As we approach a potential easing of the lockdown, people are beginning to look at their way of life and asking quite fundamental questions about how we do things. What has this taught us? Is there a better way of doing things, from the way we work, the way we live and the way we eat?
Looking at the impact within the consumer and retail sectors may provide some clues on what the long term trends may be.
Short term changes, long term shifts
Shorter term behavioural change has of course been driven by lockdown limitations and need for activity substitution, but it is reflective of grander, more fundamental shifts in how businesses and consumers interact. Whilst direct to consumer (DTC), ecommerce businesses aren’t new, their variety is greater than ever before.
Jonathan Buxton, Partner and Head of Consumer, Cavendish Corporate Finance, comments: "The UK lockdown has given some parts of the ecommerce market a massive boost, resulting in the sort of LTV:CAC ratios that digital marketers could hitherto only dream of and, in many cases, bringing forward profitability and positive cash flows. We believe that the coming months will be a window for many digital brands to consolidate these gains, either by more aggressive funding or by partnering with strategic investors."
At home suppliers have benefitted at the expense of locked down retail facilities in industries such as gyms, retail stores and food service providers.
There are those businesses who have benefitted and there are those that have been quick to pivot or adapt in order to survive and thrive in these unprecedented times or indeed take advantage of revival into hobbies such as art, gardening and DIY.
DTC, ecommerce and subscription businesses, as would probably be expected, have generally benefitted from the COVID-19 crisis.
The early success stories of hygiene companies like Who Gives a Crap, Cheeky Panda and Bumboo outlined the shape of things to come.
Indeed, the early rush for toilet paper saw consumers shift online in their droves. Bumboo reported to the BBC in March that sales had jumped by about 325% against February, and this could have gone higher, had the company not run out of stock. Who Gives A Crap's chief executive Simon Griffiths meanwhile said that at the beginning of March, sales were up to five times higher than on an average February day.
It should be added that these outcomes seemed not only to reflect the panic buy zeitgeist, but also the heightened attraction of sustainability-focused brands.
These are not the only areas to witness spikes in both new customer acquisitions and increases in activity from current subscribers. Many subscription businesses enjoyed such a sharp increase to that they were initially unable to fill the demand for new orders, and as such were temporarily forced to pause new customer orders.
Home entertainment subscription services also saw temporarily higher viewing numbers and increased membership growth during current pandemic. Netflix added 16 million new customers in Q1 this year, taking the end of March to over 180 million current subscribers.
In February, Disney+ had 29 million subscribers worldwide. Disney+ launched in the UK in late March, by which time it had well over 50 million subscribers. Disney outperformed its own projections, having told investors in 2019 it was hoping Disney+ would reach between 60 and 90 million subscribers worldwide by 2024.
What will be interesting is how these subscription rates now compare with, say, six months after the lockdown is eased. Which elements of these services will consumers cherish most in order to stay loyal?
Netflix is more than aware that its output is limited by restrictions on production. What happens when you need to make more shows? Can you sustain an audience that’s consumed your whole library? A recent L.A. Times op-ed by Netflix Chief Content Officer Ted Sarandos addressed the issue. Mr Sarandos explained that indeed the short term changes to production processes will undoubtedly spell longer term changes for the industry as a whole. For instance, crowd, intimate or action scenes for some productions may have to be postposed to prioritise other, less involved scenes. Potentially more CGI visual effects may have to be incorporated. He went on to point to closed sets as being advantageous in that they are already closed, controlled environments. Netflix does indeed see the production cliff-edge approaching, but has made sensible short term steps that will ensure longer term audience gains and perhaps even reflect a shift in how production fundamentally works.
Food & drink
With the realisation that one cannot rely on convenience foods and the spotlight shone on health, food subscription boxes and direct-to-consumer meal services have naturally seen a spike in subscriptions.
Direct-to-consumer client Parsley Box is seeing a major uptick in activity as a result of the pandemic. Its business model of delivering healthy meals which last up to six months outside of the freezer to the elderly and house-bound is certainly of its time, while the convenience of its service which critically includes a phone line alongside online ordering, fits the audience no end.
Adrienne MacAulay, Founder and Head of Product, Parsley Box, comments: “We didn’t know that we were essential to a lot of people. But when everything happened with COVID-19, we were automatically classified as an essential service.
“I think with that comes responsibility. A responsibility to service and maintain that supply to our customers, but also a responsibility to our staff. We had safety policies in place – at the warehouse we had to do safe distance packing, one-way systems and we re-racked everything. At the contact centre we were able to train up people immediately to deal with the spike, and then get them home so they could continue to maintain that service to our customers in a safe environment.”
Watch our interview with Adrienne MacAulay in full below
Gousto, which raised £33m during lockdown from investors notably including lockdown wellness pinup Joe Wicks, had to stop accepting new customers and has now started recruiting for a new premises, to be opened later this year to meet the heightened demand.
Others have had to adapt with the times. Pollen + Grace’s B2B business model, delivering health-focused foods to offices, shifted quickly as a result of the crisis to a DTC, home delivery service. In addition the company saw an opportunity to give back, providing nutritious food to NHS staff and people in need during the pandemic. The company has been delivering meals to hospitals across London as well as partnering with The Felix Project, donating surplus meals to local charities and schools.
We’re now beginning to see garden centres reopen. During lockdown we have all become avid gardeners and DIY enthusiasts. Indeed, estate agents Savills recently reported that sales in DIY stores that remained open at the start of lockdown actually accelerated as people faced the prospect of a lot more time at home. Kingfisher, who own Screwfix and B&Q, reported a sales increase of 38% in the third week of March compared with the same period in 2019.
Gardening experienced similar growth, with several young brands like Crocus and Patch Plants delivering plants to itchy green fingers
Personal health & wellbeing
The fact that people can’t go to their gyms has thrown the spotlight on an online fitness boom during the pandemic. Peloton, which makes stationary exercise bikes, offers an array of online classes and offers motivational spin class instructors, as well as a vast and supportive user community, has dominated – the company reported at the beginning of this month that 1.1m people downloaded its app in six weeks, sending its shares to record highs.
Interestingly, a new power struggle has emerged in this area. Soul Cycle, which similarly offered subscription classes, was forced to adapt and is now offering a stationary bike of its own to compete with that of Peloton, with a comparable price point. Both companies have diversified away from spin to offer other services.
There is also an emerging trend of online leasing platforms, such as The Bike Club. For a monthly membership fee, kids’ bikes are delivered direct to your door and then these can be exchanged at any time, as they grow. Another company seeing its opportunity to give back during the crisis, The Bike Club reserved all of its fleet of adult bikes for key workers. Users received free delivery and membership throughout the pandemic, along with Bike Club goodies and a promise to collect the bike for free when the user no longer has the need for it.
The question is whether this newfound freedom in exercise will continue? There is widespread coverage on the boom in bike sales as we emerge from lockdown and people are encouraged to cycle more to work. Could this translate into substantial investments in active and sustainable mobility, or positive long-term impacts contributing to green recovery?
Loyalty and the long term
The focus for now is on how the consumer has so dramatically shifted tack to meet the demands of our short term behaviour changes. The longer-term question of course will be on how these subscription and online businesses can continue such growth by keeping hold of this swathe of newly acquired customers.
While we remain in lockdown, there is much we are yet to know about the post-COVID-19 world. What the consumer behaviour in recent months would suggest, is that tomorrow’s customer is likely to be much more conscious about convenience and personalisation, and a sense of community and sustainability.
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