The consumer sentiment, permanent or temporary? How about retailing?

Covid19 made a massive impact over the last few months not only in the health axis but also in the economy, both macro, and micro. Despite all health warnings issued by the national science committees, governments tend to normalize daily life to recover the inevitable losses made especially to small and medium businesses. For sure, the recovery of a few industries, such as airlines, will take a very long time.

McKinsey issued research about consumer sentiments in some countries. I would like to share some of their results for Canada and Turkey.

Personally, one of the most interesting findings which actually out of research scope was the concern salience of Turkish and Canadian citizens. Presumably, Turkey, as a collectivist, high context Eastern culture, would be expected to prioritize the health and safety of the public and family. Remarkably, respondents put their health in the first choice and public health on the sixth row.

However, Canadians, as known for their individualistic attributes, put public health on the third row, and their self-concern was at the bottom of the list. Honestly speaking, either this virus also mutated sociological facts, or we should revisit our well-accepted fallacies.

Inevitably, both of the countries are too much concerned about the economy and how long this situation will last.

Another page was about the overall sentiment of the countries. Respondents are asked to answer whether they agree or disagree about the given statements.

Turkish consumers are strongly expressing the negative impact on their income, followed by a very negative outlook for the future. For sure, their spending behavior changed to cut back and be very careful about how they spend.

On the other hand, Canadians did not prioritize the outlook, but they tend to be highly cautious about how they spend. It looks like most of them are confident about their income and ability to make ends meet.

One of the profound outputs is the intent of customers to spend on categories compared to previous normal.

Turkish consumers are saying that they will spend more on groceries, snacks, tobacco, and entertainment at home, which is entirely compatible with the mentioned negative outlook. This reminds typical short term indulgence behavior at low confidence level times.

Canadians look like keeping their words on controlled spending else than groceries and entertainment at home. Interestingly, cleaning and hygiene products are also intended to spend less compared to Turkish consumers.

One of the most profound impacts will be the usage increase of online channels and the shift between brick and mortar retail. As mentioned before, spending decrease is already expected to lower the turnover; moreover, shift to the online transactions will push all retail businesses to revisit their way of doing things.

Turkish customers are planning to spend more and use both online and offline channels for perishable products such as grocery, household supplies. Remarkably, else than lowering the intention to spend, they plan to shift online for clothes, shoes, and such products, which reminds of a dramatic change for retail business owners. Over competition might tend to curb the profit levels.

Canadian consumers, as mentioned before, are planning to spend less, however online, is also getting dominant both for the new users and intent to use it permanently. This shift should be reviewed carefully to make the necessary adjustments for brick and mortar stores.

As shown above, telemedicine physical and even mental are new business lines that had quiet strong uptake in Canada.

After this short review of the consumer behavior shift, I would like to mention some points which could be useful for retail business.

These trends will shape the industry’s next normal and could have profound implications on a retailer’s P&L. Store sales could plummet, fiercer competition and increased operational complexity due to workforce disruptions could contribute to margin compression, and the migration of purchases from stores to e-commerce (typically a lower-margin channel for retailers) could further hurt profitability. Forward-thinking retailers will redefine the role of their stores, streamline store operations, and reevaluate their store networks.

More than ever, stores need to offer unique customer experiences instead of merely serving as transactional venues. To better cater to changing customer preferences in the next normal, stores should seek to deliver superior product-discovery expertise and provide access to exclusive merchandise.

Rapidly digitize and automate non-value-added work. Retailers should digitize and automate in-store activities, where possible, to free up associates for higher-value work. This includes automating labor scheduling, expanding the use of self-checkout and mobile checkout, and providing remote-management tools for store and field managers.

I hope this unexpected incidence quickly ends and leaves fewer side effects. However, for quick thinking and agile business owners might also enjoy mid to long term benefits from power shifts of the incumbent markets.