In a year that brought forth major events like vaccine rollouts, COVID-19 variants, and economic strains of inflation and labor shortages, there have been several major shifts in consumer behavior that we've been tracking.
Our goal was to identify the areas in which consumers are getting back to pre-COVID lifestyles, and what areas are keeping them in a perpetual state of a “new normal."
To understand these macro shifts, we've been closely monitoring consumer behavior throughout 2021 using smartphone foot traffic data, credit/debit transaction, and attitudinal survey panel data.
1. People are feeling, and living, much more “normal” than in 2020 - but they aren’t fully back to pre-COVID behaviors yet. And some COVID-driven retail behaviors seem like they will stick permanently.
What we see:
- Among the fully employed, ~70% are now back to going into work (vs. only 55% in mid-2020).
- “Planning future travel” was one of the only activities respondents cited as doing more of in 2021 than 2020. Other early-COVID habits like watching streaming content or working on home improvement were still commonly cited as being higher than pre-COVID, but are lower than 2020. Consumers also cited their travel planning and average gathering size for the holidays were higher in 2021 than 2020.
- Apparel (+2%), beauty speciality (+7%) and department (+10%) retailers have made a comeback vs. 2020, to a higher extent than most other retail categories after suffering an especially hard 2020.
- Delivery platforms for restaurant and grocery continue to grow and have not suffered a sales decline amid the return to in-person shopping.
- Specifically around holiday shopping, 2021 solidified trends that began in 2020 regarding tighter gift giving circles, spreading holiday shopping more broadly across November / December, and using a mix of digital and in-person channels to shop.
Why it matters:
- Recognizing how your brand fits into the shopping occasions around travel, going to work, going to school, and social events is increasingly important. This is once again a growing space as people return to the pre-COVID habits that were heavily suppressed in 2020.
- Channel presence, vs. days of promotion, will continue to be the most critical parts of winning during holiday shopping. With consumers utilizing a mix of in-person and digital more, plus spreading shopping across more weeks, a strategy around just Black Friday and Cyber Monday is likely to fall short.
2. Value / price-sensitivity has grown in importance for consumer decision-making, but it's having a bigger impact on how they shop rather than their total consumption.
What we see:
- Amid public visibility of high inflation rates, rising prices of goods is heavily cited as the most important factor in household purchase decisions (34% cited, ranked #1 of 15 factors).
- While consumers cite inflated prices as a likely driver of curbed spending (both in the form of reduced consumption and the shift to cheaper substitutes for goods), there is not yet much evidence to suggest they are actually doing either. There is a weak relationship between average transaction $ size growth and transaction volume decline - this is in terms of comparing retail categories to one another, comparing individual retailers within a given category, and examining case studies like that of Chipotle’s public disclosure of price increases.
- What does seem to be an emerging trend is the increased effort to hunt for deals and to switch to payment options like Buy Now, Pay Later (20x+ growth compared to 2017). In the latter’s case, the rapid growth of this payment method has been one of the biggest trends of 2021.
Why it matters:
- Consumers may complain about rising prices, but considering the widespread and consistent nature of its occurrence, they may have little choice but to accept it and continue consumption patterns like before. This appears to be the case so far and gives liberty to retailers to take price when internal costs are also rising. Sweetening the blow via deals / special offers may offer some psychological comfort for consumers, and simultaneously drive them to the channels / products you want depending on how they are rolled out.
- Having a strategy for Buy Now, Pay Later is vital. Integrations with leading platforms, and investing in promotion through those platforms, may mean the difference between a sale for you vs. a competitor. These platforms are increasingly becoming a marketplace for selecting retailers and not just a way of paying once on a retailer’s website. But be cautious of contractual terms and liability, as a sizable % of BNPL users have been late or defaulted on payments in the past.
3. Vaccines may make people more comfortable with in-person shopping, but the vaccinated are still less active than the unvaccinated.
What we see:
- Vaccinated panelists increased their retail visit activity once becoming vaccinated. This was at a faster rate than the unvaccinated did during the same time period.
- However, the unvaccinated were both before and after a more active group for retail + restaurant visit frequency. They’re also more comfortable doing nearly every in-person activity compared to the vaccinated.
- While vaccinate mandates theoretically could be catastrophic to the traffic at restaurants and retailers considering the points above, early indication from cities that have implemented them have not seen notable declines in foot traffic compared to the country as a whole.
Why it matters:
- Retailers should not count on future health policies to shock retail trends to the level of Spring 2020, neither positively nor negatively. Gradual, modest shifts are more likely to be the reaction to big developments regarding vaccine mandates, as evidence is light so far that they are having a devastating impact on curbing restaurant / retail foot traffic. However, the DMAs where they have already been implemented may be sustaining restaurant foot traffic due to pivots toward outdoor dining / pick-up, a swap of unvaccinated for now-comfortable vaccinated diners, low enforcement of policies, and other factors.
- Unvaccinated customers continue to be an important part of the in-person shopping / dining clientele. Risk tolerance for each retailer may vary, but a balance of maximizing safety protocols to protect all visitors but also considering the unvaccinated may care even less about safety as a selling point for your brand is key.
Download the full analysis here - The Biggest Consumer Behavior Shifts in 2021.
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