Retail trust is a core casualty as coronavirus spreads
by Francoise van Rheede. There’s an undeniable impact that COVID-19 will have on economies as it continues to spread. COVID-19 is causing mistrust. Consumers want to be assured of safe shopping experiences in physical locations.Monday, 09 Mar 2020
by Francoise van Rheede. I recently edited a corporate film for a client’s roadshow. Chapter One focused solely on the Wuhan epicentre and the spread of coronavirus disease (COVID-19), plus the impact this may have on global economies.
For perspective, the SARS virus of 2003 wiped out US40 billion dollars from the global economy, while recent news reports about COVID-19 claim that nearly US5 trillion dollars were lost during the last week of February 2020. Access to Chinese suppliers has become so restricted, that the Shoprite group has reportedly forecast an estimated loss of R100 million due to not being able to stock winter products from China.
There’s an undeniable impact that COVID-19 will have on economies as it continues to spread. Still, there’s an interesting shift in behaviour as the world tries to manage the effects of the virus. Some of the biggest challenges in retail and shopper marketing are to anticipate consumer and shopper reactions, shift preference and convince shoppers that they are buying brands that are tried, tested and trusted.
In the case of Corona beer, we see the first clue as to how quickly behaviour shifts when a global crisis presents itself. With absolutely no connection to the virus, the beer brand is feeling the snub from a significant portion of consumers, purely because of its namesake. According to an article published on Business Insider on 29 February 2020, “A US survey says 38% of drinkers won’t touch Corona because of COVID-19 fears.”
So, what does this mean for South Africa? We waged war on polony, and we all know what that did for Enterprise as a business and brand. Listeriosis killed off a staple in South Africa for quite some time; however, it is back on the shelf with seemingly minimal changes including new packaging, which bears a quality passed lock-up logo stating, ‘improved food safety’. But, Enterprise did not re-enter the market offering a discount. It is one of the more expensive polony brands on shelf. It will be interesting to see if it will overcome the broken trust amongst its market, even as it has a renewed focus on ‘quality you can trust.’ Herein lies the key insight and takeout from this example.
COVID-19 is causing mistrust. Consumers want to be assured of safe shopping experiences in physical locations. They want to be confident that the products they purchase are safe to consume. They have an expectation that brands are looking out for, and protecting them, especially when they don’t always know where products come from. Diminishing trust amongst shoppers is driving some emerging themes; ones that are already changing shopper mindsets and triggering adaptive behaviours in South Africa:
- Retailers discovered they could cut costs by ordering from manufacturers in China: COVID-19 is now prompting buyers to look closer to home. In Europe, customers are looking for local suppliers, with a significant increase in enquiries and confirmed orders to local factories. The challenge is, will local manufacturers source and invest locally to find suppliers to fulfil their needs, or could we see empty shelves?
- How advertisers might respond to COVID-19: There will be a more significant push towards online shopping. Purchase behaviour will be influenced by targeted campaigns with a large focus on product information to increase brand awareness and establish trust from the source. Offline, there may be a lot of trolley abandonment, and perhaps more store dashers and top-up shopping. Alternatively, we’re starting to see stockpiling, which could be an interesting proposition for wholesalers.
- Out of stock could lead to switching: In the US, there is a growing narrative around stockpiling, which started with items such as face masks and hand sanitisers. US customers are specifically stocking up on non-perishables, food, bottled water, over-the-counter medication and household necessities, including toilet paper, pet food, alcohol and cleaning wipes for potential self-quarantine situations. Locally, shopper behaviour may lead to switching to alternative brands purely because their preferred product is not on shelf.
- Confusion and fear change base level shopper behaviour: “The rising numbers of coronavirus cases outside of China could trigger a psychological change in consumer behaviour that ultimately damages the US economy;” an economist told CNBC. This could be true for other markets, too. Generally, South African consumers are already spending a lot less money as the country enters its second recession in two years. This has a negative impact on foot traffic in malls, cinemas, live sporting events and even local travel. Also take into account the Tokyo 2020 summer Olympics, how will the pandemic affect this global showpiece?
How can brands adapt to this? Recovery takes patience, but will your shopper be there? Recovery takes time. Supply chain replenishment will take its toll on local retailers which have long-term trade agreements from suppliers within China, as their factories remain shut and workforces are kept under quarantine.
This could play into the hands of locally established brands which can re-affirm their positioning within the most affected segments. As a result, South Africa’s local economy could be bolstered with smaller suppliers solving the shortfall.
Francoise van Rheede is co-founder and partner in One Experience shopper marketing consultancy, heading up business operations. Formerly Motherland, One Experience was launched by Van Rheede, with industry brand stalwarts, Brian Ferns and Carolyn White in February 2020. They describe One Experience as a new breed of shopper marketing and retail marketing consultancy where there is fusion for the first time of insights, technology and ideas in brand growth solutions.
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