Key Indicators — The evolution of consumption
Cast your mind back a couple of months: supermarket shelves void of hand-sanitiser, batteries and, of course, toilet paper. As we made preparations to go into the unknown, a ‘survival instinct’ was awoken in us, inspiring us to stockpile. Some experts claimed that our fascination with toilet paper was a way of regaining control over our lives, which we understandably crave in so-called unprecedented times. But the impact of the pandemic on our consumption habits goes much further than not having to buy loo-roll for the rest of the year. As with many other aspects of our lives, this will undoubtedly have an effect that we, both as consumers and as service providers, will feel for years to come.
It makes sense, then, to look at how consumption has changed so far this year, and think about what it might mean looking forward. In alignment with Transformative Times’ first speculative study (which you can participate in here), we will take a look at consumption in two categories that we have become considerably more aware of over the course of this year: essential and non-essential goods.
Looking at the answers so far, it seems that we agree more about this topic than any previous one: 63.4% of participants think that consumption of non-essential goods won’t go back to how it was before the pandemic, and only 27.7% think we will bounce back and consumption will hit record highs. While the former would undoubtedly be good for both people and planet, it isn’t going to happen all by itself. As always, we are here to explore what has been happening over the past few months to try and find some clues as to what might happen next.
So, what out there gives us some clues?
We could, as is common in this type of analysis, look to the ways that consumers have been spending their money over the last months as an indicator of what the future may hold. It likely won’t come as a surprise that even with the lifting of lockdown restrictions, the gap between e-commerce and normal commerce continues to shrink; or that, in the US, grocery delivery was up over 500%; or that media consumption rose significantly, with Netflix gaining almost 16 million new subscribers during the first three months of the year.
What I would like to understand, however, is the ways that organisations are adapting to these times and, in turn, how this is shaping our consumption habits. As we have spoken about countless times, both in our interviews and in the previous Key Indicators, this period has been an accelerator. As Lenin wrote, “There are decades where nothing happens; and there are weeks where decades happen.”
Last year, With Company did a project to define and materialise a new vision for on-demand insurance in Portugal; during the project, the team defined on-demand as: a fully automated, end-to-end, seamless experience which allows users to access a service from anywhere, whenever needed. Now, besides maybe Amazon Dash, I don’t think that we are there just yet, but there are certainly some signs that we’re heading in that direction.
At the beginning of this month, Uber announced its acquisition of Postmates, further cementing its grip of the food delivery market. While this might not feel like big news by itself, we just need to take a look at the Uber Newsroom to see how many of these moves are being made; including deals with major supermarkets like Asda, with whom they will be trialling 30-minute grocery delivery. Could this be seen as the first step towards a fully automated, end-to-end, seamless experience for ‘essential goods’?
In a recent interview, Jim McKelvey, co-founder of payment service Square, stated that Uber offers the best payment experience today: not paying at all is the best way to pay, right? The point I’m making is that the technical infrastructure and consumer trust is already there. Uber is now trying to understand which services they can bundle together to add the most value for their customers. With groceries and food-delivery as the main focus, for now, it seems that Uber is doubling down on the functional aspects of our consumption habits; providing us access to certain goods from anywhere, whenever needed.
If they wanted to continue down this path, what could be the next step? Sticking with the theme of the global health crisis, could on-demand pharmacy be an interesting space? There are already companies doing this, with Capsule and Zipdrug operating in some parts of the US. Obviously there is significant regulation to navigate in this industry, but if a start-up can manage that, and Uber (or another player) was to come in with superior distribution, this could become a really interesting opportunity. We saw this exact move from Amazon back in 2018 when they acquired online pharmacy Pillpack. This concept isn’t just limited to pharmacy, however, the same could be done with a variety of other ‘functional purchases’.
The way we consume isn’t always functional, however, and it seems to me that the more we go down this path, the more space we open up for what lies at the other end of the spectrum: experiential consumption. Experience has always been a massive part of how and why we consume and, it shouldn’t come as a surprise that this has changed a lot in the past couple of months.
For one, we have been spending much more time in our homes, and with many of us continuing to work from home for the foreseeable future, this isn’t going to change any time soon. Maybe over the last few months, you’ve decided that it’s time to buy that new set of pots and pans you’ve been thinking about, or to upgrade your home sound system, or to buy a new TV. Similar to the way that we tell ourselves that by paying for a gym membership we are more likely to go; in buying these things, we are sure to want to make the most out of them. I’m not really one for looking at the stock market for trends, but we can see some signs of this with the performance of companies like Sonos and Peloton over the past few months.
On the other hand, there are those of us who are itching to get out again, to get back to spending our days in shops, restaurants and bars; in fact, some of us even “assume a recreational shopper identity as part of our self-concept”. Consumer psychologist Peter Noel Murray believes in-person shopping experiences give us a positive psychological boost, stating: “By sitting in a luxury car at the car dealership, we are vicariously experiencing the emotion of owning a luxury car, which means browsing in and of itself can be a rewarding experience”. Following this thought, perhaps by shopping in a more traditional way — and projecting our self-image onto items we see in-store — we can, once again, get a glimpse of what we want the future to hold, and perhaps even find the motivation to get there (even if it doesn’t involve a luxury car).
It’s important for retailers too: a 2019 report from online merchandising company First Insight found that during a typical shopping visit consumers spend more in-store than they do online. But long queues, closed fitting rooms and disinfecting items between customers isn’t the experience most shoppers are looking for. So what can be done to facilitate this transition, and what effect might it have on our experience as consumers?
Some high-end retailers, like Bergdorf Goodman, are trying to navigate this by appointment only; reinforcing their positioning and trusting that their loyal customer base will get them through these times. But maybe luxury brands don’t need to worry, there have been reports of a significant post-lockdown uptick in China, in what some are labelling ‘revenge spending’.
Everyday purchases are also transforming. Starbucks, while still looking to leverage their loyal customer base, is taking a different approach. They recently announced that they are going to ‘transform their store portfolio’ by introducing pickup-only locations, where customers have to order and pay on their already successful mobile app. While this doesn’t quite fit our earlier definition of on-demand, it certainly plays into the functional consumers’ hands.
But with an estimated 25,000 store closures in the US this year, it’s clear that these capital-intensive strategies won’t work for everyone. Is this what people are referring to when they say ‘new-normal’? The survival of those who can afford to weather the storm and the death of those who can’t? I, for one, don’t want my behaviours to be dictated by those with the deepest pockets.
As consumers, we have power, but we need to learn to exercise this power to drive us in desirable directions. It’s undeniable that the changes made during this time will have a lasting impact, we already know that the Great Depression still shapes the way Americans eat today. I’m hopeful that we will harness this moment for positive change.
I’m hopeful that the patterns of reckless consumption that have been temporarily halted by the pandemic could be stopped altogether. I’m hopeful that the clear skies we have been seeing in places like Delhi & Seoul are the kind of tangible feedback we need to really understand the impact we have on our surroundings. I’m hopeful that the so-called ‘death of the high-street’ will be a rebirth of vibrant, connected communities. We need more than hope for this to all come true, however. We need to transform this hope into the next set of value propositions, business models and innovations; actively shaping the ways we provide to, in turn, shape the ways we consume.
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