Understanding the CPG market shifts that are here to stay
COVID-19 has had a monumental impact on the consumer packaged goods (CPG) market—both in the near term and the long term. Take the shortage of toilet paper at the onset of the COVID-19 pandemic, for instance. As consumers worried about a shortage of critical products, items like paper goods and cleaning supplies flew off the shelves in an unprecedented manner.
Where consumer purchasing behaviors were once hedonistic, the pandemic coupled with a more cost-sensitive consumer base has marked a dramatic shift to the purchase of utilitarian products. As a result of the volatility, uncertainty, complexity, and ambiguity (VUCA) of the market, CPG brands have made rapid adjustments to where, how, and what products they are selling. This has involved embracing new channels and updating approaches to outreach to ensure the timeliness and relevance of every interaction.
A CPG Behavior Shift
While some disturbances, such as the lack of toilet paper, were only a short-term obstacle for CPG, the COVID-19 pandemic has also served to amplify trends in consumer behavior that were already in motion. These include:
BOPIS and delivery
Forty-one percent of consumers are shopping online more frequently as a result of the COVID-19 pandemic. This has led to a rapid rise in delivery and Buy Online, Pickup in Store adoption. In fact, the total U.S. online grocery spending has reached nearly 15% since the pandemic began, up from 3% pre-COVID-19. Even as consumers adjust to a new normal in the coming months and years, it is forecasted that this shift toward omnichannel shopping marks a lasting change for CPG.
With limited willingness or access to in-store shopping, consumers are turning to digital offerings to try out new products. According to Nielsen, 51% of consumers are now more willing to try advanced technologies like augmented reality and virtual reality to assess their products and services. This can be seen in the furniture industry, where stores like Wayfair, Home Depot, and Target have introduced 3D visualization tools to their apps that are empowering the at-home customer to view furniture in context.
Closures and limitations put in place for key service areas like hair salons and restaurants has led to a resurgence of do-it-yourself. For instance, a 23% increase in the sale of hair coloring kits was recorded during the lockdown. With consumers willing to develop new skills and try things at home, CPG brands can bring value to customers through tutorials and influencer partnerships for products.
With 60% of consumers shopping in stores less frequently since the pandemic began, CPG subscription services have also seen an increase in popularity. Of shoppers surveyed, one in five had purchased a subscription box since the pandemic, with HelloFresh (21%), BarkBox (20%), Blue Apron (19%), and Dollar Shave Club (18%) reported as the most popular subscriptions. Even following the pandemic, subscription services are forecasted to continue growing: by 2023, as many as 75% of direct-to-consumer brands are projected to have a subscription-based offering.
Preparing for the post-COVID CPG landscape
It is estimated that COVID-19 has pushed eCommerce adoption 10 years forward in a six-month period. To evolve with the market, CPG brands will need to adopt omnichannel solutions that merge the physical and digital world to engage customers in a way that’s relevant, meaningful, and timely. Doing so requires an intelligent personalization solution that can learn from consumers’ buying behaviors, taking into account contextual, historical, and environmental factors to guide the customer journey.
At Session AI, we are working with customers to understand and respond to in-the-moment actions to influence desired outcomes. Our in-session marketing (ISM) platform provides deep insight into every visitor across digital and physical channels to foster lasting and memorable experiences. Learn more about how ISM can empower retailers to adapt to the shifting CPG landscape.