Consumer Behavior and the Global Recession

The Covid induced lockdowns, social distancing norms and other restrictions forced people to stay indoors. on one hand so many people lost their jobs and on the other so many had to live with reduced salaries and earnings for much longer period. More & more world population opted for spending less and saving more for the future. It also made the lives of Retailers/Brand miserable as the consumer activities came to a halt (barring the shopping on online channels). The Retailers/Brand were already facing challenges in terms of low revenue growth & margins and increasing debts even before the pandemic began.

After the two & a half years of the pandemic, we now have visible signs of extreme changes in consumer shopping behaviors such as relying less on brick-and-mortar storers, inclination towards off-brand & discount retailers, buying only what is needed, looking for lowest pricing/cost, expecting customized offerings and changing brand loyalty quickly and many more such changes. The pattern, more or less, continued even after when the restrictions were eased.

To look it from the global economic health perspective, according to Oxfam, the world's 10 richest men have doubled their fortunes during the pandemic period while more than 160 million people have also been pushed into poverty. (refer to the graph taken from the World Inequality Report 2022 below).

While the Retailers/ Brands were still upgrading themselves to deal with the changed reality, they were exposed to another unexpected event in the form of war in Ukraine. The pandemic of the past 2 years and the war both have sent the whole globe into the grips of high inflation. This was mainly due to the exponential increase in the prices of crude oil, supply chain issues, excessive liquidity in the market and the resultant uptick in the prices of consumer goods. It's now predicted that the global economy is slowly and steadily heading towards recession.

The recession will create more income disparities and push more populations into poverty. This will also likely to result in Retailers/Brands seeing their losses increase further. To make the matters worse, the consumer behavior will again change which the retailers/Brands are hardly prepared to cater to. It takes years of developing and nurturing the relationship to create a breed of loyal customers but the same was lost due to prolonged pandemic and the current recessional trends are going to worsen it.

Here are some of my predictions for the expected consumer behavior trends during the recession :

1. Consumers have adopted the online shopping platforms and are willing to explore the convenience the new digital experiences bring with them. Therefore, it's expected that these trends will continue to accelerate
2. The Retailers/Brands who had developed strong digital shopping platforms and are able to analyze the consumer data meaningfully, will continue be able to capture majority of the customers offering them better services and value for their money
3. There will be more conscience consumption in terms of buying more locally sourced items including purchasing from those Retailers/Brands who support Environment, Sustainability and help in UN's climate control strategies
4. The unemployment is still high so the discount retail, second hand luxury products, customized offerings, promotions, essentials etc. will continue to be adopted & sold more and more
5. The consumers will look for customer service which might include a chat-bot but if the problem persist then there has to be a mechanism to replace with a human as well
6. 'Phygital' is continuing to grow and will become more prevalent including providing customer experiences which are a combination of the best of both worlds (physical retail store and online shopping platform).
7. Consumer Experience (CX) will become the key and Retailers/Brands have to define their organization-wide strategies while being customer-centric. It will become a norm rather than a one-time exercise.
8. Brands have to co-operate and collaborate to remain relevant and a experience a sustainable growth because brand loyalties have taken a hit and will continue to have an issue in foreseeable future.

These are simply a few trends which I could foresee but there could be many more which we will witness in coming months as the quantum and the length of the recession becomes clearer. Retailers/Brands who can understand this and make incremental changes in their operational strategies around new consumer behaviors in a timely manner, could well thrive and even emerge stronger.