By Livio Martucci, Solutions Vice President, IRI Italy
Change sometimes happens so quickly that it is almost impossible to keep up. But no-one could have predicted just how quickly the impact of the Covid-19 pandemic would change the way we live. Everything from the way we work to the way we shop has been turned on its head and we now view the world in terms of before-Covid and after-Covid.
From an FMCG industry perspective, retailers have been feeling the pressure more than most. Struggling to restock shelves as consumer demand hits record levels, managing increasingly stretched supply chains and making sure shoppers and staff are safe and adhere to guidelines around social distancing and hygiene.
In Italy we went into lockdown before most other countries, giving us unique insights into market and shopper behaviour before and during the crisis and what life could be like when things get back to ‘normal’.
It’s hard to believe that just seven weeks ago we were living in what we now regard as the ‘old normal’. In Italy FMCG growth was around 1.7%, and supermarkets represented more than half of all consumer spending, with just 10% in the 30,000 or so smaller stores here. At just 1%, online shopping was small compared to other markets like France and the UK. Shopping behaviour was fairly predictable, with an average weekly spend of €40 in supermarkets and around €10 in convenience stores.
But on 21st February everything changed, restrictions were enforced and panic set in. We had entered a new era. This had a dramatic effect on shopper behaviour, as Italians rushed out to buy groceries. We saw figures start to rise for the first time on 21 February, the day of the first recorded death in Italy and then again on 24 February when seven deaths were recorded. They continued to increase over the next four weeks as further restrictions were put in place.
But after this initial panic phase, sales dropped over the next two weeks. It was clear that shoppers had stocked their larders and were only topping up supplies, a pattern that is now being replicated in other countries as they follow the same curve.
We have also seen other changes in behaviour. Shopper loyalty is much less important in the Covid-19 era. Smaller and local stores are winning as shoppers heed warnings not to travel too far and shop closer to home, while out of town hypermarkets are losing out due to ongoing restrictions. This has led to a 41% increase in convenience store visits, while discount stores are also seeing a boost in visits, perhaps because of personal financial concerns in difficult times.
Basket sizes have also increased from €45 to €76, a rise of 69%, as shoppers look to make their shop last. Basket composition has also changed; full of essentials like eggs, milk and pasta, up by 20-40%, and still growing, as well as items for home baking, like yeast and flour. Given the focus on hygiene, it’s little surprise that disinfectants and wipes are the two fastest growing categories.
We are also seeing greater numbers going online and use of services like click & collect to avoid queuing at supermarkets. We’re now seeing this in other countries like the UK where supermarket delivery slots are either booked up or suspended as retailers struggle to cope with demand. In Italy, higher growth figures for click & collect suggest that retailers are finding it easier to scale up this side of their business rather than develop new infrastructure for home deliveries.
As we emerge from the eye of the Covid-19 storm, we can expect to see further changes, including a level of emotional relaxation as people get used to new ways of living and working.
But we’re also going to see people maintaining habits they have adopted during the crisis. Retailers will need to identify those ‘sticky’ behaviours that are a genuine shift in consumer behaviour. For example, engaging with a whole new generation of shoppers in different ways as older consumers learn to shop online and decide that it’s much more convenient for them.
Another challenge for retailers and brands will be in finding the right balance between being competitively priced to encourage footfall and offering value to price conscious shoppers, while at the same time minimizing the inevitable impact that might have on supply chain.
One thing we do know is that the ‘old normal’ has gone and the ‘new normal’ is in. Habits, such as social distancing and avoiding crowded places, are now a feature of our lives, as we choose to shop in local and smaller stores and work from home more regularly.
Health and hygiene now affects what we eat, drink and the way we keep fit. Out of home consumption is being replaced by home delivery and, as restrictions lift, we will continue to eat and socialize at home with a smaller group of friends and family. Shoppers will choose self-service and store payments at a distance, while online shopping and a more immersive digital experience will see fewer of us go in store to interact with retailers and brands.
All of us must be prepared for this new normal. By drawing on lessons from the Italian market, it is possible for retailers and manufacturers to understand what the future might look like in a challenging and uncertain period.