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COVID : Changing Consumer Behaviour a Threat and Opportunity for Brands

10 May 2020

According to Office of National Statistics (ONS), eCommerce accounted for more than 21% of UK total retail in 2019 with growth rates 4x that of traditional retail channels. New verticals that had been slower to embrace digital have been migrating as consumer behaviour continues to shift, notably in grocery, where more than 35% of consumers purchased online in 2019, and high-ticket, luxury items as consumers gain greater confidence with security. We took a look at how COVID-19 has impacted shopper behaviour during lock-down and what this may mean for brands and sellers for the rest of 2020.

New-To-Brand Purchases

We analysed over 3 million UK purchases across more than 47,000 products from January through April 2020 and saw significant, +58.1%, growth in monthly New-To-Brand (NTB) sales in March as the Government ordered lock-down and subsequent closure of retail outlets. In prior months, NTB purchases for the products analysed trended between 5% and 6% growth month on month. This seismic shift of consumer behaviour led to massive YoY and MoM sales growth rates for brands in certain categories but created enormous strain on supply chains and customer service processes. Even Amazon had to restrain demand on logistics and fulfilment centres by limiting FBA (Fulfilled by Amazon) to products deemed ‘essential items’.

Month on month New-To-Brand sales grew by +58.1% in March, up from a 3-month trending +6%

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New-To-Brand Opportunity

As the data displays, many brands have had the opportunity to engage with new customers via Amazon that had previously shopped elsewhere. This has been an opportunity to feed life-time value funnels and bring new customers into programs such as Subscribe and Save.

Products in Grocery category have seen an March to April increase of +98% for Subscribe and Save

Category Performance Volatility

As has been well reported, sales for products within certain categories rocketed. Our analysis in the below graph displays significant month on month growth for sales in consumer goods as shoppers stockpiled; Kitchen +415%, Cookware +174%, Grocery 156%. As gyms and stores closed Sporting Goods +542%, Tools +389% purchases grew as did Toys and Games +342% while parents were coming round to the reality of home schooling. The year on year growth of each category being in excess of the monthly increases displayed. Taking a broader view, the trend for March and April has differed greatly depending on category; Beauty products declined in sales from February to March -8% but have rebounded by +167% March to April as shoppers shift attention away from short-term essential items. Baby has seen a similar trend, initially declining -58% month-on-month but increasing 221% in March to April. For some items such as toilet roll, stockpiling has led to massive demand peaks followed by subsequent over-supply as demand as fallen below 2019 sales volumes.

For some categories and brands, the surge in demand has been too dramatic as supply chains and customer services have buckled.

Mar_Apr 2020 Category.jpg

What Can Brands Learn From Current Challenges?

Fulfilled by Amazon and Merchant Fulfilled – being too reliant on FBA has left producers of non-essential items with no means to distribute goods to customers. There are strong benefits of being FBA, reported here, but having some capacity to merchant fulfil if Amazon changes policies or goes out of stock mitigates risk.

Being Vocal – a poll by Opinium reported brands that are more vocal in times of crisis are perceived more favourably by consumers. Brands have struggled with the scale of orders and customer servicing, those that have invested in improving communication will fair more favourably.

Vendor Central / Seller Central – assessing which avenue is best for your business and applying the right strategy to maximise returns from being a Vendor and/or Seller on Amazon. Amazon have greatly reduced purchase order volumes for some Vendors recently, opening a Seller account could prove beneficial in taking more control over how and when you market and sell products and at what price.

Understand Customer Life-Time-Value (LTV) – track NTB customers, enlist products to Subscribe and Save, and via measurement strategies gain insight into customer LTV. Assessing effectiveness of paid media and allocating investments across sales channels via impact on LTV supports development of longer-term growth strategies.

Invest in Strategic Hires and Skills – as brands start to assess what the future looks like key job functions and roles are emerging; Technology, Customer Services, Data and Insights, PR & Communications, and Company Culture. These roles or divisions have become ever more important for companies.

Adjust to Consumer Needs – it’s a volatile time for everyone, your target consumers are addressing issues and needs they didn’t expect to have. Adjusting product messaging ie appealing to family meals vs school lunch boxes, or optimising paid media according to changing consumer behaviour to stay front of mind and stand out from the ‘digital shelf’.

Consumer Behaviour Normalises – abnormal spikes and troughs in consumer demand could well turn out to be compressed demand trends vs a ‘new normal’. Sales in toilet roll are down YoY in May as consumers have yet to use stockpiles. Non-essential items are rebounding as people return to habit.

COVID has disrupted every 2020 plan. Whereas before this crisis companies could forecast the year ahead and adjust by quarter if needed, we’re currently in circumstances where adjustments are being made and plans reviewed weekly. Acorn-i are supporting clients through these volatile times and to create an advantage over competitors as consumers shift spending. To speak with one of the team please connect here.

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