5 Ways Consumer Behavior Will Change Due to the Upcoming Recession

With thousands of businesses closing during the social distancing period and over 30 million Americans having filed for unemployment so far, experts across the country are expecting the United States to be placed in a recession as a result of the coronavirus pandemic. Here at Chicory, we predict that we’ll continue to see major changes to consumer grocery shopping and purchasing behavior for months to come.

The pandemic has led unemployment rates to surge past 24.9%, according to Fortune, rivaling the estimated rates seen during the Great Depression. As the economy transitions into a recessionary period, lifestyles will continue to change and consumers will get more conservative with spending as unemployment rates continue to rise. They will also be accustomed to the “stock-up” behavior learned in the early stages of this crisis. Combined with price-sensitivity, they will likely opt for bulk and larger packs of food and will trade down to lower priced and private label products. 

A Chicory client using a “shoppable aisle” campaign setup, in which shoppers can choose their preferred product and pack size prior to sending to the grocery cart, saw a 400% increase in dollar value sent to cart in early April. However, the number of add-to-carts did not increase, indicating that consumers were selecting larger pack sizes in an effort to stock up and save in the long-term. Consumers are already thinking ahead and planning their spending carefully.

And while we’re already seeing that consumers are leaning into stock up behaviors that veered on hoarding through bulk buying and multi-packs, they’re no longer shopping at hypermarkets, big box stores and warehouse chains, such as Walmart, Sam’s Club, Smart & Final, or Costco. Generally, these club-style and big box retailers are less easily accessible to shoppers in panic buying mode, who are looking for stocked shelves and a speedy shopping experience in order to avoid unnecessary exposure. Additionally, these retailers tend to offer fewer options for online delivery, bear heftier order minimums and come with membership fees. In an effort to tighten purse strings, shoppers are more likely to avoid big box stores and warehouse chains and turn to their local grocery stores, buying from those shelves instead.

Overall, high volume in grocery buying will be sustained as long as restaurants, workplaces and schools are closed and consumers spend more time at home than they’re used to. Until then, consumers will have no choice but to make nearly all meals at home, save for the occasional splurge on takeout. Chicory’s recipe network is already seeing unprecedented traffic--engagement on April 12 nearly doubled that of the Super Bowl, and the average Sunday during coronavirus garners engagement levels that match those of Christmas Eve.

As consumers look to avoid unnecessary excursions, purchase cycles have elongated. But additionally, shoppers are also getting accustomed to not only fewer, but larger trips to the supermarket. CPGs and retailers will be forced to place more budgets behind price- and value-based promotions to entice cash-strapped shoppers to purchase more frequently. These promotions will include temporary price reductions (TPRs), coupons and promotional campaigns and will emphasize promotions on single SKUs rather than stock-up offers to counteract hoarding behaviors. 

We turned to our data, to find that, with more time at home and out of home activities being put on hold, convenience and time-saving have become less of a concern. Consumers are prioritizing frugality over convenience, swapping ready-made items for cooking more from scratch -- which may explain why social media has been overrun with sourdough starters and banana bread. Comparatively speaking, making one’s own bread costs less than $1 per loaf when homemade, while packaged bread found in-store costs anywhere from $3 to $5. Views averaged 8,263 per day on “from scratch” recipes from January 1 to May 6 and reached an all-time high of 4x typical levels.

And for many up-and-coming brands with higher price points, typically in the organic and natural category, will need to more seriously and strategically think about brand identity as price conscious consumers opt for legacy brands that can offer lower prices and wider distribution. Brands that target niche audiences will be traded down and Chicory’s shoppable recipe network reflects that there’s a decline in interest in diets like paleo, vegan, keto, gluten-free and low-carb. 

“What may separate those that survive from those that don't is how brands position their brand identities. If consumers perceive a brand (or an entire category) as something that is easy to “trade down” on or replace with a close enough substitute, then there may be a big fall out for the more high-end niche brands that in the past ten years or so have been able to build strong customer bases. Brand quality and perception will need to more drastically outweigh the price differential. This has always been true to an extent, but this will be increasingly challenging. It’s going to get competitive fast,” says Joey Petracca, Chicory’s Co-Founder and COO.

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