In the second Consumers and the new reality report, we continue to examine the effects of COVID-19 on consumers’ needs, behaviors and preferences. The effects of COVID-19 continues to be felt around the globe and organizations will need to anticipate and prepare for the new reality. In particular, what are the long-term shifts in consumer behaviors and how can organizations transform their business to successfully adapt to these changes?
This executive summary is the second of three reports based on KPMG International’s survey of more than 60,000 consumers from 29 May – 24 August 2020. This report examines consumer experiences during that period in the following key sectors: Consumer & Retail, Banking, Insurance, Entertainment & Leisure and Travel & Tourism.
Overall, the combination of basic consumer needs of value and convenience indicates serious consequences ahead for the economic fortunes of individual markets. The predicted increased use of local suppliers remains positive while the trend for global brands is down.
Additionally, we see that personal safety moves into the top three purchase drivers demonstrating the need for organizations to work harder and faster to ease consumers’ anxiety around in-person interactions.
Organizations which are most likely to prosper over the long term are those that:
Trust in retail has been eroded. Retail, and grocery retail in particular, was initially seen positively during the COVID-19 situation. Trust in these sectors was higher than any other — however as time has passed, this trust has eroded with a significant decline compared to W1 (-10 percent for grocery, -8 percent for non-grocery). Net trust is now negative for both sectors.
Grocery baskets are larger but filled less often. Consumer spend has increased — reflecting the necessity faced by many customers to consume more at home. This is in contrast to spend on non-grocery — across almost all markets, particularly Hong Kong (SAR), China (+33 percent), mainland China (+24 percent) and Brazil (+19 percent vs. pre-COVID-19). France is the exception (-1 percent). Customers are shopping less often and are much more thoughtful about where they choose to shop — especially in Canada and France, where frequency is even further reduced (-45 percent and -29 percent respectively vs. pre-COVID-19).
Dramatic drop seen in no-grocery spending. Customers believe they will spend far less in the future on their non-grocery retail. This pattern is reflected in all markets. Retailers need to consider what steps can be taken to restore customer confidence. Similar to grocery, personal safety is a key driver of customers to online channels and a necessity in store.
Consumers wil pay more to support their community. Support for local suppliers has continued over the past months, with a strong desire to support the community as well as the perception that local goods are higher quality. Predicted use of local suppliers has decreased slightly over the past months, but still remains high.
Knowing consumers is not enough: understand them. Banking customers, more than ever, want to feel in control. They want to be equipped to make sensible decisions about their future and they want proactive communications to help guide them on their way.
The banking industry was already facing extensive disruption and change. COVID-19 provides a chance to reset the role of banking in the mind of the customers and align it with providing tailored solutions. Integration, proactivity and purpose are the new watchwords.
Personalization should be based on a deep understanding of the individual customer’s circumstances, a humanized and easy experience, especially for those new to digital channels. This is more relevant to those aged 45+, who still value a telephone number to contact banks (27 percent).
Digital banking has been fast-tracked. Despite the restrictions being lifted, banking is expected to become ever less branch-centric with consumers looking to securely access personalized products and services online. Many banks will need to further evolve their channel strategy and advance their digital investment. In the COVID-19 new reality, consumers will use branches less (-4 percent on average) and shift into digital channels like websites and apps (+4 percent, +5 percent). This trend has been consistent through all waves of this research, suggesting these changes are permanent.
This trend is most evident for purchasing new products (+4 percent website, +6 percent app), including high-value products, like mortgages (+7 percent website, +5 percent app) and savings (website and app both +6 percent).
Consumers demand more from insurers. The insurance industry has a key role to play in supporting customers and societies through COVID-19 and the recovery.
Insurance customers are becoming more demanding of their insurance companies, with more people seeking greater ease and clarity through:
Overall, insurance ownership is down slightly, driven by travel insurance which saw a 6 percent drop vs. W1, the highest drop is in Spain (-14 percent) and the UK (-10 percent).
Demand for insurance is up. COVID-19 has led to an increased customer desire to secure against unforeseen events. Where customers need to make a claim, efficient processing of claims remains critical — especially in the current environment, where delays in pay-outs may have severe implications for customers’ personal financial situation.
Acquisition was focused around auto insurance (which was +5 percent vs. W1), the highest is in Italy (43 percent) and Brazil (27 percent) vs. 16 percent globally. Smaller increases of 1-2 percent were seen for life, home, health, pet and annuity insurance vs. W1. Financial security is, perhaps unsurprisingly, linked with insurance ownership — those who feel secure are more likely to have invested in life, health, critical illness, annuity and travel insurance. Financially comfortable consumers invested in home and travel insurance. Yet those financially overwhelmed also have a greater tendency to own life insurance.
Travel faces a long road to recovery. COVID-19 is expected to have a long-term impact on the Travel & Tourism industry as companies work on regaining lost trust.
The travel industry was one of the hardest hit industries in the world. Only two in five consumers are confident to go back to this sector, fewer in Japan (29 percent), and Hong Kong (SAR), China (34 percent) and more in Brazil (54 percent), Italy (53 percent) and France (51 percent).
Consumers say the industry’s key priorities should be the flexibility of refunds (46 percent) and hygiene measures (44 percent). The former is especially relevant as consumers have been particularly affected by a long and complicated refunds process. This has higher relevance in Australia (60 percent), Hong Kong (SAR), China (53 percent), Germany (52 percent), France (51 percent) and the UK (51 percent). Addressing concerns around hygiene and personal safety, when flying or staying at hotels, is critical to improve confidence to resume tourist activities. This is particularly important for Canada (56 percent).
Holidays at home: staycations are on the rise. As the travel industry faces high levels of disruption and uncertainty remains due to safety concerns and COVID-19 measures abroad, local holidays are replacing airline travel.
There is an appetite to travel if reassurance can be given regarding security. Many consumers are now planning to take a holiday locally (22 percent) taking into account how the local COVID-19 situation develops, and 21 percent have already booked a local holiday. This can help to support the local tourist industry.
As mentioned previously, reassurance on safety measures is key: clear communications and messaging that destinations/facilities are COVID free and that all necessary measures is in place are key to encourage hotel bookings. Providing sanitizer (45 percent), enforcing social distancing at hotels (44 percent), additional cleaning during the stay (44 percent), limiting the number of customers at any one time (43 percent) and staff wearing PPE (42 percent) would help customers see tangible measures in place.
Consumers remain cautions: personal safety is first. Confidence to interact with the entertainment industry remains low, but is rising as restrictions are lifted and venues operate under limited capacity. However, net trust is lower than pre-COVID-19, as consumers need further reassurance on personal safety measures.
Confidence to go back to entertainment and leisure venues is quite low in the sector, with only 27 percent of consumers saying they are confident to do so, higher in mainland China (38 percent), France (35 percent) and Australia (33 percent).
Confidence to go to restaurants or cafes is much higher (53 percent), seeing a 7 percent increase in little over a month. This is also higher among financially comfortable consumers (59 percent). As restrictions continue to be eased, we also see an increase in consumers already visiting these venues vs. June/July, especially restaurants (+11 percent), cinemas (+5 percent), pubs and bars (+4 percent) and swimming pools and spas (+4 percent). While 24 percent of consumers are already visiting pubs/ bars and 39 percent expect to do so in the next 3 to 6 months, confidence is relatively low at just 28 percent, in comparison with restaurants/cafes where 54 percent are already visiting and confidence is at 53 percent.
Home is the new hub. Home becomes the “center of operations” as all activities take place in one place: home office, home-schooling, eating and cooking at home, exercising and online socializing. There are 3 big drivers of this shift away from the out-of-home entertainment and leisure industry, to in-home. Firstly, with 43 percent of consumers financially affected by COVID-19, spend on non-essentials has decreased. Secondly, with safety concerns as mentioned in the previous section, we would not expect consumers to go back to entertainment venues as often as they did before COVID-19. In general, 35 percent of consumers say they will visit entertainment venues less, slightly more negative for cinemas (40 percent) and pubs or bars (39 percent), as well as in Japan (47 percent), mainland China (43 percent), Hong Kong (SAR), China (42 percent) and Brazil (41 percent). Finally, we are now witnessing behavioral changes. Research suggests that consumers need an average of 66 days* to form new habits. With over 5 months in the Western world and over 8 months in the East, most consumers have now adjusted their behaviors, routines and expectations. Thirty-nine percent of workers are working from home more now. Fifty-nine percent of this group expect to maintain this routine in the future, once all restrictions are lifted. This is particularly high in the US (74 percent), the UK (73 percent), Germany (69 percent), Italy (69 percent) and Spain (68 percent).