Consumer sentiments analysis during Covid-19 by Mckinsey

Global consulting giant McKinsey & Company has reached out to consumers around the world to assess their current state of economic confidence, with those in Saudi Arabia and the UAE proving by far the most optimistic in the face of the ongoing coronavirus pandemic.

  • McKinsey & Company boss Kevin Sneader recently made the comment that following the coronavirus crisis nothing would return to normal, but a new survey from the management consulting giant suggests that the citizens of Saudi Arabia and the UAE might not share the same view, with almost 60 percent of those canvassed expressing confidence that the economy will grow to become “just as strong or stronger” than prior to the pandemic.
  • Notably, the MBB firm had only just released its annual global consumer confidence survey report in the month before last, but with a monumentally altered business and consumer landscape in the weeks since has returned to the polls, taking the pulse of consumers in a number of the world’s leading economies and those most impacted to date,including the US, UK, Italy, Germany, France, and Spain along with Saudi Arabia and the UAE.
  • According to the poll conducted between the 23rd and 26th of March (and covering roughly 1,000 consumers in each nation), both the KSA and UAE came out well on top compared to respondents abroad in terms of economic confidence expressing faith in a return to growth at a respective rate of 58 and 57 percent. While it should be noted that they’re also among the least impacted by the viral outbreak to date, the difference in opinion is stark.
  • As a comparison, just 16 percent of respondents in the UK felt that the economy would rebound within two to three months after the crisis had subsided and return to a former pattern of growth  and while the UK is also facing the dual economic shock of Brexit, residents in stable economies such as Germany weren’t all that much more positive, with the nation registering such optimism at just 25 percent. The US remained optimistic at a figure of 41 percent.
  • But for Italy and Spain, two of the worst hit countries so far, the positive sentiment sat at just 11 and 14 percent, while in Japan which appears to have gained some control over the viral spread despite experiencing an early threat confidence was at absolute rock bottom, at just 6 percent. The one bright spot in the data, with respect to confidence being the actual driver of markets, there appears to be growing positivity in China as the country emerges over the hump.
  • In an earlier poll taken in China between the 21st and 24th of February, local respondents were optimistic about a return to economic growth at a rate of 43 percent, a figure which had grown to 48 percent roughly four weeks later while those who were still unsure and suspected the economy would be impacted for six and twelve months or longer and likely stagnate dropped from 56 to 46 percent, although has been a slight creep in negativity since.
  • In an interview with The National, McKinsey Middle East’s Consumer & retail practice lead Abdellah Iftahy reiterated the first caveat that the UAE and KSA were still within the early stages of the Covid-19 contagion curve when the latest survey was conducted, but added that emerging trends such as a five-fold growth in demand for online grocery shopping, albeit tied to the current situation, were likely to be retained by consumers going forward.
  • Consumers within the Middle East are changing their buying behavior. They’re feeling less optimistic about their financial prospects and are therefore spending less. They’re also becoming less brand loyal and more demanding—expecting more convenience, more health-oriented options, and locally sourced products.
  • These shifts in consumer expectations and behavior, which were evident in the results of our latest Middle East Consumer Sentiment Survey (more on that below), are among several challenges that retailers and consumer-packaged-goods (CPG) manufacturers within the region are facing. Another is the influx of competitors: retailers are competing with fast-growing online players, while large CPG manufacturers are losing share to smaller brands. Furthermore, structural changes such as volatility in oil prices and geopolitical developments are subjecting companies to higher costs and bigger risks.

Analysis in DUBAI: 

  • Consumers in Saudi Arabia are among the foremost confident within the world that the economy will recover after the hamper due to the coronavirus disease (COVID-19), but they are still reining in spending while the emergency lasts.
  • That is the main finding of a survey conducted in the Kingdom by international consulting firm McKinsey as part of a global analysis of consumer sentiment in light of the virus’s impact on normal economic life.
  • There is also a big increase under way in e-commerce and online entertainment as travel restrictions affect everyday activity.
  • The survey found that 58 percent of citizens and residents were confident that the economy would rebound within two to three months and would grow just as strong or stronger than before the virus appeared.
  • That was the highest of ten countries cited by McKinsey. Italy, which has experienced the most severe outbreak in Europe, had the lowest level of optimism, with only 13 percent of Italians believing things would get better quickly after the outbreak.
  • Only 12 percent of Saudis agreed that COVID-19 would have a “long lasting impact on the economy and show regression or fall into a lengthy recession.” Consumers in the UAE were almost as optimistic as Saudis, with 57 percent confident of a rapid rebound and 15 percent thinking things would get worse.
  • But an outsized number of individuals within the Kingdom said that the outbreak would change their personal and family spending patterns during the crisis. Half of respondents told McKinsey that they worry about the impact of the illness on their overall finances, with 51 percent cutting back spending or saying they have to be careful about how they sodden their money.
  • About 36 percent said that uncertainty about the economy was preventing them from making purchases or investments they would otherwise make, but only 16 percent said their income had been negatively affected by the crisis.
  • There will be a greater focus on essential items. Some 30 percent will increase the amount they spend on food and drink over the next 12 weeks, while beauty and cosmetics sales can expect to see a downturn, with 55 percent saying they will decrease spending on these products.
  • With widespread curfews in operation in the Kingdom, online consumption is expected to grow significantly. Some 24 percent of those polled said they would buy groceries online over the next two weeks, five times more than before while 55 percent said they would spend more money on entertainment online. More than 40 percent expect to spend more time using social media and the Internet for education and reading.
  • Abdellah Iftahy, the McKinsey partner who led the research, said: “The circumstances have required consumers to vary their behaviors rapidly, both in terms of consumptions and channels, accelerating the penetration of online industries, such as e-grocery.”

Analysis in UK

  • UK consumers are worried about the economy during the COVID-19 crisis, but less so than in prior weeks.
  • In the UK, pessimism about economic recovery has declined since the last pulse, but remains relatively high compared to the onset of COVID-19. Most consumers expect the financial and personal impact of COVID-19 to continue to last beyond two months. Many believe that the crisis has had an impact on their ability to work and have delayed purchases as a result. 
  • This is evident in reduced shopping intent across categories, except groceries. UK consumers have adopted online shopping across grocery and entertainment categories, and many intend to continue after the crisis as well.

Analysis in INDIA

  • Consumer optimism in India has declined as the COVID-19 crisis has progressed. As restrictions begin to lift, consumers continue to be worried about personal and family safety. 
  • They expect to continue cutting back on spending across most categories, except for some household essentials and at-home entertainment, and plan to shop more online for most categories. 
  • While at home, they have increasingly adopted digital and low-touch activities, such as online streaming and digital payments, many of which they intend to continue post-COVID-19. Indians are leaving the house primarily to shop and to work, and they expect to continue doing so in the near future. 
  • Consumers who are not yet engaging with out-of-home activities are waiting for the approval of medical authorities before doing so, and they are prioritizing cleanliness and sanitization when choosing where to shop in-store. Most Indians believe the impact of COVID-19 on their routines and finances will last for more than two months.

Analysis in USA

  • Consumers are shifting their spending to essentials and seeking value across purchases

Most Americans believe that the impact of the crisis on their routines and personal finances will last beyond the next four months. This sentiment has made consumers evaluate what they are spending and where, more carefully. Spending on essentials is the only category with positive intent even as many categories are beginning to rebound since April.

  • The flight to digital and omnichannel continues, and many intend to stay post-crisis

More consumers intend to continue to shop online even as the crisis subsides, with a portion of consumers shifting almost entirely to the online channel. Most categories have seen a 15 to 30 percent increase in online channel user growth. Consumers have also adopted many digital and contactless services including curbside pickup, delivery, and drive-through service.

  • As consumers struggle with limited access, there is a shock to brand loyalty

More than 75 percent of consumers have experimented with a different shopping behavior during the crisis, including trying new brands and places to shop. Of the consumers who switched stores or brands, availability, convenience, and value were the most drivers. Digital channels including online advertising and social media, as well as proactive researching were the key places people went to find out about these new places to shop.

  • Looking toward reopening, there is a renewed focus on health and expectation that companies “care” about consumers.Consumers are actively looking for safety measures when deciding where to shop in-store, such as enhanced cleaning, masks, and barriers. One-fourth of consumers believe that a company’s treatment of its employees has increased in importance as a buying criterion since the crisis started. Companies’ actions in this time, especially toward their consumers and employees, will be remembered for a long time and can lead to goodwill.
  • Given the length of the crisis, consumers have adapted to the homebody economy with new habits.Even as many US regions reopen, 73 percent consumers are not comfortable going back to “regular” out-of-home activities. Most consumers are waiting for milestones beyond governments lifting restrictions—they are waiting for medical authorities to voice their approval, safety measures to be put in place, and a vaccine and/or treatments to be developed.
  • While these changes in consumer behavior hold overall, there are some trends that are accentuated by generation, financial situation, and geography. This current reality and the prospect of a “next normal” have strong implications for B2C players, many of whom are already changing their operating model, their media spend and/or mix to better position themselves in the short term.

Analysis of consumers when lockdown is open around the world

As the COVID-19 crisis continues and geographies around the world begin to reopen, consumer behavior has begun to change. We see six trends in consumer sentiment and behaviors globally. While there are certainly differences by country and region, overall, these trends hold in countries we studied:

  1. Despite pockets of reopening, net consumer optimism has decreased, and most consumers continue to expect a long-lasting impact from COVID-19. Net optimism has declined in most countries in recent weeks. China and India remain the most optimistic, while Japan remains the least, and many countries in Europe have more consumers who are pessimistic about an economic recovery than are optimistic. Most consumers globally still expect COVID-19 to impact their routines for a long time to come, with 70 percent of consumers in hard-hit nations anticipating adjustments to their routines for four months or more. In most countries, consumers expect their finances to recover more quickly, though more than half of consumers in most countries still believe their finances will be impacted for four months or more.
  2. As incomes have declined, consumers are spending on essentials and not discretionary categories, with some exceptions in South Korea and China. Consumers globally continue to see the impact of COVID-19 on their incomes, with those in Brazil, South Africa, and India most impacted. As a result, overall spending intent is down across two-thirds of countries surveyed, and most categories across countries still show a net intent to reduce spending  though more optimistic countries tend to project higher spending intent. Spending on groceries and at-home entertainment continues to show positive momentum, as it has since we first started measuring in mid-March. Today, consumers in more countries intend to increase spending on other basic categories, such as household supplies and personal care, as well. Chinese and South Korean consumers intend to spend more on select other categories: food takeout and delivery, snacks, skin care, non-food baby products, fitness and wellness, and gasoline. While overall spending bent most discretionary categories remains negative, there’s reduced pessimism about future spending on categories like restaurants, restaurant delivery, apparel, footwear, and consumer electronics today versus in mid-March. Spending intent is on the brink of neutral in China across most non-travel related categories.
  3. Consumers are shifting to online and digital solutions also as reduced-contact channels to urge goods and services. Intent to buy more online across categories is positive in several countries, including the US, India, South Korea, and Japan. In Europe and Latin America , intent to buy more online is lower. This lower penetration likely stems from lower reach given limited infrastructure, which has limited the ability of consumers to shift their spending in a large-scale way. Across all countries measured, consumers are adopting and intensifying digital and reduced-contact ways of accessing products and services. As we look more granularly in the US, this digital trend is magnified for Gen Z and millennials and for higher-income consumers.
  4. Consumers stated intent to continue these behaviors varies across categories. Some categories are gaining many new customers who intend to stick with the behavior post-COVID-19, including online fitness and wellness apps, store curbside pickup, and physical telehealth. In contrast, consumers demonstrate less of an appetite to continue with other growing categories, including restaurant curbside pickup, professional video conferencing, mental telehealth, and remote learning for children.
  5. Even though many countries have lifted stay-at-home restrictions, most consumers still feel the pull toward a “homebody economy.” Most consumers across countries still feel they are not back to “regular” out-of-home activities. However, with restrictions lifting in pockets around the globe, consumers are increasingly venturing outside their homes for select categories of activities. Most commonly, consumers plan to shop, with nearly all consumers planning to shop for necessities out-of-home in the next two weeks, and roughly half planning to shop for non-necessities. In Europe and China, over 50 percent plan to leave home to get together with family. A large minority of consumers intends to dine at a restaurant or bar, get together with friends, go to a hair or nail salon, or work outside the home across most countries. However, intent to travel, shop at malls, or attend crowded indoor events remains low across countries.
  6. Consumers want extra reassurance to resume day-to-day activities outside their homes. In order to feel comfortable engaging with out-of-home activities, most consumers are waiting for milestones beyond the lifting of governmental restrictions. Many consumers want the endorsement of medical authorities and therefore the implementation of visible safety measures from stores, restaurants, and other indoor spaces. Others (around ten to 15 percent across most countries) are waiting for a vaccine before they feel comfortable going back to routines outside the home.
  7. Consumers also want to see an ongoing emphasis on cleaning and safety. As consumers determine where to shop in-store, they are prioritizing cleaning and sanitization and are looking for the usage of masks and barriers. Physical distancing,while important is less critical in most regions.

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