While it would be safe to say that all of us have seen different types of crises in our lives, it would not be an exaggeration to state that none of us have experienced a crisis of such magnitude as the one COVID-19 has presented. The speed at which this has gone from a news item to the only news, and the pervasiveness of its impact on the way we live our lives, places this on a completely different level, and thereby earning it titles such as black swan event, a concept that till now was written about but not experienced in its entirety. People have experienced wars, social unrests, health crisis, economic crisis and similar, but often their impacts were more localized, not like the world we live in today where working from home is not just an employee friendly policy in the handbook but the way of life, and a casual meal with friends in a restaurant feels like a lifetime away.
It is indeed a perfect storm, that has shaken the pattern of our lives and has impacted every aspect of it– social, economic, and health. For corporations as well, it is a perfect storm, one that is impacting every aspect of their business – consumers who are behaving very differently and have become hard to get to through traditional means, supply chains which have been disrupted due to shutdowns, labor shortages and economic strains, workforce which is fighting its own battle for maintaining health, attending to matters at home and handling job insecurity and business models which are being put to test.
A perfect storm is also an opportunity for heroes to emerge, as they say never waste a crisis. The leadership of the captains of the ships weathering this perfect storm will be severely tested as they look to survive, navigate and emerge stronger on the other side of it, stronger and with wisdom worth a 100 years. All this while facing a new challenge every hour, with no time to pause and reflect, and constantly trying to balance multiple considerations.
As India starts to unlock while it battles rapidly rising infections, natural calamities, pessimistic economic outlook and social heartburn, we took the opportunity to talk to some leading consumer sector CEOs in India and interposed that with what our global Russell Reynolds Associates colleagues are hearing from consumer sector leaders across the world. We bring together some leadership lessons from this crisis, both from a consumer behavior and business model implications standpoint and also from a leadership style and talent implications standpoint.
Businesses today stand at a vantage point from where it is amply clear that going forward, certain things are going to change permanently and that we may never return to the proverbial “business as usual.” Similarly, with the events that have unfolded, and their cascading implications continue to do so, some consumer behaviors will leapfrog change, while others may be more temporary till things stabilize. Our interactions and insights suggest the following key changes:
VALUE VS VALUE ADDED
With most households experiencing a decline in their household incomes, compounded by the insecurity around economic revival and job cuts, it is fair to say that the consumer sentiment index is sharply leaning towards an all-time low. The fall in disposable incomes and purchasing power and a general anti consumerism sentiment, accentuated by an appreciation of glimpses of a simpler life and cleaner environment during lockdown, have in general triggered the demand for essentials and “value products” rather than “value added products”. The conservative Indian consumer from a few decades before is back once again in prominence. While essentials are trumping discretionary spends for now, another interesting trend, somewhat contradictory, is emerging in terms of pack sizes wherein relatively more affluent consumer, who looks to minimize frequency of shopping trips and exposure is gravitating towards larger pack sizes, while the relatively less affluent consumer with the strain of finances is being frugal and opting for smaller packs wherever possible.
HEALTH, HYGIENE & NUTRITION
This trend has leapfrogged during the past few months and if one goes by the experience of countries which have opened up much ahead of India, this is likely to stay. The “going concern assumption” which has been the foundation of most of our lives has been challenged and the risk of more such pandemics have jumped out from fiction books and staring at us as a realistic possibility. The only defense one has is a disproportionate focus on health, hygiene and nutrition, and our insights suggest a lot of this will come on the back of traditional home remedies, natural products and rapid development of the nutraceuticals market. At the same time, COVID-related products like sanitizers, masks, disinfectants and similar products will find a more permanent place in shopping lists.
TRUSTED BRANDS VS AVAILABLE BRANDS
In uncertain times, it is natural for people to gravitate towards brands that they trust, those which are tried and tested and stand in their minds for assurances of quality and hygiene. At the same time, while trust may be a key variable for items like baby care products, skin products and edibles, it gets trumped by availability in times like these where supply chains are broken or sub optimal. Customer loyalty has been thoroughly tested during lockdown times and there will be some wins and losses for all, and as supply chains get restored, building and rebuilding trust will be key. Newer brands will have to struggle to make space in customers baskets as impulse buying in large store formats will go down due to concerns around social distancing, and related issues.
In situations like these, trusted brands become go-to names as people gravitate towards the brands they trust. More trusted the brand is, better placed it is.
As the center of recreation moves away from malls, restaurants, and vacations, to home, there is a visible shift towards a do-it-yourself culture, which has been compounded with the shortage of house helps, either due to their migration back to their hometowns or stopping part timers due to concern of infection. This is triggering a sharp rise in cooking ingredients (food condiments, frozen foods, packaged snacks, baking products), especially those which substitute items for which people would eat out or order in, which has also sharply declined due to infection risks. There has also been an increased demand for items like dishwashers, washing machines and vacuum cleaners as the Indian household is learning to live with lesser help and more people at home. The needle will surely move on the DIY meter for India, a journey which has been slow paced due to the abundant labor availability in the past.
A whole lot of innovations will come in the DIY space around the equivalent of what I call 'Online Learning'. We need to make the appliances more DIY friendly and also be prepared to provide simple advice over video calls or zoom calls.
DIGITAL CUSTOMER INTIMACY
Just like online dating and matrimony portals and apps changed the paradigm on relationships from friends and family introductions, COVID can claim credit for transforming the customer digital intimacy and engagement paradigm. On one hand, while these times have brought back the spotlight on the humble neighborhood kiranas who served the country while the other channels shut down, it has also revalidated the clear acceleration of digital, ecommerce, direct to consumer models. The key aspect in both would be the ability to converge and deliver in a safe contactless environment. These times, driven by necessity, have also seen some unlikely marriages between online and offline models, some competitor business models working together and indicating shifting operating models.
There is a massive opportunity for 'e-everything' that can digitize the entire economy. The biggest benefit that I see coming out of this crisis from channel perspective is the 'renaissance of the humble grocer'. People have suddenly realized the benefit of proximity. If we can bring technology to the grocer, then about 100 million lives dependent on such grocers could survive and thrive.
|% of respondents||Intent to continue2|
|Shopped new grocery store||41%||52%|
|Changed primary grocery store||39%||56%|
Switched to a |
|Shopped new website: basics||26%||61%|
|Shopped new website: non-basics||15%||63%|
|% of respondents who have switched stores|
|Closer proximity of store/easier to reach||58%|
|Store is less crowded||54%|
|Store is less cleaner||42%|
|Store has better home delivery or pickup services||27%|
|Store has longer opening hours||20%|
|Need to find cheaper prices||18%|
|Store offers Special promotions on relevant brands/products||14%|
|Store offers a larger assortment||12%|
The dramatic disruption in the way we live over the past few months and the changing consumer behavior is bound to impact the business and operating models of companies, some more tactical to respond to the current situation which is continuously evolving and some more strategic to address more permanent shifts. When faced with an unforeseen crisis, the first emphasis is on fire fighting and handling the situation, and as things settle a bit, there is greater thought towards preparing for the future. Some visible shifts in the operating models we see are as follows:
With changing consumer preferences, changes in product portfolio are inevitable. The visible shifts towards, health, hygiene and nutrition and “in home” vs “out of home consumption” have and will continue to reconfigure product innovation pipelines. Some have already pivoted on this front towards launching products like sanitizers and vegetable washes, and others are in progress to latch on to this demand bandwagon. Similarly, with more DIY and less labor, home automation products and personal grooming products are likely to see more push. At a more macro level, companies are rationalizing their product portfolio, streamlining their range and going to market with less SKUs.