Conversion

The Impact of COVID-19 on Consumer Sentiment and Behavior

the-impact-of-covid-19-on-consumer-sentiment-and-behavior

As Direct-to-Consumer (DTC) brands continue to navigate the public health crisis, many are striving to meet evolving consumer demands.

It’s difficult for some brands to know if consumers will find their offering valuable during these unprecedented times…e.g. are swimsuits still a summer staple when most tropical vacations are postponed?

One thing is certain: brands will have to anticipate ways they can improve their offerings and adopt new marketing tactics in the coming months.

As a commerce agency advising the strategies of brands, we have found that it’s been extremely important to monitor trends in consumer sentiment and behavior as the global situation changes.

Consumer purchasing behavior has been dramatically shifting out of necessity and new desires. In this article, we’re investigating how consumer sentiment has evolved, in addition to looking at spending behavior and how it may serve as a guide to businesses searching for new ways to convert and retain customers.

Collaborating with one of our strategic partners, Klaviyo, a marketing automation platform for eCommerce, we have leveraged some of their data and survey results to provide actionable insights. Ready to read some customer minds (or at least try to)? Let’s do it.

Consumer Spending Intent & Priorities

How are your customers feeling right now? Hesitant to buy, excited for the future, pessimistic about the overall economy…? These are important questions for brands because they may affect how you choose to build relationships with your consumers.

As found by a study performed by McKinsey & Co., in the most optimistic countries, consumers intend to continue to increase spending as the COVID-19 pandemic cycles through. However, the United States, relative to the rest of the globe, averages out in the middle of the optimism scale and subsequently reflects consumer intention to decrease spending.

As many people have struggled with the financial hardship of being out of work, more cautious spending appears to continue to be on the forefront. As some might have guessed, the U.S. Department of Commerce reported a staggering 8.7% dip in retail sales during March. Since then, we’ve seen many big retailers, like Neiman Marcus and JCPenny, go under and file for bankruptcy.

Despite this gloomy news, there are still some bright spots on the horizon. In fact, eCommerce is booming right now. Across more than 32,000 Klaviyo customers surveyed, overall online sales have increased by more than 42% since before the start of the COVID-19 outbreak in the United States.

To further understand what people are choosing to prioritize right now, we need to remember that most people divide spending into two basic categories: essentials and non-essentials. Essentials represent food, water, paper products, electricity—the basics we need to live our everyday lives at a minimum. Non-essentials are everything else.

However, and as a result of many people staying at home, priorities and needs have changed. This has yielded a third category of spending: ‘new essentials’.

We’re seeing verticals that fall within the ‘new essentials’ category thrive. According to Klaviyo’s findings, these are any items that fall under office supplies, health and fitness, beauty and cosmetics, housewares, home improvement, and toys and hobbies categories— in other words, items that help you feel more comfortable at home.

“With so many people being relegated to work from home, they are now spending 16 waking hours at home, up from 4 hours at home. Their environment has changed, which caused their priorities and needs to change.”

“Categories that support spending time comfortably and safely at home and that keep people from getting bored are benefitting from this change,” explains Jake Cohen, head of Product Marketing at Klaviyo.

What can brands do in response to new consumer priorities?

Brands that do not fall within the ‘essentials’ categories need to focus on low-cost tactics that increase their visibility to users that may still find their offering valuable during these times. One way to accomplish this is through email marketing, an area of digital marketing that is yielding high benefits to many brands right now.

What can we use to guide email marketing strategy? We shared already that overall eCommerce sales have increased by 42% since the start of COVID, and, interestingly enough, the majority of those sales are being driven by new customers. This tells us that consumers are feeling open-minded right now, and unattached from loyalties to specific brands.

Further validating this conclusion, in the month of April, sign-up form submissions (i.e. website newsletter lists) were more than 1.5x what was seen in March. This means that more new users were not only visiting websites, but were also willing to provide their information and subscribe to email updates.

Confirming this wave of consumer willingness, every email metric that Klaviyo measures has increased. Open rates between March 15 and April 29 were 22% higher than open rates between Jan 1 and March 1. Click rates over this time span were also up 21%.

Why does this matter for business? Well, revenue per email recipient is up by 39%. And what’s more, overall revenue attributed to email is up a staggering 81%. Email marketing is helping the bottom line.

For comparison, the spike in daily revenue that started when stimulus checks were deposited during the week of April 13 is sustaining at more than half of daily levels seen during Black Friday and Cyber Monday last year. However, unlike Black Friday, where revenue quickly returned back to the normal seasonal level, email revenue was still up through the last week of April, and there have since been no hints of it slowing down.

Consumer Time & Spending

When it comes to how consumers are spending their time, Mckinsey & Co. found that people in the U.S. have been more focused on entertainment and leisure activities at home. This can be seen from increased streaming service usage and purchases of toys/games.

Because of the increased time spent inside and more consumers lacking employment, this means that spending has turned to entertainment products they can use within their homes.

Additionally, people are spending more time consuming media.

However, it’s interesting to note that in China, which reopened ahead of the U.S., there has been an economic shift from consumers spending more time and resources on entertainment to spending more time working. As more of the U.S. reopens, we may see similar patterns, although many businesses are still leaving their employees at home working remotely, which may bolster certain ‘new essential’ categories geared towards at-home comfort. With the current rising cases and uncertainty about the longevity of the virus within the U.S., it is too soon to tell whether these spending preferences will shift at all in the near future.

Through the pandemic, many consumers discovered the convenience of online shopping for essentials, and even as physical storefronts re-open, it is likely they will continue with this newly adopted preference.

Here are a few further conclusions we can gather from Klaviyo’s insights:

  • People working from home are in no rush to hit the stores

51% of non-essential workers say they won’t return to in-store shopping for non-food items for another couple months, at least. Only 37% of essential workers plan on holding out for that long. With non-essential workers spending more time at home than their essential counterparts, they may be more inclined to shelter in place longer.

  • While people are staying at home, many are buying new summer clothes.

24% of survey respondents said they plan to buy more summer clothing over the next few weeks. Some of the most popular items they mentioned include swimsuits, shorts, t-shirts, sandals, and summer dresses.

Several people mentioned buying comfortable clothes that will be good for warmer weather. One surveyed respondent mentioned that they’re “buying more [comfy clothes] now since I have no reason to get dressed up!”

What can brands do in response to new consumer behavior?

This current environment provides a great opportunity for many digital brands to focus on optimizing ad spend. The fact that much of the recent spike in eCommerce revenue is coming from new customers shows a great opportunity for many digital brands to focus on optimizing ad spend geared at acquisition. People are also spending a lot of time consuming online content, especially on their favorite social platforms.

In the middle of April, consumers under the age of 45 were heavily focused on Instagram accounts of new (to them) brands, while those over 45 were directing their shopping searches on Google. Based on your target audience, it’s important to consider these insights in creating your paid media campaigns.

While this is a great opportunity to build contact lists to set your brand up for a strong back half of the year, it’s also important not to neglect your current loyal customer base.

In 2019, 59% of all Klaviyo customers’ Black Friday/Cyber Monday (BFCM) sales came from contacts that had engaged with the brand prior to Q4 – this all means that when brands invest in acquisition, they need to be equally investing in relationship building heading into the holiday season. And, yes, the holiday season is fast approaching!

As brands gain a new subscriber, they should also be nurturing that relationship – listening to their preferences, asking for more information, understanding what makes them tick, and developing marketing experiences that are highly personalized.

Conclusion: Moving Forward

There are a lot of elements at play in the new phase of reopening the economy, and many businesses are still figuring out the best way to continue operating. The top takeaways from our findings that we can offer brands right now are:

  • “New essentials” are on the rise and the category provides an opportunity for many businesses to pivot or adjust their offering in order to appeal to customers.
  • Depending on if you are an essential or non-essential brand, you should consider investing in email marketing or increasing your ad spend.
  • The pandemic has caused an increase in demand for some categories like media and entertainment, but with people going back to work brands that belong in that category will have to remain alert to any new shifts.
  • Whether your brand is essential or non essential, you should continue to work on retaining and nurturing customers.

For DTC brands, there are many ways that you can adapt your strategy for better endurance during these rocky times– most of them centered on strengthening your relationship with your customers. Leveraging consumer insights is one of the best ways to ensure your strategy is informed and relevant.

About Klaviyo & BVA

Klaviyo is one of the best software platforms for marketing any business that sells online. They drive billions of dollars of revenue for brands large and small, all over the world.

BVA is a commerce agency that incubates and grows the direct-to-consumer (DTC) brands that people love. With the largest and most versatile client roster in the industry, we’ve launched more brands on Shopify Plus than any other agency and currently manage a client portfolio that generates nearly one billion dollars annually in gross merchandise volume (GMV).

BVA and Klaviyo are strategic partners that work together to optimize eCommerce marketing efforts. Interested in collaborating with us? Reach out today!

Megan Holett
Megan Holett is the Sales and Marketing Coordinator at BVA. Her role involves bridging the gap between sales processes and agency marketing through content creation and other initiatives.

This article originally appeared in the BVAccel blog and has been published here with permission.

About the author

Steve Hutt

Steve has entrepreneurship in his DNA. In the early days of online commerce, he achieved Power Seller status at eBay, which then propelled him to become a founding partner of VisionPros.com, a contact lens, and eyewear retailer. After a successful exit from his startup, he embarked on his next journey into agency work in e-commerce and digital strategy.

Currently, Steve is part of the Merchant Success Team at Shopify Plus, where he is a Strategic Advisor helping brands continue to grow and scale with the Shopify Commerce Platform.

To maintain a competitive edge and life of learning mantra, Steve also hosts and produces a top-rated weekly podcast show, eCommerce Fastlane, where he interviews Shopify partners and subject matter experts who share the latest marketing strategy, tactics, platforms, and must-have apps, to help Shopify brands build and scale lifetime customer loyalty.