How Consumers Forced Big Merchants To Up Their Digital-First Game
Human beings are creatures of habit.
Take popcorn and going to the movies.
Americans consume roughly 13 billion quarts of popcorn every year, roughly 30 percent of that at the movies. Well, that was back when theatres were open, before COVID, and going to the movies was a regular part of a consumer’s routine.
But in those good old days of 10 months ago, digging into a tub of popcorn while watching a movie on the big screen seemed an inextricable part of the movie-going ritual — and theater owners kept that popular snack at the ready.
And for good reason. Margins on concessions sales, including popcorn, are as high as 85 percent, and can account for as much as 46 percent of theater owners’ profits.
In 2014, scientists wanted to determine how much of a ritual eating popcorn at the movies is for the American consumer. They did a study in which they gave consumers two different buckets of popcorn to taste — one stale and one fresh. Consumers, naturally, preferred fresh to stale, until they were randomly given buckets of fresh and stale popcorn at the movie theater. There, researchers found that of the consumers who typically ate popcorn at the movies, just as much of the stale popcorn was eaten as fresh.
Old habits are hard to break — even, apparently, when it comes to eating lousy-tasting popcorn.
This finding, though, is just another data point in the growing body of evidence to prove how habits and context shape the ritual of a person’s regular routine. Habits deliver certainty — and the more routine the activity, the more incentive people have to shortcut the process of deciding what to do every time they do it. Scientists say that 40 percent of the 12 primary activities that account for the typical person’s day-to-day norm are largely done on autopilot, the repetition of tried-and-true behaviors that deliver a predictable and satisfactory outcome.
Since the early part of the year — the middle of March, for those living in the U.S. — people all around the world broke with the habits and rituals that once defined their daily routines across all 12 of those activities. First, it was partly out of necessity, as governments locked down the physical economy — but now, it’s increasingly out of choice, as the duration of the pandemic continues and consumers’ concerns over their personal health and safety remain high.
These digital-first consumers, this new digital advance guard, define certainty and predictability in new ways. The once tried-and-true habits introduced frictions, and no longer provided the satisfactory outcome they once did.
New PYMNTS research suggests that this shift to digital now foreshadows a more permanent change in how consumers shop and even order and eat food at restaurants. These are the results of the thirteenth study PYMNTS has conducted since March 6. Each study examines consumer behavior about the shopping and dining behaviors of a national sample of now roughly 30,000 U.S. consumers, as well as the behavior of a sample of Main Street business owners.
What we have learned is that health-first has accelerated the consumer’s shift to digital-first, and continues to influence to whom the consumer turns to build those new habits.
That has forced merchants to break their own habits, and to meet consumers where and how they want to shop, pay, order and eat their food.
On their very digital-first, touchless turf.
Consumers are also quite willing to put their money where their mouth is.
A third of consumers, some 70 million Americans, now report that they are very or extremely likely to select a merchant based on the availability of suitable digital, touchless offerings — a number that swells to more than two-thirds (69 percent) when adding those who said they were also somewhat likely to do so.
Follow The Consumer
Merchants have gotten and read that memo.
The national study PYMNTS fielded to 2,157 adult consumers between Sept. 10 and Sept. 15, then some 181 days into the pandemic, found a consumer whose digital-first experiences with merchants have gotten better.
In fact, on average, consumers report that their experiences are a lot better.
Using digital-first channels to shop for retail products and order food from restaurants using aggregators is two to two-and-a-half times better than consumers reported just three months earlier, at the end of May. For grocery, consumers report that their digital-first and touchless experiences are now nearly two times better for that same time period.
Delivery (66 percent), curbside pickup (58 percent) and inventory availability (55 percent) top the list of the experiences that consumers say they value the most. Interestingly, when asked to rank in order the capabilities of greatest importance, inventory availability tops the list. Part of reducing shopping friction is knowing whether items are available when consumers want to buy them. Lower on the list is the acceptance of digital wallets, even though consumers report more merchants adding that capability.
And they have definitely added capabilities.
Seventy-nine (79) percent of consumers report that the merchants they shop with have added or improved their digital-first and touchless experiences over the course of the pandemic, with curbside pickup (55 percent) and contactless payments (51 percent) as the two features that consumers say more merchants have added as shopping and payments options.
Naturally, the more digital-first and touchless capabilities merchants offer, the more likely consumers will make those capabilities — and those merchants — part of their new digital-first routines.
The number of consumers who report missing the physical store shopping experience have dropped by 20 percent since April. And as fond as consumers are of the restaurant experience, 10 percent fewer now say they miss eating at one.
What seems increasingly, perhaps even overwhelmingly, clear is that as merchants continue to add new experiences and align them to what consumers want, those consumers will have little reason to “go back.”
The same goes for retailers.
In this latest study, PYMNTS finds that 85 percent, 84 percent and 80 percent of consumers who have shifted to digital for shopping for groceries, shopping for retail products and ordering food from restaurant aggregators, respectively, say they will stick with all or most of those habits moving forward, where “shifted digital” means a consumer is doing less in a physical channel and more in a digital channel for the same activity.
This is a finding that has been largely consistent over the course of PYMNTS’ 13 studies — even as retail shops have reopened and people have returned to shop in them, as restaurants have reopened and people have resumed dining in them, and as grocery stores (which remained open throughout) have become less friction-filled to shop in.
Digital-first will be how consumers engage, and how merchants reinvent themselves and their models — if they want those consumers’ business.
Based on the results of this latest study, PYMNTS estimates that now, some 84 million U.S. consumers representing some $1,025 billion of sales volume will shift some or all of their retail shopping, some 40 million U.S. consumers representing some $112.5 billion of sales volume will shift some or all of their food ordering and some 35 million U.S. consumers representing some $144 billion of sales volume will shift some or all of their grocery shopping to digital-first channels.
Those numbers will no doubt grow larger as the experiences offered by merchants get better and better.
Health-First Shopping Habits
What also remains remarkably consistent is the influence of health and safety on consumer decisions about where and how they shop, and order and eat their food.
With perhaps even more conviction than at any time we have observed since the pandemic began.
The latest PYMNTS study, conducted 181 days into the pandemic, finds a consumer who is slightly more afraid of dying from COVID as she was in April, at the height of it.
For many consumers, death from COVID has become more than a statistic reported by Johns Hopkins University, touching someone they knew firsthand or secondhand: the aunt of a co-worker, the brother of a neighbor, a longtime family friend. Even more people now know someone close to them whose family member had become extremely ill or had a terrifyingly close call.
In this study, we also observe a consumer who is now increasingly concerned about getting sick and missing an extended period of time from work.
As more is known about the long-term and lingering effects of the virus for those who survive it, consumers worry about their ability to perform their jobs, even if they get sick and recover. Those concerns are most acute for lower-income workers who lack both a personal savings safety net and options for employment should they be unable to fulfill the duties of a job they once had.
All of this contributes to a consumer whose timeline for feeling comfortable reengaging in the physical world continues to grow longer.
In September, most consumers said it would be 374 more days — until October 2021 — before they would be comfortable reengaging in the routines that defined their day-to-day activities: getting on an airplane to take a trip, going to movies and concerts, or engaging in any activity where lots of people are jammed into a single space.
That has increased 104 days since May.
In fact, the fear of crowds is the primary reason why the majority of consumers say they continue to prefer a digital-first experience for shopping for groceries (57 percent), retail products (52 percent) and even ordering food from restaurants (45 percent). That’s up across the board for every one of those experiences since May as well.
Digital-First, The Italian Way
Scientists say it can take anywhere from 15 to 254 days to form a new habit. For Italian consumers, it took about 150.
Italians are a physical-first shopping culture. Lack of broadband, an older population demographic, bad roads and a corresponding reluctance to put payments credentials online meant that at the end of last year, fewer than 40 percent of Italians had ever shopped online.
Between January and May, more than two million Italians got online for the first time, and 75 percent of Italians now shop online regularly. Experts project that online sales will reach 26 percent of all retail sales in 2020, up from 8 percent a year ago.
From all accounts, these digital habits are likely to stick as merchants and consumers see the speed, convenience and security that a digital-first experience can offer.
The Digital Shift
It’s easy to lose sight of the fact that, here in the U.S., the consumer has been dropping her digital-first breadcrumbs well before the pandemic raged. Between 2017 and 2019, analysts reported that roughly 23,144 physical stores had closed. Just last weekend, the popular fast-fashion chain H&M said it will close 250 stores in the U.S. due to a decline in foot traffic caused by the pandemic. UBS reports that 100,000 more stores could close by 2025. Analysts report that as many as 25 percent of the 1,100 malls still left standing will close by then, too.
Inertia is the irresistible force that meets the immovable object of the habits that guide 40 percent of a consumer’s daily activities, which took those consumers a long time to create. Disruption of that routine causes the sowing of the seeds of change. Suddenly, the actions that once defined those habits and created that good outcome are out of sync, or no longer work, or create friction.
But that alone isn’t enough to produce and sustain new habits.
People also crave certainty, and need to feel confident that the disruption isn’t just a temporary blip or a small break in the action that will soon right itself, but a disruption that portends the potential for a more permanent change. People still must be convinced that changing their behavior — from what they used to do to something different — will produce a better outcome, and is worth investing the time and effort to make it their new routine.
The pandemic has forced consumers to make that shift, even in places where digital isn’t a well-developed skill. But today, unlike the ritual of movie theaters and stale popcorn, consumers don’t have to accept what merchants are serving if it doesn’t fit with their newly formed shopping and dining preferences.
Some merchants are doing better than others — the enterprise merchants, in particular, are capturing more of the consumer’s attention and spend. Part of that is because they have the resources to make a quicker pivot, or maybe they think they stand to lose more if they don’t. In some cases, like retail and restaurants, it’s because they are open for business. Many of the Main Street businesses, which were once options for consumers, have closed or operate with limited hours and inventory.
As we have also seen, a lot can happen in a few weeks, or even a few days. In the U.S. and many other parts of the world, the virus is reemerging and positivity rates are climbing. In just the last few days, the president of the United States and many of his inner circle and senators have tested positive. So have NFL players and coaches. Colder weather will force more people indoors, which, combined with the onset of flu season, could increase the risk of contagion.
One thing we’ve seen consistently over the last six months is that every time we do a survey, people — in processing all of the information associated with what’s going on — predict that it will take longer than the last time we asked for things to get back to normal. Given what’s happening in the U.S., and given the resurgence of the pandemic in places around the world that seemed to have gotten it under control, it is possible that the old normal will never return, and that a new, digital-first normal will become entrenched.