markets like Singapore (up by 42.6% vs last year), the Philippines (11.4%) and Malaysia (6.8%).
- In Malaysia, sales of hair colourants increased by 22.8% as consumers opted for hair grooming at home, similarly in Singapore at home eating led to an increase in consumption of processed frozen food (sales up by 113.7%).
“Consumers are already willing to do the legwork to bring a product experience into the safety of their homes. Therefore, companies have the opportunity to seize that interest and respond with affordable, accessible and branded take-home experiences,” says Scott McKenzie, head of the Nielsen Intelligence Unit.
Rationale reset. Consumers may soon redefine the significance and meaning of the FMCG goods they buy.
- As measured using the The Conference Board conducted in collaboration with Nielsen, 83% of consumers in Asia Pacific said they were cutting down their expenses in Q2 2020 (vs. 73% in pre-pandemic Q4 2019)
- Among consumers who have changed their spending, 30% or more are spending less on take-away meals, holidays, out-of-home entertainment and new clothing.
“Consumers ,,, are constrained to spend as every purchase holds greater significance, while those consumers who remain insulated too will justify premium spending based on benefits and convenience,” says Vaughan Ryan, Nielsen’s managing director for Consumer Intelligence in Asia.
Affordability reset. As disposable incomes dive, consumers will search for ways to optimise their basket spend to prioritize both health and value needs. Nielsen has observed a historically low level of trade promotion activity across various countries.
- Channel preferences are also shifting as the criteria for affordability evolves in the minds of consumers.
- In Malaysia, mini-marts are gaining importance with almost 18% rise in sales in June 2020 (versus 9% last year) as these outlets provide close-to-home access for everyday grocery shopping at desired pricing in comparison to distanced large-format stores.
A report from Digimind, a social listening and market intelligence platform, shows that 77% of consumers in APAC prefer to stay at home, even as some markets open up. According to this report, lifting of lockdowns has been met with caution by consumers surveyed—44.3% prioritising safety as a top concern.
Most mentions related to “staying home” focused on ways to maintain a certain quality of life despite being deprived of the usual routine, while preserving mental wellbeing during this time. Now, consumers are choosing alternative solutions that allow them to be at home while supplementing their past schedules and fixes, be it shopping, socialising, or seeking entertainment. This trend is forecast to hold, as consumers remain wary of a resurgence in Covid-19 cases.
Overall, news of lockdown restrictions being lifted were met with anticipation at stores reopening, and desire at being able to go out and visit friends again. Online, people actively discussed these reopenings to try to revive local economies, while emphasising the need to remain mindful and continue practising social distancing. When discussing availability (19.0%) and price (15.5%), consumers still expect a standard in product or experiences that justifies the amount spent, pandemic or no pandemic.
As consumers and marketers consider their longer term term strategy to emerge from this lockdown and hopefully defeat the virus, Euromonitor's recent global report suggests that some of these shifts in habits and spending may stick. The consumer research tracker's recent report looks at six broad themes, tracking everything from the evolution of sustainability and purpose, to changes in where and how consumers shop to marketing innovations for this new normal.
Some highlights from this report that point to how consumers and businesses will find their way through and out of this pandemic:
- The idea of sustainability has evolved and consumers’ attitudes towards sustainability topics are changing and corporations are responding to the pandemic by putting purpose first, while protecting the triple bottom line. For brands this could mean investing in locally produced goods and focussing on brand heritage and transparency
- As consumers value their time at home, marketers are expected to innovate to cater to their altered needs—everything from augmented and virtual reality, combined with holographic experiences, to transform online shopping by placing consumers in quasi physical store conditions to countertop commerce or the development of gadgets to create beverages at home.
- COVID-19 has emerged as the ultimate retail disruptor, with the potential to accelerate e-commerce adoption, expand click & collect formats and catalyse frictionless retail and D2C operations.
- Inevitably, this pandemic and changed conditions for home and work will compel consumer companies to innovate. This report suggests home-based services for customers, such as beauty consultations and DIY content, booming demand for immunity/ health-boosting ingredients and the onset of live streaming events to expand as launchpads for new brands and new products, as some new innovations.