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The Impact of COVID-19 on consumers purchasing in Europe

24/04/2020

It has been almost four months since the first case of COVID-19 was announced in China. Since then, the virus has spread rapidly across the globe, making an undeniable impact on the world. Many countries have implemented preventative measures in an attempt to slow its spread. In fact, over one third of the global population is under some form of restriction. 

Across Europe schools and offices are closed and shopping trips are restricted to essential items only. Each country has a slightly different response and set of rules, though nobody remains completely unaffected. With differing levels of aging populations, standards of civil obedience and qualities of healthcare systems, each nation has developed its own bespoke solution and response. 

Sweden, for example, remains functionally open – with bars and restaurants still operating, albeit under some restrictions. In nearby Denmark, Norway and Finland, schools and offices closed weeks ago. The UK and Ireland are in similar levels of “lockdown” with one outing permitted a day.

Italy and Spain are the most affected countries in the EU. With aging populations and large multi-generational households, they have been hit hard by COVID-19. The Italian and Spanish governments have instituted nationwide quarantines, with only pharmacies, banks and supermarkets remaining open. 

COVID-19 continues to disrupt the way that businesses and individuals operate, which severely affects the economy. Kristalina Georgieva, head of the International Monetary Fund (IMF) has warned that “the coronavirus pandemic will turn global economic growth sharply negative this year”. 

Retail, tourism, real estate and more have all taken a significant hit. FMCG, interestingly, has played a key role in consumer responses to the crisis. Families and individuals in varying stages of isolation have all significantly changed their purchasing habits. 

FMCG in Europe During Coronavirus

James McDonald, WARC Data, says that “the current downturn may not hit FMCG as hard as other product sectors, but it is likely to be consequential in terms of changing consumer purchasing behaviour. A sharp increase in e-commerce activity may result in online players becoming more significant as the gatekeepers to FMCG shoppers.” Indeed, consumer behaviour is changing, and with it, the rates of FMCG sales. 

Nielsen has identified the key stages of change in consumer behaviour linked to COVID-19. These stages result in different purchasing behaviours that will continue to impact FMCG markets around the world. The 6 stages progress in a linear fashion, as countries move from awareness about Coronavirus through to restricting movement. 

Throughout each stage, our Partner Agencies have observed how FMCG purchasing behaviour has changed in their country.

Stage 1: Pro-active Health-Minded Buying

The first stage is one that many countries have already gone through. This occurs when awareness about the virus first begins to spread. Consumers begin to purchase health-minded items such as vitamins and probiotics. 

A perfect example of this comes from a BCG report from March 21 in the UK. The findings relate to the weeks prior to Boris Johnson’s March 23 announcement that the population was to stay home in order to tackle the virus.

The report shows that UK consumers at the time were focused on boosting their immunity to fight COVID-19. Vitamins, supplements, probiotics, and other immune-boosting products were in high demand which resulted in some retailers imposing purchasing limits to preserve stock. Overall, vitamin sales alone grew by 63%. 

It was a similar story in France. In the first week of March, sales of over the counter healthcare products rose by 40% since the previous year. Sales continued to rise to 60% in the second week of March before tapering off as the country entered the next stage of their response to COVID-19.

Interestingly, in Italy, where a nation-wide quarantine was announced on March 9th, pet vitamins and supplements sales rose significantly the week prior. Pro-active health minded buying applies not only to people, but to our pets. 

McKinsey reports a 40% overall increase in the sales of multivitamins from Italy to the US, as countries go through this phase and consumers attempt to focus on their general health. Indeed, the pharmaceutical market grew 9% in March, reflecting this newly focussed customer behaviour.  

Stage 2: Reactive Health Management: 

The next stage of consumer purchasing behaviour comes as governments launch health and safety campaigns around handwashing and social distancing. Consumers react directly to this by purchasing FMCG items they believe will help protect them, such as face masks, soap, and hand sanitizer.

In February, as Germany and France began to move into this stage, shoppers complained that hand sanitizing gel became harder and harder to find. Sales of sanitizer increased by 313% in the final week of February, according to data from Nielsen. Indeed, reports from the biggest pharmacy in Lyon, France, mentioned “sanitiser would normally cover all four of these shelves. A pharmacist tells me they are completely out for a while.” 

Similarly in Ireland there was a 24% bump in the purchase of disinfecting sprays and wipes. Likewise, soap and antiseptics were up 6%. This was before the country was put on lockdown in late March. Denmark experienced the same increase in demand for hand sanitizer and resulting shortages, prior to lockdown. 

Over in Belgium, the response to the demand for sanitizing products was tempered by the country’s wealth of breweries and distilleries. The government gave breweries the go-ahead to switch from making beer and alcohol to making hand gel and other disinfecting products. This move came as hospitals and supermarkets began to run low on these vital products. 

Consumer demand for soap also increases significantly as a country enters this phase. In the UK, liquid soap sales spiked by 7%. Over in Marseilles, France, a much-needed injection of cash came from an uptick in people purchasing traditional soaps. A recent report details that “Savonnerie de la Licorne, which runs four soap shops on the Old Port, has seen its shop sales increase 30% and delivery orders quadruple since Italy declared a state of emergency over the coronavirus.” 

Finally, the sale of face masks saw a sharp rise, with shortages in many countries. In the Czech Republic, the government banned the sale of medical face masks in early March to anyone but medical professionals. This was in an attempt to curb the reactive panic buying of the masks. In response consumers took the initiative to sew 55 million masks within 7 days to make them available for everyone. 

In Poland, on the other hand, vending machines selling face masks, gloves and sanitizers were put out on the streets of Warsaw. 

Stage 3: Pantry Preparation: 

The next stage is pantry preparation. Many people recognize this stage as panic buying. As small quarantines begin and borders close, people prepare their pantry by stocking up on items for the long-term. This led to a huge leap in revenue for certain food products across Europe and additional pressure on retailer and merchandisers to ensure they kept up with the demand.

UK supermarkets saw a 20.6% rise in sales during March which is a new record. As advice warned to stay home, corner shops and brand-owned shops saw a 30% spike in sales.

For many European countries, panic buying was in full swing much earlier; around February of 2020. In Germany, according to Statista, panic buying led to a 210% leap in sales of disinfecting products. Bread mix, rice, canned sausage and flour purchases all increased by over 150% each. 

It’s a similar story across other European countries. In Switzerland, toilet paper, flour, sugar and soap were scarce. England and Ireland experienced shortages of pasta (the sales of which leapt 828%) and toilet paper. Pot Noodles experienced a staggering 610% increase in sales across Britain. In Romania, consumers queued at supermarkets to buy bottled water, oil, flour, meat and canned food. Many were also reported to be purchasing to send to relatives in Italy. Sweden, despite less stringent measures, also experienced shortages of toilet paper, but not much else. 

Why might this be? According to Andy J Yap, INSEAD; “Consumers compensate for a perceived loss of control by buying products designed to fill a basic need, solve a problem or accomplish a task. This is what we’re seeing as people rush to buy rice, cleaning products and paper goods in illogically large proportions.” 

As the supermarket sector and the associated FMCG products experience this boost, it’s important to remain realistic. The boost will be followed by a slump, as people work their way through the items they’ve stocked up on. In the UK, this is already happening. Starling bank reports that supermarket transactions peaked on March 14th. Since then, transactions have fallen back to the levels seen before the crisis. 

Stage 4: Quarantine living preparation: 

In this phase, consumers are moving towards quarantine. Large gatherings are restricted and schools and offices are closed. This creates an increased reliance on online shopping and a decline in store visits.

Many countries are currently in this phase. According to recent reports, one in four people are now shopping more online because of the pandemic. This is most common for millennials (39%), followed by Gen X-ers (25%). 

Even countries without strong eCommerce structures are pivoting to rely on online shopping, or some in-between measure that requires less social contact. Italy, for example, has a poor eCommerce infrastructure throughout the country. However, Italian shoppers are increasingly going online at the expense of visits to the store (31%). 

One of the biggest online retailers, Amazon, has seen a significant boost due to COVID-19. Consumers are spending almost $11,000 a second on its products and services, resulting in Amazon shares rising to a record high. Indeed, FMCG products are at the centre of this, with sharp rises in sales on Amazon in the US and UK over the last few weeks. The FMCG growth on Amazon far exceeded both Amazon Prime Day and Black Friday. For example, sales of antiseptics increased by almost 300% on Amazon, while sales of soaps & hand wash tripled. 

Other industries, however, are in crisis. Fashion FMCG has been hit particularly hard as consumers work from home and limit social contact. Brick and mortar stores are closed, and people aren’t purchasing clothes online. According to The Guardian, “the coronavirus pandemic has plunged the $2.5tn (£2tn) global fashion industry into crisis with a “significant number” of firms expected to go bust in the next 18 months”. 

Zalando, a popular European fashion eCommerce retailer notes that currently in Europe, over 87% of fashion sales are still completed offline. Could eCommerce save the fashion industry at this time? Unlikely. Whilst there are large spikes in eCommerce for food, entertainment, and hygiene products, fashion sales are not experiencing the same peak. 

So, it looks like eCommerce is keeping FMCG alive, but only some in sectors, as consumers re-assess what is deemed as a vital and high value product. 

Stage 5: Restricted living: 

At this point, economies have become increasingly reliant on eCommerce, yet battling to keep up with the demand. Traditional brick and mortar will need to find ways to adapt accordingly, yet it is also likely that once we emerge from this, consumers will once again seek out the experience and pleasure of shopping instores. Additionally, those with disposable incomes begin to spend on entertainment and luxury items that enhance their new restricted living reality. 

So, what are people purchasing? When it comes to hobbies and activities, Swedish DIY and homewares retailer Clas Ohlson said that “although the COVID-19 pandemic had hit sales in March, demand had grown for products such as food jars and headsets as people spent more time at home”. 

Clas Ohlson also reported that sales of arts and crafts kits, paint, paper, and blenders and food storage containers are growing. Gardening gear such as gloves and pruning tools are also increasing in sales. 

Home entertainment and hobby-related purchases will very likely continue to increase in Sweden as people face extended periods of isolation. In the Czech Republic, it’s a similar story. Bread machines at Mall.cz recently sold out as volunteers took it upon themselves to buy and donate then to older people to ensure they could stay at home. 

As interest in hobbies increases, the panic-buying mentality fades. Certain FMCG supermarket product sales have declined. For example, in Spain, around 10 days after the lockdown was announced by Prime Minister Pedro Sanchez, sales of panic-bought items began to decline. 

Toilet paper sales were down by 10% and olive oil was hit by a 58% drop. This is perhaps because people realized they had stocked up enough to last them for the foreseeable future. Recent figures from Italy show that frozen foods have leapt by 29%, as have packaged foods (19.9%). As panic-buying recedes, people focus on logical and entertainment-focussed orders. 

Living a new normal: 

This phase begins when quarantines start to lift, and people go towards a new normal. The predicted outcome is that Europe will experience permanent shifts in reliance on e-commerce and changes to supply chains. But it does not mean that e-commerce will exist in isolation. Bricks and Mortar retailers have already found ways to meet consumer demands at the peak of the pandemic and it is likely that they will continue to adapt to retain the value of the customer experience instore. For our partners who continue to service brands on the shop floor the focus will remain on supporting their staff to uphold the level of hygiene expected during the peak of the crisis.  Some partners will also be supplying vending machines with sanitiser, face mask and gloves making is easy for consumers to avail of while they shop.

As life slowly returns to normal, online grocery delivery and FMCG product eCommerce will only continue to grow. Moreover, vital infrastructure will be put in place to enable these to flourish. 

When they reopen, stores will begin to offer a suite of online services, such as click and collect, next day delivery and connected experiences online. Our Partners across Europe continue to pivot their business to meet the demand of their FMCG clients both instore and through new services such as offering a personal shopper service for those more vulnerable in society.  Digital merchandising and virtual instore compliance checks have been offered to clients as a means to continue delivering results whilst bridging the gap between offline and online.  This is to ensure that in the next crisis, they have channels customers can go through for an easy purchasing experience. Consumers are already relying on eCommerce, and it’s up to retailers to adapt and capitalize on this. 

Conclusion

As the COVID-19 crisis continues to change the way that Europe lives, works and shops, various groups of FMCG items will continue to be impacted. However, one thing is certain; the shift towards eCommerce is well underway and this crisis has ensured that it is here to stay. Be it food, fashion or healthcare, consumers are now focussed on the convenience of delivery right to their door. Our Partners are using their knowledge and skills of the FMCG market to seamlessly close the gap and integrate the benefits of online with the personable, engaging experience of offline. Though it is unlikely that eCommerce will ever completely eradicate the need for bricks and mortar, this pandemic has shown that having an online presence is no longer a nice to have.  This experience will ingrain in consumer bases the ease and accessibility of products ordered online. 

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