These Are The 6 Major Areas Of Consumption Affected By COVID-19

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As many markets across the globe begin to ease living restrictions and many consumers start to take tentative steps outside their homes, the world they are returning to is far different from the one they left at the beginning of the year. With significant new cases of the novel coronavirus (COVID-19) still prevalent in many markets and threats of a second wave, and return to a new normal will be a “mixed scenario” for the majority of markets where the virus is managed but not eliminated. Even as governments attempt to kick-start their economies by lifting quarantines and restrictions, many are implementing additional precautions across all aspects of society.

Nielsen has identified three distinct time horizons for global market regeneration beyond COVID-19 and outlined the conditions for businesses to Rebound, Reboot or Reinvent as they confront potentially unprecedented recessionary conditions. With each of these scenarios, the retail environment that consumers face and the disposable money they have in their pockets to spend will be vastly different from the world they knew pre-lockdown.

As unemployment levels around the world skyrocket and economic and business forecasts plunge, two types of consumers are emerging. Firstly, there are those relatively unaffected or insulated from health or income loss who have similar or even more discretionary income due to their inability to spend on out-of-home eating, entertainment, travel, etc. And in contrast, there is a second group of consumers who have had their income and spending significantly curtailed or constrained due to unemployment, furloughing or other COVID-19-related challenges.

Nielsen has identified six major areas where consumption dynamics will change moving forward in this unprecedented environment—and will have differing impacts for these two consumer groups.

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These Are The 6 Major Areas Of Consumption Affected By COVID-19 - Brand Spur

1. WALLETS ADJUSTMENTS BASED ON CIRCUMSTANCE

Consumers will adjust how they allocate their available spend depending on their circumstances. For some, initial cutback measures will be precautionary, but as living restriction horizons extend, these measures will become mandatory as incomes are further compressed and strained.

Insulated consumers, predominantly those middle to higher income, with minimal or no employment impact as a result of COVID-19, will have more freedom to buy what they want and need and may even trade up in certain categories to replace the “out of home” experience that has been out of reach amidst restrictions. However, as horizons expand, even this group will become increasingly cautious with their spend, thinking “they may be next,” resulting in a focus on savings and cutting back on higher-value discretionary spend.

Constrained consumers, often lower-income but not exclusively, will be looking for value and seeking ways to make savings in their everyday lives given their new financial restrictions. As their uncertainty extends depending on the length of this situation, their cutbacks will start to become more desperate and even small indulgences will be scaled back as they seek cheaper alternatives or avoid certain purchases altogether.

2. REBALANCED FMCG BASKETS

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As China initially began to ease its lockdown, we first noticed the development of a “homebody economy”—driven by consumers’ choice to increasingly live, eat and entertain at home even as living restrictions ease. Since then, we’ve seen evidence of this trend spreading to other markets, and it will likely continue to be the default for months to come. The fast-moving consumer goods (FMCG) industry has already and will continue to benefit from this shift to in-home consumption, but there will be a rebalancing of category and price tier repertoires within.

Insulated spenders will initially splurge on discretionary grocery items post lockdown—including luxuries, treats and premium lines. They may choose to supplement home cooking with prepared meals/kits, adding back takeaways and home deliveries. Constrained spenders may allow small treats like beverages or confectionery in the short term, but as timelines extend, they will seek out cheaper alternatives, downgrading to value brands and private labels predominantly on staple categories. But the longer the horizons continue, they will become increasingly reliant on these cheaper alternatives across their full repertoires. They will also seek out manufacturer and retailer support via capped prices to afford the daily essentials, and in the worst possible scenarios, government aid for basic living/food support.

3. REASSESSED PRICING MECHANISMS

The retail environment has fundamentally changed amid months of restricted living. Stockpiling, out of stocks and supply chain challenges meant that in many markets, promotional programs came to an abrupt halt, or were significantly cut back. Having broken the cycle of promotional reliance, consumers’ perception of value and price sensitivity will change the longer restrictions remain in place. Retailers and manufacturers have the opportunity to “reset” what value means to consumers and how they are best placed to meet the new needs moving forward.

The effectiveness of pricing mechanisms will differ by category in today’s new retail reality. For some non-expandable categories that benefited from quarantine living like specific staples and essentials, promotions are going to remain less effective than they were pre-crisis. But other categories, like out-of-home/on-the-go snacks, confectionery and soft drinks, may continue to depend on promotions to entice in-home consumption and invigorate demand even as some living restrictions ease.

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But this situation offers retailers and brands the chance to rethink and reset their direction moving forward. Everyday low prices (EDLP), shallower discount levels, economy or bonus packs may be better ways to incentivize loyalty to both brands and retailers as consumers continue to limit their number of shopping trips and visits to multiple stores once stock levels start to stabilize.

As supply chains faltered and stock replenishment and delivery issues prevailed during initial lockdowns, the retail environment also became increasingly fragmented with smaller retailers, direct-to-consumer models and speciality stores filling the void and offering alternatives to traditional retail channels. Moving forward, this fragmentation will test consumers’ traditional store loyalties as restrictions lift and stock levels normalize. It will be paramount for retailers to understand the unique consumer needs and priorities of different groups. This will ensure they’re able to offer tailored pricing offerings to retain consumers moving forward and ensure profitability in these challenging times.

In this new world, health, safety and quality assurances have become important accelerators in brand/product decision making and will remain significant choice drivers into the future. Consumers will reassess the brand aspects they value most, with some attributes rising in importance, or being prioritized over others.

For example, the sentiment around staying safe and hygienic has amplified the relevance of certain product claims. Research from Nielsen BASES has found that consumers now believe that homecare product claims focused on killing germs, providing immunity and overall health promotion are more relevant than claims around naturalness, sustainability, quality and brand. Whereas for food and beverage products, consumers are prioritizing products with health defence benefits, particularly those that offer immunity benefits, as well as quality and natural products.

Understanding what product claims are most important to consumers across different categories will not only drive loyalty but allow brands to identify the attributes that consumers are willing to pay a premium for. It also gives retailers the opportunity to optimize space in-store and assortment on the shelf and prioritize the products that best fit consumers’ new needs. If living restriction horizons stretch out and supply chains become even more restricted, it is unlikely that retailers will go back to the historical complexity of long product assortment tails.

Brands will need to truly differentiate themselves, with a focus on new consumer priorities, to ensure they deserve to be on a shelf, by offering true incrementality for each item in a given range. Manufacturers that are ready with these insights at the start of the post-COVID-19 negotiations stand a chance to earn shoppers’ loyalty longer-term and keep their place on a shelf.

5. RISING ORIGIN PREFERENCES

Local origin has become an important accelerator in brand/product decision making during COVID-19 and will remain a major choice driver in the future. Much of this has been due to interrupting global supply chains, as well as the need for local transparency and trust of ingredients and sourcing.

Even before the living restrictions of COVID-19, we saw that there was an increasing preference for local brands. As lockdowns were implemented, consumers increasingly came to rely on and trust local and micro-local products, and in many instances, local has been the only source of available products. As living restriction horizons extend, local origin will become increasingly important for retailers who want a guarantee of supply, but also for consumers who will want to purchase brands that support their communities and boost their economies. This will become even more evident the longer COVID-19 conditions continue.

Local goods may hold one way to protect and rebuild economies. Governments could look to incentivize local production, enabling ongoing access to affordable local products, which will lead local providers to expand and grow their product portfolios and infrastructure. Depending on what taxes or regulations governments exercise, local brands may enjoy subsidies or price protection that they have not seen after years of free/open trade conditions. This has huge implications on retailers and manufacturers in terms of assortment in stores and production facilities to ensure multinational companies and local players can play to local strengths.

During lockdowns, many brands have struggled to determine their optimal level of marketing and advertising. Early 2020 campaigns were quickly outdated and irrelevant to the new world, and companies struggled with the tone of messaging, frequency of communication and level of engagement, in addition to slashed budgets due to declining sales.

For many consumers, this has come across as lack of care, empathy and consideration for what they have faced. The longer brands remain dark, the more consumers have turned to those who are perceived to be active and supportive. Authenticity, trust and empathy have been the winning traits of those brands that remained “on-air” and relevant to consumers emerging needs.

As brands start to reinstate their marketing activity and messaging, they will need to look at where audiences have shifted their listening, viewing, engaging and socializing, as well as how they will need to repair broken relationships or strengthen new ones. Digital and virtual engagement will need to be a substantial new focus area for marketers. As horizons stretch out, consumers will increasingly value connections with brands they trust and who showcase they care about them and their communities.

ANTICIPATING ACCELERATED TECHNOLOGY ADOPTION

As markets across the globe implemented living restrictions, technology transformed our lives. Our use of digital tools has accelerated faster than expected since the arrival of COVID-19. Online shopping has grown exponentially among new demographic groups, consumers’ use of contactless payments and in-store navigation apps has risen dramatically, and brands are increasingly connecting with consumers via interactive and virtual shopping experiences, just to name a few. As businesses focus on navigating their organizations forward across uncertain time horizons of regeneration, technology will continue to play a critical role in the changing consumer dynamics outlined. Accelerating technology adoption will be a powerful enabler that will pivot consumer behaviour both in-store and online into the future.

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These Are The 6 Major Areas Of Consumption Affected By COVID-19 - Brand SpurThese Are The 6 Major Areas Of Consumption Affected By COVID-19 - Brand Spur

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These Are The 6 Major Areas Of Consumption Affected By COVID-19 - Brand SpurThese Are The 6 Major Areas Of Consumption Affected By COVID-19 - Brand Spur

Latest News

New entrant AECO Energy launches business innovation to deliver ‘last mile of value chain’ to Singapore’s maturing open electricity market

  • AECO Energy announces the launch of its operations in Singapore to provide innovation to the open electricity market for businesses with generation 2.0 of its technology and service offerings.
  • The company will introduce three solutions as part of its initial portfolio, customisable to specific business needs.


SINGAPORE - Media OutReach - 13 April 2021 - AECO Energy, a new entrant to Singapore's electricity sector, has today announced the launch of its operations. AECO Energy will be the first-of-its kind energy technology and services company aimed at innovating customer-centric offerings in electricity and renewable energy markets.

With over 12 years of experience in delivering open market electricity services and solutions to businesses in Australia under the Power Choice brand, AECO Energy is bringing its second generation of services and technology to Singapore for the first time. AECO's second generation delivers on two major offerings.

Firstly, AECO delivers the 'last mile' of value in Singapore Open Electricity Market (OEM) value chain by providing innovative services to assist businesses to manage, plan and make better buying decisions.

AECO is all about enabling increased profits for businesses. AECO has a customer-centric mission to use its low-cost proven technology and expert-led services to enable better business decisions within a complex electricity market with multiple providers and opaque medium- to long-term pricing information. This comes against the backdrop of Singapore's maturing OEM, which gives businesses and consumers the autonomy to buy and choose their electricity providers - the freedom to choose.

AECO Energy's technology platform, MarketPro™ with its unique, electricity futures market simulator Rate Watch™, delivers business and electricity efficiency and empowers businesses through relevant and timely pricing information, while also helping Singapore businesses make better buying decisions via automated tenders and reverse auctions. Moreover, for businesses who do not have the capability and capacity to manage and purchase its own electricity, AECO Energy Portfolio™ delivers scalable buying power with a fully-managed contract management and purchasing aggregation service for small, medium and large businesses.

Alan Jones, CEO, Chairman & Founder, AECO Energy, said: "We are incredibly excited and humbled to be joining Singapore's dynamic energy scene with our low-cost, high-value products and services. Our mission is clear: just like Amazon is revolutionising the 'last mile' of product supply chains with its same day delivery, we are also delivering the 'last mile' of the value chain in Singapore's OEM that enables more businesses better purchasing decisions, more business profitability and growing all of Singapore's economy."

Secondly, with SGX-listed entities, enterprises and multinational corporations (MNCs)' increasing emphasis on sustainability, AECO (through its SustainPro™ offering) will bring for the first-time in Singapore the benefit of AECO's direct relationship with generators of International Renewable Certificates (I-REC). This enables Southeast Asian markets the benefit of medium- to long-term low-cost and structured REC solutions to meet renewable energy targets and sustainability goals. This translates to more profits by providing more predictable costs for businesses in meeting their sustainability and renewable energy goals.

"As a specialised company, unburdened with corporate overheads and distractions from Singapore's local market participants, we can offer companies who are based anywhere in Southeast Asia, sustainability and renewable energy solutions that span markets and countries at a lower and more predictable price. We are honoured to play our part to bring sustainability and increased renewable energy throughout the world and to do so while benefiting our customers' cost structures," continued Mr. Jones.

AECO Energy is introducing three offerings as part of its electricity management solutions:

  • MarketPro™: Businesses can optimise costs and seize market opportunities with exclusive access to customised market price information through AECO Energy's integrated online procurement and management platform equipped with Rate Watch™, a market simulation and automated procurement technology from as low as SGD $149 per month.
  • Portfolio™: Businesses get exclusive access to economies of scale with better buying power through professional and expert-managed energy procurement portfolios overseen by AECO Energy experts. This allows enterprises to focus on their core business while AECO Energy experts will fully-manage their electricity contracts and make better buying decisions on their behalf from as low as an additional SGD $74 per month.
  • SustainPro™: SustainPro focuses on helping businesses meet their sustainability goals at the lowest cost. AECO Energy offers lower costs on the procurement of Renewable Energy Certificates (RECs) and tailored REC supply solutions designed to meet transition needs towards a more sustainable business.

"With the understanding that business needs are unique for every organisation, our energy experts will work closely with customers here in Singapore to help them reduce costs, drive efficiency and make better buying decisions. By providing technology-enabled, insights-driven energy technology solutions, we want to create a profound impact on our customers' businesses to better position them for sustainable growth in the long-term," concluded Alan.


About AECO Energy:

Based in Singapore, the AECO Pacific Group owns and operates the Power Choice and AECO Energy brands. A leading pioneer for more than 12 years in electricity brokerage and consulting services in Asia Pacific focusing on deregulated electricity markets, AECO Pacific helps businesses with electricity procurement and management backed by market intelligence. Transforming and saving businesses more, AECO's combined experience in energy leadership and innovative technology solutions remain unmatched in dynamic and changing energy markets. For more information, visit https://powerchoice.com.au/ and https://aecoenergy.sg/.

These Are The 6 Major Areas Of Consumption Affected By COVID-19 - Brand Spur
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