OWN YOUR FUTURE – LIVE 2020 took place live (from our homes) on July 9th 2020. The video included here was recorded at that event.
Victoria is a Principal at Boston Consulting Group and a lead member of the Retail and Large Scale Change practices, where she helps her clients harness big data to better serve consumers. She is an on-and-off entrepreneur in the food and beverage industries and an active angel investor. Victoria holds an MBA from MIT Sloan School of Management, a B.S. with Honors from Northwestern University, and Sommelier Certification.
Navigating the new consumer sentiment horizon
The world we live in now has been permanently transformed. Victoria will explore changing consumer sentiment looking at what has been impacted and what hasn’t. It’s time to recognize the trends, pick up on what customers will think and do now and in the future and pick the opportunities accordingly.
2:02 – Consumer Minds in Early March
2:40 – Contradictory Signals: Fear of Virus & Recession Alongside Business As Usual
3:45 – Changes to Consumer Sentiment, Behaviour, and Spending.
7:11 – Deep Dive: US Grocery
9:38 – Deep Dive: US Travel
11:10 – Deep Dive: US Non-Food Retail
12:45 – Pandemic Exacerbating & Moderating Trends
13:46 – Missing Leisure Travel
14:32 – Global Return to “Normal” Slows
15:30 – Strong Desire to Return to Normal
15:60 – New Habits for Younger Consumers
17:30 – Likely Shifts in Our New Normal
And we are gonna be moving on in Our Own Your Future presentation. You’ve been great already. There’s been so many questions coming through, keep that going. Our next presenter is just the same. I am excited to introduce that next speaker. She is going to be taking us on a wild ride through the current state of the world that we are doing business within. She is the principal at the prestigious Boston Consulting Group and a lead member of their retail and large scale change practices team, where she helps her clients harness big data to better serve consumers. She’s an on and off entrepreneur in the food and beverage industry and an active angel investor. She holds an MBA from MIT Sloan School of Management, and perhaps most importantly, she’s a certified sommelier. Now, let’s put our virtual hands together as we welcome Victoria Gutierrez to Own Your Future, Victoria.
Hey, folks. Thanks for the introduction. Let me just get my signs up here, ’cause I am useless without them. All right, let’s get that into Zooming wall. So Ben, you gave all of the important parts, and I think the one that I will also add an addition to kind of what I do with BCG, and where I attended school and the fact that I’m aligned that is I am a proud dog mom to Peaches, the Italian Greyhound. I got her at the beginning of quarantine, so that’s been kind of a great outcome for me out of all of us. But what are we gonna do today?
The first thing I wanna do is we’re gonna take a little bit of a, you know, trip in the Wayback Machine and look at what consumer sentiment actually looked like as the crisis was beginning to unfold. Well then dig into the numbers of what actually happened from a behavior perspective, as well as, a spending perspective. So not only how are people feeling but what did they actually do? And then we’ll talk about, you know, what are the sticky trends, what’s actually gonna stay, and what do we think is gonna happen based upon what we’ve seen over the last 12 to 14 weeks or so?
So jumping right in if we go back to the beginning of early March, you know, we did a survey with roughly 3500 Americans across you know, all different types of demographics, and ask them you know, what comes to mind when you think about the virus. Some things that are not super surprising death, fear, quarantine, China, overblown, and of all the things you would expect. People were starting to see risk and travel, death was top of mind for almost one out of five Americans, most people believe the worst was still ahead, and actually most people thought that there was going to be a recession associated with the crisis.
That being said, consumers were kind of throwing off some contradictory signals. On the one hand, there’s big fear of the virus, and some macro level fears, they were starting to think about reducing spends, so they could actually save, sock away some money, spend less on luxury, fashion, some of those more discretionary purchases. But there was also a sense of business as usual through the crisis. So people were still aspiring to this things we’re always gonna say like, I’m gonna eat better, I’m gonna eat more vegetables, I’m gonna eat organic, I’m gonna quit smoking and do all those types of things. Yet, roughly 80% of people still had not kind of changed their plans for how they were going to deal with shopping over the next months or so. So their expectation early on was that the winners were gonna be savings, eating better, doing more preventative health things kind of preparing, spending more on education. Whereas the expected losers were things that you definitely didn’t need to spend money on like toys, gambling, luxury and fashion.
But then, of course, we were all stuck in our homes working or not working for, you know, roughly three months, and want to take a look now at you know, how to consumer sentiment actually changed if people get more optimistic or more pessimistic? And what do they do? Did they actually change behaviors, do they actually change spend? So these numbers are gonna come from BCG’s center for consumer insights launched surveys at the beginning of the crisis and has done them for 14 weeks straight.
We’ve also brought in spend data either from credit card data or other sources where possible to kinda get us some sense for things. And most of the graphs I’m gonna show you are from kind of where things were as of June 19, so fairly recently. I’ll start with the obvious, we’ve changed our activity dramatically. Of course, we’re doing a lot less of things that require leaving the house. We’re doing a lot more of wearing a mask, washing hands, new habits like cooking, anything on Zoom that can, you know, contribute to more and more Zoom fatigue be it for work or connecting with family. And then the things that kind of net out even, some people are exercising more, some people are exercising less, and delivery and take out is kind of flat. Some people were doing less of it ’cause they were cooking more. Some were doing more ’cause they couldn’t go to restaurants, so no big surprises here.We've changed our activity dramatically. We're doing a lot less that requires leaving the house. We have new habits. – Victoria Gutierrez Click To Tweet
Now, what happened was all that was happening everyone saw China have one big you know, kind of peak and then flatten things out. France, we saw one big peak and flatten things out. We’re looking to confirm new cases over time here. And then the US we saw we were able to flatten the curve not actually go down in trajectory, and we’re starting to see uptick again. And consumers are kind of concerned about catching the virus more or less in relation to the shape of that curve. But it varies by activity type, so by far people are most concerned about catching the virus from travel and tourism.
They’re fairly concerned about local activities, less concerned around at home activities. And in Airbnb, for example, their feeling that is much safer than going to a hotel or taking a flight. And going to the local stores, you know, for most consumers, they think that is safer than the Uber you may actually need to take to get to the store. Despite all those worries people were are still fairly buoyant in terms of their spend expectations. So these views are expectations of spending more or spending less in the coming months by month as the crisis has progressed. So on the left hand side you’ve got places where people have continued to think they’re gonna spend more, so they think they’re gonna spend more on restaurant pickup and delivery, then started to kind of level off, still hoping to put away some savings.
But then there’s things like spending more on fresh and organic foods, spending more on in home entertainment to kind of, you know, not super surprising. On the right hand side there are, you know, negative spending expectations that are persisting for out of home entertainment and restaurants. And despite the fact that businesses were starting to open up in May and June, people are still expecting to actually spend less than they used to in those areas. And you know, we’re seeing fairly persistent pessimism in terms of expectations for spend and clothing. Perhaps we’re spending more in tops and we’ve killed pants and we’re just wearing pajamas. You know, and things like cosmetics are also down as well.We're seeing fairly persistent pessimism in terms of expectations for spend on clothing. Perhaps we're spending more on tops and we've killed pants and are just wearing pajamas. – Victoria Gutierrez Click To Tweet
I wanna take us through a couple of industries that have actually seen really, really big impacts. I’m gonna start with US grocery, ’cause we’ve all been impacted in this. I have because I have worked with grocery clients, but we all have because we’re so needing to change how we actually get food. So what we did here is take a look at online grocery. The green dots represent what consumers, you know, what percentage of consumers expected to actually increase their spending and online grocery. The gray line is the real year over year change in web traffic, and then the blue line is real year over year change in actual spend. And what was interesting here is what people were saying they were expecting to increase their spending on online grocery.
You can really see that the change in web traffic was a really great indicator of people actually moving to that channel from a shopping perspective. So well, web traffic has always been a great, you know, leading indicator of changes in habits and spend, as things are moving quite quickly, and people are reacting real time to the news cycle, it’s actually been a great way to identify what’s about to come. And what’s been interesting is you know, a lot of that was an initial panic by. People said, “Oh, man, I need to stock up. “I don’t wanna go to the store.” So you got a huge, you know, rushed people buying from Instacart, from Amazon Fresh, all those different things. What’s interesting is some of the behaviors have actually persisted.
Those, you know, increase in basket or trip size has actually stayed while the frequency has dropped, so people are, you know, holding on to this new stocking up behavior and actually thinking ahead about their purchases and maybe lumping multiple trips over the week into one trip or order as opposed to you know, an ad hoc, “Oh, I was gonna make a dish tonight “and I forgot this one ingredients, “so I’m gonna go to the store.” No one is really doing that anymore. And of course, all this increased grocery spend has come at the expense of restaurants.
On the left hand side you can see large chains have fared a little bit better than medium sized restaurant changes or chains. On the right hand side when you break it out by format what we’re really seeing is anyone who had a pre-existing expectation as well as capability around takeout or delivery has fared better. So you know, your quick service and fast casual have done better than the diamond restaurants. And of course, your third party aggregators like Grubhub and Uber Eats have, you know, seen dramatic increases in sales throughout all of this. One more that we’ve seen a big change in is the travel industry. So across airlines, cruise lines, hotels, they’re all down 80 to 90% from the sales perspective year over year, and unique customers are down.
What’s interesting is the customers were still buy or buying roughly the same amount of times as they were before, but whereas cruise lines have really really had to decrease, you know, the cost of the cruise. Air tickets are roughly the same price they have been. And hotels have actually increased room prices, so people are actually willing to pay the same or more for their flights and hotels, versus last year despite just a much lower frequency, or you know, individuals actually taking part in those things. Now if we look at automotive travel, of course, everyone’s you know, the kind of darlings of the VC world have been the rideshare companies, and that’s something that’s seen a meteoric rise over the last few years. And even you know, heading into this year, still seeing a big increase in rideshare sales.
Now, once the crisis hits, dramatic, dramatic drops in rideshare, as well as, in car rentals, and a shift back toward not only purchasing but maintenance of, you know, personal cars. Now, this is one where people are expecting to spend less on automobiles, it doesn’t necessarily mean they’re going to buy fewer automobiles and this is going to be an interesting one to watch as we come out of this to see, you know, are people gonna go back to trusting, sitting in a stranger’s car or not. Last kinda deep dive on data I wanted to show you all is to look at non-food retail. And the big story here was anyone similar to restaurants if there was a pre-existing at scale option for e-commerce, and if people were comfortable with buying the item online prior to the crisis?
You have less of an impact. So if you look at off price retailers none of them have an e-commerce solution to really speak of, so they’re more or less shut down, you know, 100% down year over year, whereas shoes, athleisure, lingerie, those types of things not as impacted. And then if we break out accessories, you know, glasses are barely down year over year, ’cause you could argue that’s actually not a non, you know, it’s not a discretionary purchase, so very interesting kind of range of impact seen across non-food retail. All right, so I’ve showed you a bunch of numbers, but the whole point is, what do we do now? How do we win? How do we actually plan for, you know, what the new normal is going to be?
So we’re gonna take a forward looking view of some research that was done. This is based on a BCG survey we did in mid May. So I will say this does have a little bit of a lag, and it doesn’t account for the recent spike we’re seeing in the States, so take some of this with a grain of salt. But you get a sense for how consumers were thinking about coming out of the crisis. So first to start with kind of a simple framework, on the x axis here you’ve got the long term growth outlook prior to the outbreak for a number of different categories. On the y axis, you can see what the short term COVID impact has been. So in the top right in the green boxes, categories that are growing fast, and they’ve accelerated that growth as a result of COVID. Amazon online grocery, obviously, but then we’re seeing some of those aspirational things, people are spending on OTC healthcare, organic and fresh foods, personal care, there’s still a push towards all of this and it’s been accelerating.
The loser so to speak, we’ve talked about today, it’s ride sharing, it’s restaurants, it’s anything out of the house. Kind of unexpected winner, and some of this has been retail economic, or electronics, where they were on a slow decline, they were expected to continue that decline, but now as we’ve needed to, you know, kind of shore up our home office resources as well as buy electronics to keep ourselves entertained at home. It’s actually seen quite an unexpected boost.An unexpected winner [of the pandemic] is electronics. They were on a slow decline and were expected to continue that decline, but now we're shoring up our home office resources and buying electronics to keep ourselves entertained at home.… Click To Tweet
And when you look across ages, as well as, income core tiles, overwhelmingly people miss travel the most, that’s what they miss the most. They miss getting out of the house, eating out of the house, some cosmetics, kind of your older folks in higher incomes who miss business travel quite a lot. Gambling ranks in the top five, because people really, really wanna get back to Vegas, but overwhelmingly it’s leisure travel. And what’s fascinating is that while 60 to 70% of people say they can’t wait to start traveling again, less than 40% actually see themselves taking a vacation this year.
So kind of their hopes and their excitement don’t actually meet up with the actions they expect to take. And these kind of communicated sentiments actually tie in with what we’re starting to see around the globe. So on the left hand side, you can see, you know, again, that chart of China and France, how they’ve more or less gotten to a very, very low new case count. But you know, despite that consumers are still saying overwhelmingly, that their daily lifestyle is massively disrupted versus, you know, pre-crisis, So France is only down to 70% from a 79% disruption at the peak. China only down to 62 versus 66. So people are not actually getting back to activity despite kind of having the right environment to do so, and they’re actually still expecting to kind of pull back, so there’s that expectation either have a second spike, or have an extended recession, so people are still kind of, you know, thinking they can’t quite go back to normal yet. TBD on whether this happens in the States, but you know, I think it’s fair to say that we should all be expecting that the return to normal is gonna be slower than I originally thought.
That being said when surveyed most American consumers want to return to normal in terms of levels for different activities that they’re currently doing, different amounts for so they’re doing less of shopping in stores today and 66% of those people wanna go back to their normal amount of doing that. Most people wanna get to normal in home entertainment or cooking we don’t actually want to keep these new habits, it’s truly temporary for most people. That being said, people who do wanna keep their new habits are younger. So your Gen Z and millennial consumers are the ones who are saying, “I’ve developed a new habit “and I wanna keep my new habit.” So we’re showing data here for the in home entertainment activity. So you can see that 24% of younger consumers actually say they’ve developed a new in home entertainment activity habits, and 22% of them want to actually make maintain this new level, so they don’t actually wanna go back to normal. And this is fascinating because as that group of consumers kind of rises up in terms of amount of spend and amount of the total economy, we right now have an opportunity to shape their habits, and actually create loyal, sticky customers who, you know, we’re training to do different things right now, ’cause they’re open to it.
If I take that and we look at the top 10 online categories, green dots are Gen Z and millennials we were just talking about. Blue dots are Gen X and baby boomers, and then all surveys response are the triangles here. In the first graph you can see the percent of all consumers who made online purchases during the outbreak in these different categories. On the right hand side it’s first time ever, so you can see, you know, not only are these people changing their habits, and their frequency, and buying in these categories, and the millennials may actually want to keep that new habit. A lot of them are first time buyers too, so there’s huge potential here in this particular, you know, portion of consumers, because they are actually taking out new habits that are gonna stick.
So if I sum it all up, we have two normals, right? We have the temporary normal which we’re all living in right now. Leisure, travel and out of home entertainment are basically done. We are wearing masks, and some of us are actually exercising a bit more. And if we think about those things, those are likely to revert more to the old normal. It will take more time than we expect, particularly for leisure travel and out of home entertainment, but you know, we’re gonna stop wearing masks, we’re gonna say this is a new workout regimen, but it’s gonna be just like any new year’s resolution. We’re gonna go back to normal on it.We now have two normals, right? We have the temporary normal which we're all living in right now. And we have the old normal that we'll one day revert to. Click To Tweet
Now the things that are gonna be part of the new normal, it’s gonna stick. Some of the things we’re doing less of, we’re probably gonna keep doing less of work travel is one, and I think this is gonna come from both employers and employees. We’re just gonna stop traveling. I used to spend 50 weeks about a year on the road, four days a week, I have not traveled in five months, and I can still do my job. I think a lot of different industries are starting to realize this, so it will be unlikely that we get to a totally normal level on work travel. Similar with eating at restaurants and shopping in stores, these could be potentially dampened if people you know, continue to think it’s a less safe alternative, or it’s just so much easier to buy things online.
That being said, you know, there is gonna be an opportunity actually grow over time, the overall demand here, we’re just gonna need to kind of change the offer. Some of the things we’re doing more of that, you know, will likely stick; washing hands, and cooking, these are good habits. Those are things that, you know, people probably gonna keep doing, working from home, probably not as much as we’re doing right now, but that’s gonna stick as well, and kind of all of the things that come along with that like having home office setups, having reliable internet, being on Zoom, all those types of things. And then there’s a whole host of things that were pre-crisis trends that actually have accelerated during this. And there’s an opportunity to capitalize on that growth. So online shopping, obviously, everything’s moving online, video chats, having virtual classes for fun, learning different things online, social media in general, delivery and takeout. Those are the types of things that, there’s actually a big opportunity ’cause we’ve seen the capacity for people to switch to these things, and we can capitalize it with kind of longer term to create the right solutions and the right offers for people.
Six takeaways for you all from tons and tons of numbers I wanna leave you with. One is it’s right to be thinking about, and planning for post crisis behaviors. It’s the right thing to do, but we do expect there to be a bigger lag, you know, to get to new normal than we expected. We’re gonna be in temporary normal likely longer than we want or expect. A lot of the changes, particularly the huge declines we’ve seen in certain categories are more likely to be temporary. Travel is gonna come back, it’s down 90%, it will be back, we want it to be back, it’s just might take longer.
Third, now more than ever watch web traffic as a leading indicator of change. It’s always been a great way to kind of anticipate shifts in consumer sentiment and consumer demand. But right now, as things move quickly keep doing and if you’re in an industry where that actually can help. We talked about this and for bit, but change is sticky with younger consumers, and they’re signaling that they’re making new habits now that they want to stick, so you have a chance right now to actually create loyalty with these fox as they’re kind of rising up in terms of socio-economic status. Pre-crisis growth in health and wellness, the aspirational things to eat healthier and be healthier. It was growing in pre-crisis, it accelerated in the crisis. There’s a huge opportunity here because people are just spending time with themselves, and you know, wanting to invest in themselves and their wellbeing.
And then lastly, if I were to sum up where the likely winners are gonna be kind of heading out of the crisis. Near around, you know, to the extent that you can enable working from home in the many different ways that you can do that to make it easier, to make it more convenient, to make the home setting work better for us. Distance learning of new skills, be it you know, cooking, I just invested in, you know, classes to try and make my sourdough bread suck a little bit less. A lot of people are, you know, learning a whole bunch of new things, user classes, all of that, so being able to teach people online it’s gonna be huge. Anything for social interaction, we’ve got, you know, grandparents learning how to use Zoom for the first time, that’s exciting.
So what else can we do to actually enable social interaction and keep you know, all of these new interactions that aren’t in person going. And then last mail delivery as more and more gets to kind of moving online as we you know, we’re buying everything online, you know, how can we actually enable that in a way that is scalable and makes sense. There’s gonna be some winners and some losers there. Thank you all for listening was a lot of data. This is my e-mail address, feel free to shoot me a note, if you have a specific question. I know there’s a whole bunch of folks from a lot of different industries. And I’m happy to kind of, you know, jump in where I can, ’cause this was a pretty high level overview kind of what BCG is seen over the course of the last 14 weeks.
Yeah, it’s really fantastic. Oh my God, the amount of information there is mind blowing. Oh, I’m just gonna turn off your screen share there, so we can appreciate each other and this new virtual world that we are living in. So again, thank you. One, we have a few cool questions come in. One that I’m really intrigued by is, if you have any insight on if people during this time have kind of become more trusting of tech, or if it’s all just been a function necessity, and you know, kind of disappear after that.
That’s an interesting one, and I don’t have a fact based or data informed answer.
Of course, there’s not a lot of data to that I don’t think. Right, it’s just based off of your insights, what’s your gut telling you?
Based on the insights people are being forced to do things that they probably should have been doing all, or that, you know, it requires breaking bad habits, and this has been a clean break. It’s kind of gone cold turkey for some people, so to the extent that we’ve all had to move to video conferencing and Slack and all of that, and nothing catastrophic has happened. I have to expect that that’s created a lot of trust and goodwill in tech in general.
Yeah, for sure, it is interesting. One thing that, and this is kind of a question for myself and I’ll get to a couple others, but you know, one thing I’ve noticed between just personal data myself and my friends is we’re all kind of saving a lot of money right now, ’cause I’m not going to restaurants, and you know, I’m not, you know, spending money on a glass of wine or something like that. Do you guys see there’s gonna be like this huge boom at some point when people’s kind of like they’re kind of accumulating all this wealth, and all of a sudden they’re gonna not know what to do with it.
Yeah, that’s an interesting one, because it requires peering into the crystal ball a little bit and saying, “Are we going to have a massive impact “on the economy or not?” If not, maybe this enables people to be first time home buyers. Maybe it means paying down a bunch of debt. There is a whole host of different ways people could actually, you know, change their spending habits and you know, their total, you know, kind of economic health with that. Whereas, if, you know, we have a second, third spike, if we go back into massive layoffs. If you know, there’s an extended recession then people are gonna need you know, all those extra savings to actually get us through all of this.
Yeah, and for sure. This one, I think it’s just kind of a recap here, someone was asking what were some of those key indicators you mentioned on how the markets doing, can you expand a little bit on that?
I mean, consumer sentiment is one thing, but we all know that we don’t always do what we say we’re gonna do. The best kind of indicator at least through this and historically when there have been big shifts is to just watch web traffic. Simple things like watch search traffic for particular words, look at web traffic for a group of site of websites that are in a particular industry, increases usually predict future activity. So that’s kind of been, the big kind of unlock for us as we watched, people said they were gonna buy more online, people started researching more online, and then you saw the money actually come.
Guys, it’s kinda like this staged out process makes sense. You know, like, it’s funny. There’s a question here from someone, and I’m assuming owns a website or a business in the home and garden niche and they’re kind of wondering what do you think the outlook is in that industry? I mean, I guess as people are staying home are they investing more and how beautiful their backyard is?
Yeah, so I’ve had a few in conversations with folks in the real estate industry, as well as I’ve had some DIY retailer clients in the past and talking to them, they’re seeing huge booms. People all of a sudden are realizing not only that they’re spending more time at home, but they may be spending more time at home more long term. And you know, they need to make it you know, a place that is more multifunctional than it used to be, needing to make sure that you actually create an office space, making a beautiful garden to walk around and wonder when you’re on the phone, those types of things. People are reinvesting a lot in their homes, both in the real estate itself as well as kind of look and feel of their homes, because all of a sudden we’re spending way more time than we used to in them.
Right, for sure, we only have a minute or two here last of. Thank you first before I before I kick you off the internet, but I thought this was a good question to end it with from Sanjeev and it’s a great one. He says, “If you were to enter one business space after viewing all this data, what would that be? we’ll pretend money is limitless and the world’s your oyster.
Money is limitless. I am buying a massive fleet of electric powered trucks and I’m just making deliveries.
I like it, you can be combining several industries. I’ll buy Tesla’s stock it’s been going through the roof. Amazing stuff. Well, thank you again, Victoria. I love seeing that much data. I’m gonna flip through your deck again myself just so I can take it all in, ’cause it’s so much. So thank you for being here, and I’ll say goodbye for now. I’m pretty excited
Thanks for having me.