In early March, before COVID-19 was declared a pandemic, a small team at McKinsey started doing consumer research. “We knew our clients would need to understand how their customers were doing during this crisis," recalls Kelsey Robinson, a partner in our Marketing & Sales and Retail Practices. “We ran the first survey on a Friday in the U.S. with 1,300 people, asking about their health, financial situations, sense of optimism, worries, plans for household spending."
As COVID-19 became a global pandemic, we expanded the survey from one to 45 countries, polling participants weekly through July; now the survey is conducted monthly. The most recent results are in—with early signals about holiday shopping. Here, Kelsey talks about how consumer sentiment is evolving in response to changes in the pandemic and what this means for retailers.
Before we get into the research, tell us a bit about your background.
I grew up on the East Coast and my path has always been a combination of art and science. My mother was a nurse and dad was a construction estimator. In high school, I loved both art and calculus and wondered: should I be an architect? Engineer? In a way, bringing an analytical approach to consumer brands combines art and science. And, I am a passionate shopper: I find joy in finding exceptional brands and in buying for others; I am often a 'focus group of one' for my clients buying apparel, footwear, beauty products, home décor, children’s wear and more.
What does the survey data reveal about how retailers and consumers are thinking about holiday shopping?
As we would expect, holiday shopping is looking different this year: It is starting much earlier and about half of the shoppers we surveyed—48 percent—say they will be shopping online.
The McKinsey team behind our consumer research. Top row: Sebastian Pflumm, Anne Grimmelt, Mayank Mayank, Yvonne Staack, Naomi Yamakawa. Bottom row: Nancy Lu, Resil Das, Tamara Charm, Mianne Ortega, David Hutchinson
Holiday shopping typically begins in earnest around Thanksgiving with the weekend between Black Friday and Cyber Monday. But this year it kicked off in mid-October with Amazon Prime Days, which were a big win in particular for Amazon products (e.g., Echo) and for their third-party sellers: small and medium-sized businesses.
Retailers are sending out holiday promotions early to lock in sales and cement their position as the "go to" choice. They want to pull demand forward, and ensure they have enough time to fulfill and deliver orders on time—in light of COVID-19 constraints on supply chains and fulfillment partners.
How are shoppers approaching the holidays?
I would say they are cautious: 42 percent say they plan to decrease their holiday spend this year and in keeping with that goal, three-quarters will be looking for deals at the season’s blockbuster sales.
While the holidays may look and feel different this year, it is clear that Americans are needing the break, shopping aside. The day-to-day is a struggle for the average household right now. Over a third of Americans continue to report a decrease in income over the trailing two weeks.
Eighty percent of families have children in a remote or hybrid-learning situation. One in three mothers say they are considering decreasing their hours at work or leaving their jobs altogether as they struggle to manage both work and taking care of their children. It's a real stress and financial burden that has persisted through the pandemic—a trend that also shows up in our recent Women in the Workplace research.
Looking at trends over the year, what surprised you most about the research findings?
I would have to say the shock to brand loyalty was definitely surprising. More than 73 percent of Americans have tried new shopping behaviors, such as experimenting with new brands, trying new retailers, buying through new channels such as ordering groceries online, and trying new experiences like curbside pickup. And of these, some 80 percent plan to continue with their new choice.
It also differs by age: Gen Zers have suffered the greatest impact to income from the pandemic and are more likely to trade down to less expensive new brands. But they also have the highest intent to spend more online and are the most optimistic about economic recovery for the country. So while retailers view millennials and Gen Zers as "must wins," they are the least loyal and most financially challenged right now.
How have changing restrictions and shutdowns affected consumer behavior?
In early fall, as restrictions started to lift, people were venturing out to shop and dine, see family and friends and plan travel.
And we saw a corresponding drop—maybe a bit of fatigue—with some online activities including work and personal video conferencing; online workouts, and streaming content. And we are starting to see movement among shopping categories: Consumers are evolving from shopping only for essentials like groceries to beginning to be interested in buying apparel or even jewelry.
But there is still anxiety about going to malls, flying, and traveling more than a few hours from home. As the virus starts to peak again and we see a new wave of shutdowns, it will necessitate a return to the digital shopping behaviors of the first lockdown.
As of early fall, some 45 percent of holiday shoppers were planning to do at least some degree of shopping in brick-and-mortar stores. What sort of experience are they looking for?
Consumers want a seamless digital experience when they shop—benefits like touchless check-out and curbside pick-up. The environment must be hygienic and safe; the single most important factors are universal mask wearing and protective barriers at check-out. Stores must have access to a full inventory with knowledgeable staff on hand to answer questions. Shoppers are making fewer but more purposeful trips: They want to build baskets quickly, with less time spent browsing.
It's a real challenge for retailers: How do you differentiate your store with personal, thoughtful attention, full product lines and expertise, when people want to be socially distanced and move quickly through a sanitized, touchless experience? Personalized promotions, extensive product information, and empathetic service will all become important.
As you look back at this year, what three words come to mind?
It has been tumultuous, day after day. As the holidays approach, I am nostalgic. For the first time, like many people, I won't be traveling to see my family for the holidays.
But most of all I am appreciative—grateful for all things we might have taken for granted before: our health; my family; and the chance to continue to work with my clients and teams, even if via video.
