COVID-19: How is the Retail Consumer Changing?

How is COVID-19 changing the retail consumer? Data-driven insights into consumer behavior Accenture COVID-19 Consumer Pulse Research—Wave 7 AUGUST 2020 OUTMANEUVERUNCERTAINTY NOW NEXT

New and everlasting consumer behavior The COVID-19 pandemic has fundamentally changed the world as we know it. People are living differently, buying differently and, in many ways, thinking differently. Long-term trends have been accelerated. Changes anticipated over the next few years have occurred in the space of mere weeks. The impact is profound. Retailers are reshaping their businesses in real-time, to permanent effect. Our new Accenture COVID-19 Consumer Pulse Research, which we have been conducting every two weeks since March 2020, indicates that habits formed now will endure beyond this crisis, permanently changing what we value, how and where we shop, and how we live and work. Even as this crisis continues to evolve, by exploring the changes that are happening now, we can consider what retail businesses should do today to outmaneuveruncertainty, and emerge stronger to be ready for what’s next. 2

Consumers have changed how they live, work and shop and these changes are here to stay With consumers’ lives upended by the crisis, there have been substantial and lasting changes in the way people live, work and shop. As retail and leisure facilities reopen, our research explores how consumers are individually reshaping their lives for this new reality. Concerns for both health and finance continue to influence consumers’ attitudes and behaviors. In the last three months, personal health has remained the top priority for consumers, while fear over financial security has risen. Even as restrictions lift, retail footfall remains below pre-pandemic levels, and consumer confidence in visiting public places remains low, although there are hopeful signs. Despite the huge challenges that many businesses have faced, consumers have high expectations for medium and large businesses to act responsibly, addressing major issues such as sustainability. 3

Financial security is now a prime concern for half of all consumers, but health is still the top priority Evolving consumer needs Proportion of consumers that rank need in their top 3 priorities 50% th th Current priorities, 19 -25 March nd th Current priorities, 2 -8 June of consumers now nd th Next 3-6 months, as of 2 -8 June rank financial -8% -13% security in their top 78% 77% 81% three priorities—a 72% 74% 70% +36% rise of 36%. -30% 45% 50% 39% 37% 28% 27% Personal health Health of friends Food & medicines Financial security and family security th th nd th Source: Accenture COVID-19 Consumer Pulse Research, conducted 19 -25 March, 2 -8 June. Source: Accenture COVID-19 Consumer Pulse Research, conducted 19th-25th March, 2nd-8th June. 4

Consumer confidence remains low, but is expected to increase slightly in the near term Level of comfort around going to public places in the near future* Next 2 months Next 6 months E +24% L B 43% 42% A 35% 37% 36% T 32% 30% 34% 32% 31% OR 25% 24% 26% 28% 26% 25% F 20% 16% 20% 18% 22% OM 16% C % Bar or Club Sporting Public Café or Coffee shop Shopping Doctor’s Non- Friend or Grocer or AVERAGE event or transport Restaurant center surgery essentials relative’s pharmacy concert retailer house E BL A T 22% R 26% O 30% 28% F 35% 33% 36% 35% M 38% 37% 38% 38% O 46% 45% 43% 45% NC 55% 55% 55% 50% U 61% 60% % th th th nd Source: Accenture COVID-19 Consumer Pulse Research, conducted 20 -25 May, 16 -22 June. *Provided that they were open and it was allowed. 5

Retail footfall remains below January levels across most markets, despite lifting restrictions Percentage change in visits and length of stay vs. January Grocery & Pharmacy Non-Essential Retail & Recreation 8.0 10.0 12.0 3.0 2.0 1.0 0.0 3.0 1.0 1.0 Average -1.0 -1.0 -3.0 -4.0 -4 -9.0 -8.0 -5.0 -5.0 -10.0 -12.0 -11.0 -13.0 -12.0 -13.0 -18.0 -16.0 -18.0 -17.0 -19.0 -24 -26.0 -22.0 -36.0 -38.0 -40.0 -41.0 -50.0 -57.0 l -62.0 a n y y a a a E a a i e i i i z l an al al nd en e ce SA SA UK di a i t a ad UA K ssi r Spa I l ed man or an nes U u In Br Ch Jap st er w r K r o R u z S e h Can F t A i G nd w out I S S 28 36 61 39 39 46 50 57 65 66 68 69 69 70 73 75 77 77 78 LOW RESTRICTION STRINGENCY INDEX HIGH Source: Google LLC "Google COVID-19 Community Mobility Reports". https://www.google.com/covid19/mobility/ Accessed: 26/06/20. Non-essential retail and recreation includes places like restaurants, cafes, shopping centers, rd th theme parks, museums, libraries, and movie theaters. The baseline is the median value, for the corresponding day of the week, during the 5-week period Jan 3 –Feb 6 , 2020. The Government Response Stringency Index is a composite measure based on nine response indicators including retail / workplace closures, travel bans, and restrictions on movement rescaled to a value from 0 to 100 (100 = strictest response). Hale, Thomas, Sam Webster, Anna th Petherick, Toby Phillips, and Beatriz Kira (2020). Oxford COVID-19 Government Response Tracker, BlavatnikSchool of Government. Data use policy: Creative Commons Attribution CC BY standard. Restriction as of 16 June 6

Consumers have high expectations for businesses to act responsibly Expectations for businesses % agree or significantly agree 67% Companies will use their government funding to first 68% benefit their employees and society of consumers agree or Companies will strengthen their business processes and 67% significantly agree that— operations to be able to respond better to future crises Companies will ‘build back better’ by investing in Companies will ‘build back better’ by investing 67% longer-term, sustainable in longer-term, sustainable and fair solutions and fair solutions. Coronavirus has strengthened the need for greater business 66% involvement in improving social and environmental outcomes Companies will work together to solve bigger challenges 65% (e.g. food availability, distribution and waste) Companies will create better products and services that 64% have a positive impact on society and our planet nd th Source: Accenture COVID-19 Consumer Pulse Research, conducted 2 -8 June. Source: Accenture COVID-19 Consumer Pulse Research, nd th conducted 2 -8 June. 7

But not all businesses are considered equal Big Business Local Treasures Consumers have high expectations of medium to In comparison, consumers define their ‘local’ large businesses, looking to them to solve many businesses—small, independent stores in their of the world’s major issues. It’s an imperative for immediate neighborhood—as much-loved places consumers that these businesses care for their that they fear won’t survive. They’re making efforts employees and customers—and they will judge to support these retailers and their staff, ordering them if they don’t. takeout and shopping there when they can. Profit—Accountability—Responsibility Community—Neighborhood—People Companies shouldn’t try to make money out of this My wife and I have been ordering from local “ “ pandemic… it’s a difficult time and companies need to restaurants about two or three times a week. step forward and help, not increase their prices It’s a way to support them, and to help them or fire people. They need to increase transparency. keep their heads above water. Male, 32-39, China Male, 56-69, US th th Source: Accenture COVID-19 Qualitative Consumer Research, conducted by Happen 26 –27 May. 8

Consumers continue to adapt Implications for retailers  Focus on initiatives that will have the biggest impact on consumer confidence, as both employees and consumers need to see the changes being made to keep them safe. These could include protective face coverings, reformatting store layouts for social distancing, disinfecting during store hours, limiting the number of shoppers in the store, and temperature screening.  Ensure a safe return to work for employees in the corporate office by acknowledging that working practices will be different and some roles may continue from home. Provide a safe environment and allow employees to work remotely, as this will be appreciated by employees and also consumers who may be aware of retailers’ practices, given today’s transparent world.  Train store associates to handle today’s new customers, who will have varying degrees of anxiety and comfort going out in public. Keep everyone safe by ensuring employees are aware of new protocols and trained on how to best approach customers and de-escalate any form of rising tension.  Leverage data to continue monitoring relevant factors at the local level, such as the spread of the virus and consumer confidence. Ensure both the store and regional teams are fully informed and have plans to modify operations. 9

For work, rest and play—homeis where the heart is Consumers are still choosing to stay at home. Despite lockdowns easing, restrictions lifting, and many consumer businesses reopening, the home continues to be the hub of all activities. Socializing at home (or someone else’s home) is still the preferred option, while connecting virtually with friends remains a high priority across all age groups. The initial rise in home cooking and baking, as well as home improvement and DIY activities, which was evident in our earlier research, are remaining popular pastimes for consumers. And the once mandatory working from home has been embraced by many and continues to be popular despite many offices reopening. 10

Socializing at home is preferred in the next 6 months Preferred locations for socialization Top places consumers anticipate doing most of their socializing in the next 6 months 36% Top 1 In my home (or another’s home) 73% Top 3 We learn to have fun with “ Connecting virtually with friends 33% simple things like spending 59% time together at home talking Parks or other open spaces 9% about things in life. After the 54% outbreak I believe that we will At work 7% enjoy more time together in 30% open environments like In coffee shops 6% squares and parks instead 28% of being in malls. In restaurants 4% Male, 25-31, Brazil 28% Indoor recreational facilities 2% (e.g. gyms) 15% In bars or clubs 2% 13% th nd Source: Accenture COVID-19 Consumer Pulse Research, conducted 16 -22 June.*Provided that they were open and it was allowed. Source: Accenture COVID-19 Consumer Pulse Research, th nd conducted 16 -22 June 11

Preference for socializing virtually persists across age groups Virtual socialization in the near future by age % who ranked connecting virtually as a preferred location (ranked top 1 or top 3) to socialize in the next 6 months Top 1 I will video chat with family Top 3 “ and friends. I am not doing 67% face to face for a while. 60% 57% 55% Female, 70+, US 52% 43% 36% 30% 25% 24% Consumers Consumers Consumers Consumers Consumers aged 18-24 aged 25-39 aged 40-55 aged 56-69 aged 70+ th nd Source: Accenture COVID-19 Consumer Pulse Research, conducted 16 -22 June. Source: Accenture COVID-19 Consumer Pulse Research, th nd conducted 16 -22 June 12

New hobbies from home continue as markets stabilize Increase in hashtags for hobbies from home % increase in social media hashtags since January (stabilizing markets) Home Cooking and Baking 4x One thing I've come up with 3x “ that is fun is baking. I think I 2x will continue with [it] in the 1 0.7x future because it is one of my passions that I have just Jan Feb March April May come up with. +65% Male, 18-24, Sweden DIY, Home Décor and Gardening +32% +17% Arts & Crafts +19% 11 +8 +11% Jan Feb March April May Source: Accenture social listening analysis Jan-May 2020. Source: Accenture COVID-19 Consumer Pulse Research, th nd Stabilizing markets included: Canada, Australia, France, Germany, Italy, Japan, Spain, South Korea, Switzerland, UAE conducted 16 -22 June 13

Working from home continues to be popular Change in work-from-home frequency from pre-to post-outbreak Life at home has become more Less “ 14% fulfilling since I have been working from home. I spend more time with my family. Female, 32-39, UK Same 53% 50% of people who never More worked from home 36% previously now plan to work from home more often in the future. nd th Source: Accenture COVID-19 Consumer Pulse Research, conducted 2 -8 June, N = 3,826 respondents working from home. Source: Accenture COVID-19 Consumer Pulse Research, th th conducted 5 -11 May. 14

Home is where the heart is Implications for retailers  Plan and prepare for a shift to at-home and virtual for the medium term, as this is the new reality.  Consider how to serve new social and creative occasions in the home that can be formalised and commercialised through new business models or services.  Collaborate across industries to bring together products, content, engagement and digital technology to enhance ‘edutainment’ and digital paths to purchase.  Retain new consumers and sustain new channels or increased levels of usage, by exploring key purchase motivators such as price, payment models, support and experience.  Review the locations and formats of your stores, given the continued focus on the home for living and working, and on local and neighborhoodshopping. 15

Shoppingremains local, mindful— and digital What consumers are buying and how they are shopping has changed dramatically as a result of the pandemic, and these new habits are continuing to play out, long after the easing of lockdowns. In many cases, consumers have used this life pause to reflect on their own consumption. They are striving to shop locally (whether that is to support neighborhood stores, national products, or as a quest for authentic and artisan products), limit food waste, shop more sustainably, and consider costs. The dramatic rise in the adoption of ecommerce and omnichannel services, which has been evident since the start of our research in March, sees no sign of abating. Consumers are enjoying the safety and convenience of these services and are continuing with them, despite stores reopening across all sectors. 16

Demand for local goods—and local brands—is growing Proportion of consumers who are Purchasing changes changing their shopping habits during the pandemic 56% 56% Net* The smaller shops in the nt “ 5% 30% 25% area that were selling rre fruit and vegetables— u Local Brands we wanted to support C them so their businesses Shopping in closer Buying more locally 6% 26% 20% wouldn’t go to the wall. neighborhood stores sourced products Male, 40-55, Germany r National Brands te f 23% 15% -8% A Global Brands 79% Decreasing purchases 84% Same as before Increasing purchases nd th th nd Source: Accenture COVID-19 Consumer Pulse Research, conducted 2 -8 June, 16 -22 June. Source: Accenture COVID-19 Consumer Pulse Research, conducted 16th-22nd June 17 *Net purchases measured as the % of consumers increasing purchasing, less the % of consumers decreasing purchasing of these brand types, vs. their purchasing habits in the prior two weeks.

Sustainability trends are accelerating in some categories Search volume for sustainable and ethical clothing “sustainable clothing” e m u ol V ch r a e “ethical clothing” S e l Goog “Reformation clothing”* 1-Jul-19 20-Oct-20 9-Feb-20 15-Mar-20 19-Apr-20 21-Jun-20 Source: Google Search Data, June 30, 2019 – June 21, 2020, United States. *Sustainable clothing brand in US 18

Consumers are forced to face their own consumption causing many to reconsider their purchases accordingly s Face-to-face with waste Re-evaluating needs it 72% ed b g a 61% n h a g h in e cp o’vop h h w s eir % h t Now you’re at home all day, It’s been a moment to Limiting Making more “ “ food waste environmentally you see how much you’re pause and re-evaluate friendly, sustainable or ethical purchases using and the garbage what’s important. I’m e u k you’re producing. You start realising that I need a lot, in t ea on r to rethink what you need. lot less than I thought. b o ct t ou Female, 40-55, US Female, 56-69, US - y t el s ik o l p % 90% 89% th th th nd Source: Accenture COVID-19 Qualitative Consumer Research, conducted by Happen 26 –27 May, Accenture COVID-19 Food Study, Accenture COVID-19 Consumer Research, 16 -22 June. 19

Consumers are cost conscious, increasing purchases of mid-range and budget brands Purchasing changes during the pandemic 35% Net* of consumers say their Budget Brands 11% 29% 18% income has declined due to the outbreak. Mid-Range Brands 10% 19% 9% 54% of consumers are Premium Brands 42% 12% -29% shopping more cost consciously and likely to continue doing so. Decreasing purchases Same as before Increasing purchases th nd Source: Accenture COVID-19 Consumer Pulse Research, conducted 16 -22 June. Source: Accenture COVID-19 Consumer Pulse Research, th nd conducted 16 -22 June. 20 *Net purchases measured as the % of consumers increasing purchasing, less the % of consumers decreasing purchasing of these brand types, vs. their purchasing habits in the prior two weeks.

eCommerce has seen 10 years of growth in a matter of months eCommerce acceleration US eCommerce penetration as % of retail sales 30% 27% 25% 20% +11% 14% 16% 15% 13% 11% 12% 10% +10% 9% 10% 7% 8% 6% 5% 5% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 April 2020 Source: Bank of America, US Department of Commerce, ShawSpringResearch via L’Orealpresentation at Deutsche Bank Access Global Consumer Conference, 9 June 2020. 21

The shift to ecommerce will remain once the outbreak subsides Proportion of purchases made online by infrequent ecommerce users The huge shift to Frequency of online purchases for consumers who used online channels for less than 25% of purchases prior to the outbreak ecommerce is likely Prior Current Future to continue. 19% 18% +169% 17% 17%17% 16% 16% 16% 16% 15% 15% 15% 15% 15% 15% 15% 15% 15% 13% 12% 13% 13% 169% is the expected future 8% increase in ecommerce 7% 6% purchases from new or 6% 6% 6% 6% 5% 5% low frequency users. 4% 4% Food (for Take-away Alcoholic Prescriptions Personal Home décor DIY tools and Apparel, Luxury goods Consumer Average cooking or delivery beverages care items materials footwear and electronics at home) accessories th nd Source: Accenture COVID-19 Consumer Pulse Research, conducted 16 -22 June. Source: Accenture COVID-19 Consumer Pulse Research, th nd conducted 16 -22 June. 22

Consumers continue to shop online even where retail has reopened in stabilizing markets Increase in online shopping hashtags % change in social media hashtags for online shopping since January (stabilizing markets) I have shopped and “ 1.5 +45% purchased more products online than before the 1.4 coronavirus and I will +30% continue this practice even 1.3 when the restrictions and 1.2 17% outbreak subsides. I have found the online experience 1.1 very interesting and 1 pleasant and the delivery 1.0 service to my residence -10% very prompt and courteous. 0.9 Female,56-69, Australia Jan Feb March April May Source: Accenture social listening analysis Jan-May 2020 Source: Accenture COVID-19 Consumer Pulse Research, th nd Stabilizing markets included: Canada, Australia, France, Germany, Italy, Japan, Spain, South Korea, Switzerland, UAE conducted 16 -22 June. 23

Consumers using omnichannel services are likely to continue doing so Proportion of consumers who have increased usage of digitally-enabled services during the COVID-19 outbreak Consumers who have increased or significantly increased usage 54% 54% 47% 44% 44% 43% 42% 40% 37% 36% 36% 35% nt rre u C Contactless In-app Home Curb-side Shopping via Live chat/ Virtual Virtual Phone call Company’s Store locker Virtual payment ordering delivery pickup/Click social media chatbot/ Consultation: Consultation: to company website pick up Consultation: and Collect platforms voice Consumer Personal Personal assistant Electronics Health Styling r te f A 87% 84% 82% 78% 80% 77% 78% 78% 76% 77% 78% 76% Proportion of consumers who expect to sustain increased level of usage nd th Source: Accenture COVID-19 Consumer Pulse Research, conducted 2 -8 June. Excludes those who do not use services. 24

Shopping is local, mindful and digital Implications for retailers  Create closer partnerships with local businesses to meet the demand for local, trusted and authentic products and shopping experiences, and help these entities survive the current turmoil.  Consider introducing or increasing value and mid-range brands within the assortment, to meet the demand from cost-conscious consumers.  Continue to focus on broader and holistic health and wellness offerings—strategies that include changes in assortment, driving education and awareness, and developing incentives can go along way to help consumers to make healthier choices.  Focus on incentivizing conscious consumption by driving public- private action and consumer education.  Provide options for shopping digitally—offering consumers different ways to shop will help to generate loyalty. 25

Retailers to rebuild with responsibility and resilience The retail industry has suffered challenges in its past, but none like the current pandemic. Long term trends have accelerated, and retail consumers have permanently changed what they buy and how they shop. Retailers have responded in record time with new products and services, new ways of working, and some impressive displays of innovation. Responsibility to employees and consumers has taken on a new significance. To understand and build relationships with their new consumers, retailers need to leverage data-driven insights to inform future decision making. Home will be the new battleground. With life, work and shopping continuing to focus around the home, retailers need to develop products and services to meet new consumer needs, increase investments in digital, and maximise the potential of their stores by reconsidering formats and locations. Retailers have an opportunity to reset and rebuild their businesses. How they help consumers navigate the pandemic will influence future success. 26

Contacts This is a sample of the Accenture Consumer Pulse Research 2020. To access the full report and discuss its potential implications for your retail business, please contact: Jill Standish Maureen Bossi [email protected] Retail Global Lead Consumer Research Lead [email protected] [email protected] 27

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Methodology 30 Copyright © 2020 Accenture. All rights reserved.

The COVID-19 Consumer Pulse Research Accenture’s COVID-19 Consumer Pulse Research is monitoring the changing attitudes, behaviorsand habits of consumers worldwide as they adapt to a new reality during the COVID-19 outbreak, and which of these changes are likely to have a lasting impact once the crisis is over. th nd The seventh wave of this survey was conducted from June 16 -22 and includes 8,852 consumers in 20 markets around the globe. This has been complemented by a number of digital ethnographic studies: rd th • Accenture COVID-19 Food Study: 30 consumers in the US completed April 3 –8 th th • Accenture Research COVID-19 CG&S Human Perspectives: 15 consumers in China, Mexico, Spain, and the US conducted 27 April – 8 May, • Accenture COVID-19 Qualitative Consumer Research, conducted by Happen: 60 consumers across China, Brazil, USA, Germany and Italy, 26-29th May Australia Austria Brazil Canada Chile China France Germany India Indonesia Italy Japan Mexico Russia KSA Singapore S. Korea Spain Sweden Switzerland UAE UK US N = 405 ** 413 406 412 616 415 409 405 411 620 409 ** 415 406 ** 425 409 422 406 412 420 616 Wave Seven Continuing 70+ Lockdown normal 18–24 4% routines 9% 15% Continuing 56–69 normal 14% 31% routines Social Working from home Work Age 19% 25–31 situation 51% situation* 49% 40–55 23% Social 57% 9% distancing Self-isolating 21% 32–39 th nd * Of those employed Source: Accenture COVID-19 Consumer Pulse Research, conducted 16 –22 June. **Excluded in Wave 7. 31

The 20 markets were split into two types based on the stage of outbreak at time of fielding Markets were grouped into two stages of the COVID-19 outbreak. The classification took into account the time since first 100 cases were diagnosed in each country, the weekly increase of new cases and the lifting of government restrictions. Advancing Stabilizing • Brazil • Australia • Chile • Canada • India • China • Indonesia • France • Russia • Germany • Saudi • Italy Arabia • Japan • Sweden • South Korea • UK • Spain • US • Switzerland • UAE Source: Accenture Research analysis of data from Johns Hopkins University, Centerfor Systems Science and Engineering Coronavirus Resource Center. 32