Accelerating shifts driving a radical rethink of the customer journey

Canadian Consumer Insights 2020

At a glance

  • The impacts of COVID-19 on the retail sector will vary by category, but the crisis has accelerated several shifts to consumer behaviours that were already underway.

  • Many of these shifts, such as increasing use of and expectations around e-commerce, correlate strongly with other key trends, like the rising influence of urban Gen Z consumers.

  • While some consumers will return to prior behaviours, the pace of change will only pick up, requiring retailers to transform the customer journey and re-examine the role of a brick-and-mortar presence.

With the world in flux, we’ve worked to understand shifting consumer behaviours through our 2020 Consumer Insights Survey. This year, we focused on the lifestyles and shopping habits of urban consumers. With population growth in Canada’s largest centres outpacing the rest of the country and cities tending to have a younger and wealthier demographic, urban consumers are a good indicator of where consumer behaviours and sentiment are going. 

Our survey analysis suggests the pandemic is accelerating shifts—due to factors like the rise of Generation Z and the trend towards working from home—that were already underway. This will require retailers to take a long-term view to understand what a more digital, remote world means for all of their touchpoints with the consumer and the evolution of their brick-and-mortar presence.

Tracking consumer behaviours before and during COVID-19

Before the COVID-19 pandemic, we surveyed 19,098 people in 27 countries. Respondents include 1,002 consumers in Canada, all of them located in Toronto, Montreal and Vancouver. We then conducted followup surveys in the spring with 1,000 Canadian consumers to explore potential impacts of COVID-19.

How will the pandemic affect consumer behaviours across retail categories and activities? In recent months, we’ve seen how Canadians tend to have a higher risk perception of the pandemic than Americans, which could hold them back from resuming their shopping habits for a longer period. But looking further out, the outlook varies by consumers’ comfort level in each retail category. Consumers are showing greater comfort with going back to previous behaviours at physical retail and grocery stores, followed by restaurants and malls.

Not surprisingly, consumers are the most reluctant to resume activities related to tourism and large gatherings. Bars and movie theatres are also unlikely to bounce back as quickly.

But even as consumers are saying they likely will return to previous behaviours in some areas, retailers will need to focus on several key shifts in setting out their long-term strategies. We explore three of those shifts below.

 

Which activities do consumers feel most comfortable returning to?

Shift No. 1: Buying behaviours of Gen Z consumers

It’s particularly important to pay attention to the buying behaviours of younger consumers, especially Gen Z, as their habits will increasingly shape consumer patterns in the coming years. Our survey found key differences between Gen Z (aged 18-22) and baby boomer (aged 55-73) respondents. Examples in the food category include:

  • A 25-percentage-point gap between Gen Z and baby boomer respondents who buy their products online at least half of the time. Gen Z consumers also showed a higher tendency to use other online food options, such as food delivery apps and meal kit services.

  • Younger consumers have higher expectations around grocery delivery times: 68% of Gen Z respondents expect to receive their purchases within 24 hours if they pay for delivery, versus 35% of baby boomers.

  • While the COVID-19 pandemic has put a pause on the shift to microtrips (store visits of less than five minutes), they do have greater resonance with younger respondents (both Gen Z and millennials). We also saw a strong link between people making microtrips and consumers looking for fresh products, specific ingredients to prepare a meal and ready-to-eat items.

Categories showing the biggest gaps in digital shopping behaviours between Gen Z and baby boomer shoppers
Category Gen Z Boomer
Grocery 34.8% 10%
Clothing and footwear 37% 16%
Sports equipment/outdoor 23.9% 4.7%
Furniture 23.2% 5.3%
Books, music, movies and video games 43.5% 26%

We also found several key differences around apparel shopping habits:

  • Gen Z consumers are less likely to shop at retailers with traditional formats: Only 20% said they primarily buy clothing from a department store, versus 33% of baby boomers.

  • Gen Z consumers are more likely to look for additional reasons to justify a trip to a store, such as personal shopping services. Younger consumers are also more likely to want additional services, like a spa or coffee bar, and to look at a store visit as a source of fun.

  • Gen Z consumers (42%) are more receptive than baby boomers (27%) to automated checkout options, as well as other digital, self-guided experiences in stores.

What brings you to a physical store rather than buying or researching online?

Young shoppers are much more likely to go to a physical store for experiences or additional services

Shift No. 2: Retail strategies for the work-from-home consumer

The shift to working from home has been accelerated by COVID-19. As more organizations settle into new ways of working, there will be significant implications for retail strategies given the link between work-from-home arrangements and other demographic and consumer trends.

Those who work from home tend to be younger and wealthier and are more likely to have an Amazon Prime membership, shop for food in microtrips and be open to alternative fulfillment methods beyond home delivery.

In response, retailers will need to put more effort into online product discovery as e-commerce grows, adapt their product mix (for example, to increase fresh food selection for microtrippers and offer more athleisure products as people need fewer clothes for the workplace) and offer expanded fulfillment options.

The link between working from home and digital shopping behaviours
People who don’t work from home: 30% households have Amazon Prime, 37% have used online as primary channel for holiday shopping versus People who work from home: 49% households have Amazon Prime, 49% have used online as primary channel for holiday shopping

Shift No. 3: COVID-19’s impact on the future of retail

The COVID-19 pandemic has accelerated many of the shifts retailers have been dealing with for several years. This is especially true of grocery stores, which have faced a sudden surge in demand for e-commerce and delivery services.

While many Canadians are likely to return to their previous grocery shopping patterns, this doesn’t free grocery retailers from the need to change. It’s still important to adapt to trends that predate COVID-19, like microtrips, by focusing more on fresh items and ready-to-eat meals.

Even with online delivery, survey data showing significant demand from Gen Z shoppers shows grocers must keep investing in e-commerce to address customer pain points and expectations. Many in our survey reported poor experiences with these services during the pandemic, with only 7% agreeing that shopping for groceries online is easier.

While grocery stores have been busier than ever, the situation has been different for categories like apparel. Among the challenges during the pandemic is the ongoing concern about shopping in malls. With Gen Z shoppers looking for enhanced experiences and additional services to justify a trip, retailers will have to address not only health and safety concerns but also the role of the store.

Retailers will also need to adapt their product mix to better reflect key consumer trends that will shape the new environment, including the rising interest in locally made, environmentally sustainable and socially conscious products. In this year’s survey, 49% of respondents said they expect businesses to be accountable for their environmental impact.

 

Ease of using online shopping

Only 7% agree that shopping for groceries online is easier

Transforming the customer journey

As these shifts to customer behaviours become even more entrenched, retailers that step up their efforts to adapt have a better chance of winning. Now is the time to be bold and embrace creative solutions while adapting and making difficult decisions about your operations. What can you do?

Reinforce 

As a key first step, you’ll need to go above and beyond local guidelines to address health and safety concerns. We see good opportunities for retailers that are vigilant about safety measures to both retain existing customers and potentially reach new ones who are looking for brands they can trust. 

Besides following best practices around health and safety measures, digitally focused, contact-free experiences can help customers feel more comfortable. This may also require you to invest in improving your employees’ digital skills so they can better engage with customers through digital channels.

Reimagine

Build on the innovation started during the COVID-19 pandemic by re-examining the role of the store and creating seamless integration with your e-commerce operations. Rethink how consumers will discover your products, whether they’re coming into your stores to explore carefully curated assortments or they’re engaging with your online offerings.

In expanding your e-commerce capabilities, focus on the fastest-growing channels—like mobile shopping—that have seen the biggest surges in activity during the pandemic. You should also explore which fulfillment options are the best fit for your customers and your operations.

Rebalance

As consumer behaviours and tastes evolve, retailers are likely to need fewer physical stores. Determine where and in what circumstances it makes sense to have a brick-and-mortar presence and where you need to repurpose your store format and size to respond to consumer shifts and preferences.

Rebalancing is also about re-examining your costs. This can free up capital to help retailers make necessary investments, in areas like robotics, to more efficiently manage e-commerce fulfillment.

Reinvigorate 

The retail experience matters. Gen Z shoppers want a reason to make the trip to a store. You can give them that reason by investing in your in-store customer experiences. We see great examples of this already: some leading retailers are creating engaging social spaces in their stores, while others, notably digitally native brands, are setting up a brick-and-mortar presence as a place to touch, try and potentially customize their products or offer additional services.

Contact us

Myles Gooding

Myles Gooding

National Retail & Consumer Lead, PwC Canada

Tel: +1 416 687 8598

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