How the Italian consumer is reacting to Covid19 in terms of purchasing behaviors and related insights for future thinking

In the courtyard of the building where I live in Milan the only sounds you hear in a sunny afternoon are the birdsong and the voice of a father explaining math to his daughter. These sounds are often broken by the ambulances scream, "were they covered in the past by the strong noise we were normally used to, or instead are they actually circulating more, more and more?"

In this scenario yesterday in Italy official figures about some sectors/segment/categories performances (real consumer purchases not stocks) have been released. They say quite something about consumers reaction to these first weeks of covid19 storm.

(Most of the insights are here in this article reported with precise figures and in this case sources are mentioned, some others are indeed only the result of informal conversation with people in my network and in this case there is not a specific number behind the information but only a qualitative consideration.)

The key focus will be on the data itself but especially on the potential insights about consumption styles that we might take out by this first part of the storm.

KEY DATA

Food, grocery, pharmaceutical products and personal care are simply booming since the start of the crisis. Segments that were, with different specificity, more or less flat vs py up to Feb the 16th, have seen in the following weeks an extreme acceleration.

Medicals and emergencies products drive obviously the group by far, but:

-       house care (+24,9%)*

-       personal care (+19,6% - with hand soap +83,5%)*

-       food (i.e pasta +56,7%, dry food +49,2%, sauces +48,75 %)*

are extremely sprinting too.

Also the consumer electronics segment is doing quite well, GFK reported that in the last week of February the market signed a positive +8,8% in value vs py seeing the growth of categories such as TV (+7,5%), laptop (+5,8%), smartphone (+13,3%) but also Washing Machine (+4,7%).

In the first week of March, then, portable computers have shown an outstanding +63% vs py, printers +53% and desk PC (!) +15% - signing the highest week in terms of sales in the last 6 months excluding black Friday. **

In all these segments the online channel growth is outstanding (+41% / +91% according to the different products).

Clearly We must consider that especially concerning consumer electronics and similar goods, the week in course is actually a strong stress test as it is the first one in which stores have been completely closed. It will be then interesting to see if “online purchases” will fully compensate the “physical channel” loss, in a country where at the moment they don’t account for more of 20% of total sales in these segments and is actually very improbable to happen. Many operators are not positive at all for the coming days.

On the other side also fast growing categories as food could show a significant trend change both for a simple "in house stock" reason (I have enough pasta for months) and potential issues and stops in the production chain: many companies are correctly reducing the number of workers per shift to preserve their health by adopting all the distances norms and could be tough for this reason to rebuild retail stocks quickly. (Some situations in which workers are threatening strikes have been signaled too.)

Very different data might be expected in the next weeks, but my main focus it's on behaviors more than economical forecast.

PUTTING IT ALL TOGETHER - THE INSIGHTS:                    

The main behaviors driving the consumer in these tough moments can be clustered as it follows:

1.    Surviving: seen in the growth of all the categories related to disinfection, medicals and emergencies products

2.    Preparing for the worse - “war approach”: preparation to a potential product shortage or store closure, impacting mainly: dry food and home care

These 2 behaviors are the ones more strictly related to the emergency and specifically to the emotional side of the reaction to it. They might be related only to the first part of the emergency

3.    Fostering New daily life habits – the OLD BASIC needs

• Need to arrange all the meals, for all the members of the family, per each single day, at home. This is clearly determining an increase in the food segment shopped in retail but has as a downside the deep loss in ho.re.ca channel. We don't know if the two effects are balanced, we only know that this is not the case from a social perspective
• Need to clean the house more often not only because of the hygiene stimulus coming from the virus threat but also for the increasing daily usage
• Appliances (daily allies) renewal, driven by:

-  A higher usage rate of major (MDA) or small domestic appliances (SDA) might highlight that it’s really time to change them even in countries where the change-rate of a Washing Machine is the slowest. The overall situation could then suggest to not postpone this anymore. The perspective of spending more time at home could be in this sense compared to life-events like a baby-birth, that normally impact these categories, for the needs they generate

-  The higher time spent at home might suggest the addition/purchase of an appliance not yet owned (i.e dishwasher, tumble dryer, additional freezer)

This group is as well strictly connected to the emergency but represents the more rational reaction (more time at home requires certain purchases) - it should last at least for the entire “non normality” period

4.    Fostering new daily life habits – the NEW “BASIC” needs

• Home working arrangement: as reported by GFK Italian consumers are creating an authentic office at home (laptop, printers, faster connection?)
• Home entertainment: TV, consoles, tablet, streaming TVs and co. as allies to spend good time at home – I don’t have any insight about books but I’d be happy if they were super green too
• Streaming services: connected to both the points above but generally related to the whole basic need to make things remotely (working, learning, communicating, sporting)

This last cluster - The New Basic Needs - is the more interesting to look at, in terms of future view as it surely derives from the crisis but It can definitely be prolonged and become more and more structural in the future.

That’s the area where to focus on to figure out which “new solutions” can and will be part of this cluster and play to satisfy this emerging need in the future. It is from here that we have to start if we want to think about the next needed innovations: in products, services or simply business models.

I might be wrong but I’m not one of those thinking that We will never work anymore in office, or learning in class, or training in a gym or travel to attend a conference or hold a meeting abroad. But it is quite sure that the balance between remote and non remote activities will inevitably change for ever, as there were already many forces acting in this sense. If We just make the hypothesis, that the split between “remote” and “not remote” actions moves from the current 20 /80 (theoretical assumption), only to 40 / 60 … a possible disruption is served! And we could have expected it.

PS

This article is voluntary concentrated on positive thinking and insights but to conclude it We cannot forget the downside, meaning the sectors in strong and incredible sufferance like tourism, ho.re.ca (hotel, bar, restaurants) and OOH, luxury, textile, and transportation. 

And We all know that many of these represent authentic foundations of the Italian economy.

The other simplification is that I have not considered any reasoning on the potential purchase power loss upcoming from the entire crisis, that governments will hopefully avoid.

We are unfortunately only at the beginning.

Notes:

*Fonte: Nielsen, Market Track, Iper+Super+Liberi Servizi+Discount+Specialisti Drug.

** Fonte: GFK , Technical Consumer Goods - settimana dal 24 febbraio all'1 marzo.