Post COVID-19 spending bounce back set for late summer, says EY


18-03-2021
Silvia Rindone, EY UK&I Retail Partner

The latest EY Future Consumer Index shows UK consumers have big plans to spend post-COVID-19 and have three basic needs – a holiday, haircut and a day out.  However, short-term anxiety remains around returning to non-essential retailers on 12 April.

  • Customer experience is more important than ever – both in store and online.

  • Retailers need to use golden opportunity to re-engage customers in store.

  • Online experience needs improvement overall but especially in grocery sector – almost half (49%) of consumers say they do not shop online because they have less control over purchases, and just over one-in-ten (11%) believe grocery websites are better than physical stores.

There is significant pent-up demand for consumer spending post-pandemic, with UK consumers prioritising haircuts, holidays and a day out as they emerge from lockdown, according to the latest EY Future Consumer Index.

However, the survey of over 1,000* UK consumers found that anxiety remains around health and returning to non-essential retailers on 12 April, suggesting that the real spending boost will come later in the summer when larger numbers of consumers have been vaccinated. Consumers’ ability to spend will be supported by the currently elevated savings ratios.

Forty-three per cent plan on spending more on a holiday post-COVID-19, up from 31% in October. Meanwhile, 37% are planning on spending more on out-of-home recreational services versus 26% in October. And 29% plan on spending more on personal care services (such as hairdressers), nearly double the October figure of 17%.

However, the majority of those surveyed (55%) believe the virus will only stop affecting their daily lives after most of the population is vaccinated. This suggests that the big ‘unlock’ in consumer behaviour will come later in the summer once most of the vaccination programme is due to be completed, rather than as soon as non-essential stores reopen on 12 April. Fifty-nine per cent of those surveyed said they avoid touching items when outside the home.

Silvia Rindone, EY UK&I Retail Partner (pictured), comments: “Consumers are ready to spend, particularly in areas relating to their social lives as they look to reconnect with loved ones in person. Retailers need to be prepared. To ease anxiety around returning to store, retailers will need to focus on providing reassurance to customers and employees alike, making them feel protected and secure by maintaining a heightened focus on hygiene and sanitation.

“As consumers look for a return to in-person engagement and the in-store shopping experience, retailers need to engage customers with store events and activities. They simply can’t underestimate the power of the store and the consumer desire to re-engage with the social aspect of shopping.”

Online experience still needs work, especially for grocery sector

EY’s research shows that the consumer appetite to return to stores is not being driven by increased freedoms alone: it is partly fuelled by a growing frustration with online shopping and the fact that it does not offer the immediacy and control of physical stores. While there has been a shift online as non-essential retailers have been forced to shut, and some behaviours have changed for good, tolerance of the challenges of online ordering has diminished.

The survey suggests that what were online shopping ‘niggles’ are now full-blown pain points. Half of consumers say that they are frustrated with expensive deliveries, 28% by slow deliveries and 25% by not being able to find what they are looking for easily.

These frustrations are particularly evident in the grocery sector where almost half (49%) of consumers say they do not shop online because they have less control over purchases, and just one-in-ten (11%) believe grocery websites are better than physical stores.

Silvia Rindone continues: “Retailers must continue to improve their online offer, ensuring that all elements of the online experience satisfies increased customer expectations.

“The balance of store and online will continue to be important for shoppers that research and buy across channels, although its importance varies according to category. For example, 43% of beauty and cosmetics consumers who buy online will have browsed in store first versus 28% who buy in store and browse online first, but 57% of consumers who buy technology in store have researched online first, versus 33% who buy technology online have researched in store first. This means that making it easy for consumers to mix and match their research and buying across channels will be crucial.”

Price remains key but growth is expected across several product categories

As well as expecting to spend on holidays, personal care and going out, almost one in five consumers expect to spend more on clothing (22%) and beauty (18%) in future. Consumers are also revamping lifestyles and looking to get healthier, with plans to reduce their spend on alcohol (17%) and tobacco (19%) and increase spend on fresh food (20%) and non-alcoholic beverages (11%).

Two other strong trends seen during the pandemic are also expected to continue. Spend on the home, which first emerged as consumers revamped gardens and interiors as they were confined to their homes, is expected to continue to rise with 19% of respondents saying they will spend more in this area. And, with the increase in pet ownership during lockdown, 14% of consumers plan to spend more on pet supplies – this was 8% in May last year.

Mona Bitar, EY UK&I Consumer Leader, comments: “More than three in five consumers said price is their most important criteria when making a purchase. This is supported by a greater willingness to shift to store brands than previously, with 20% of consumers switching brands to reduce costs. Pricing and proposition are also vital both online and in store – retailers and consumer goods companies need to have the right range to take advantage of category growth.

“However, those seeing growth in their online sales must remember that these will be likely to tempered by reduced physical sales, coupled with increased operational costs in store. To thrive in the post-pandemic era, retailers and consumer goods companies must look to truly integrate their channels, otherwise they risk running two parallel business models with reduced productivity across both and split capital and overall investment activity.”

For the latest insights and information on the UK EY Future Consumer Index visit: https://www.ey.com/en_uk/consumer-products-retail/four-ways-to-make-the-most-of-consumers-post-lockdown-spending

About the EY Future Consumer Index

The sixth EY Future Consumer Index is a survey of 14,483 consumers across UK, US, Canada, Brazil, France, Germany, Denmark, Sweden, Finland, Norway, India, UAE, Saudi Arabia, China, Indonesia, Japan, Australia and New Zealand from 25 January to 4 February 2021.

*1,000 respondents live in the UK. The index explores current behaviours, sentiment and intent.

 

 

 

EY is a global leader in assurance, tax, transaction and advisory services. With over 400 employees in our Cambridge and Luton offices, our teams provide a range of services to a variety of sectors, including manufacturing, life sciences, consumer products and retail, technology, real estate and construction, health, and the public sector. The broad array of companies across the East allows us to bring real, relevant and key insights to our clients.

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