As the Pandemic Evolves, So Will Consumer Spending
As we write to you today, the pandemic is still with us, but we are beginning to get occasional glimpses of normal life peeking through. As the vaccines get rolled out to greater numbers, and we start to see fewer restrictions, you can expect a new surge in consumer spending to follow closely behind.
Normally, that would be good news, but for most of the last 11 months, consumers have been relegated to buying mostly what they needed. This has been a windfall for many essential retailers in the grocer and general merchandise categories. With no access to restaurants, entertainment, or sporting events, certain consumer segments have been holding on to cash. According to a recent Kiplinger report, as much as $1.6 trillion is sitting in savings accounts that would have normally been spent on services. As we edge toward spring and summer, we anticipate a substantial uptick in spending in these service sectors.
With so much pent-up demand, you can expect to see consumers go a little crazy. Over the last few months, the height of entertainment was to cruise the isles of your favorite big box store. Soon gyms will open, dining out will be in demand, sporting events and entertainment will explode. You can expect travel and tourism to take off as well. People are ready to get out and live again.
There will be many implications associated with our economies’ opening, but one thing that may be less obvious will be a reduced focus on spending at grocers and general merchandisers. This will have a two-fold effect. Some retailers are still experiencing supply chain issues. Once retail spending declines, you can expect to see the supply chain normalize due to reduced demand. And that will be the tipping point for retailers, they will have products to promote, and competition will heat up.
In the post-pandemic economy, not only will you again have to compete with all the other options people will have to spend their money, you must now resume competing with other retailers for market share.
To complicate matters further, Amazon CFO Brian Olsavsky said during a recent call with analysts, “Jeff Bezos’ announcement that he will step down as Amazon’s CEO will allow him to focus on issues such as strategies and going into grocery.” Let that sink in for a moment.
Amazon currently has eight “Fresh” and 25 “Go” stores, and some industry experts believe the company’s goal is 2,000 brick-and-mortar US sites, including 750 Whole Foods Market stores. To top it all off, a survey just completed a few days ago found 59% of U.S. shoppers see their “Just Walk Out Technology” as a “threat” to major grocers, Like Walmart and Kroger. Source: Piplsay Research Feb 21, 2021.
Lastly, and we’re not trying be profits of doom and gloom, but there are additional factors still in play. Unemployment is stubbornly hovering around 6% which is down since the start of the pandemic, but will continue to influence shopping patterns. And the Consumer Confidence Index, after rising to readings in excess of 100 in September and October 2020, has now declined to readings below 90 for December and January. These factors will influence shoppers who will continue to seek out value in the coming months.
So, What Now?
They say “a rising tide lifts all boats,” but unfortunately, it works the other way too. What will your Q2 sales look like when compared to last year’s numbers? How about Q3? What are you planning to do differently to offset the predictable sales declines that are surely coming?
During the pandemic, essential retailers were the only game in town, and many chose to reduce or pause their print advertising programs. But times are changing. If you haven’t already followed the lead of retailers like Albertsons/Safeway and Fred Meyer, who restored their print campaigns months ago, it’s time to revisit your marketing plan.
We recognize that things will be different going forward. They will be different for us too. That’s why over the last six months, we’ve made changes as well. In many of our previous communications, we’ve shared the value of integrating print advertising with a digital ad campaign. Sighting results from test after test showing that when combined, the two media perform so much better than when either one is used alone. So, to that end, in addition to providing print programs that are proven to drive consumer spending, we have committed to offering a best-in-class digital advertising solution. We are now fully equipped to help you integrate your print and digital campaigns into an effective overall solution that will help you grow revenues and market share during the next phase of our economy.
Digital advertising is a powerful tool to add to your marketing mix, and we are excited to share some of the game-changing applications we have developed for retailers.