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Nielsen: cash-constrained consumers driving online CPG sales

The rate of consumers making purchases online has exploded. This is creating tough decision for brands as they decide where to put their energy and their dollars. Here’s what you need to know about today’s omni-channel consumer.

Covid-19 has created a sea change in how, when, why and where consumers buy the products they need. However, not all consumers are making purchases online in equal parts. In fact, those who are financially constrained are often actually leading the charge.

For a little perspective, it’s important to know that the first half of 2020 was witness to dollar growth of 65% in online US sales of consumer-packaged goods (CPG). In terms of CPG channel share, online now stands at 11%. Based on even the most optimistic forecasts, that number would normally have taken years to arrive.

But this new growth in online CPG sales comes with new complications and questions in the recessionary landscape confronting us. Brands and retailers are asking questions around whether we have reached a true tipping point for ongoing growth in online sales, or whether some cohorts slip back into offline-only shopping habits. Others wonder how consumers will research prices as confidence levels around the economy inevitably slide. And what platform will be best able to help shoppers make smart decisions around product choices yet reconcile fears around ongoing economic instability?

Nielsen cast its net across the world and came up with some answers that point to a clearly changing dynamic. Our Global New Shopper Normal Study found that only about 9% of consumers globally said they were shopping online before the pandemic. But as lockdowns kicked in, online adoption skyrocketed, with 27% of global consumers telling us they pivoted to shop online for the first time.

Even as lockdowns began to ease, we saw early signs of the stickiness to the online channel taking hold. In May 2020, 44% of global consumers said they were shopping online each week, with 23% reporting shopping online multiple times each week. As the year played out, we saw people still going to stores, but less often. Online had become more entrenched in their lives.

Financially constrained consumers are buying more(!) online than before.

One would think that constrained consumers, those feeling financial pressure, would be behaving differently. Well they are, but not in a way you would expect. Thirty one percent of those constrained global consumers told us they were new to online shopping in CPG and a whopping third of them were shopping multiple times a week. This was in stark contrast to more insulated consumers (those who said they had not been impacted financially yet)—of whom only 18% were shopping online multiple times each week.

Now, this might, in part, be explained by cash flow challenges of the constrained versus the insulated, but this meaningful shift to online by constrained spenders is a surprise, nevertheless. Savvy retailers spotted this early on and moved to remove as many barriers as possible to online shopping. Delivery charges, preferred pricing, promotions on essentials and the like were all tactics to cast the net beyond the well-heeled or more economically confident shopper cohorts.

As a consequence, constrained consumers are showing themselves to be very quick in developing omnichannel habits. Compared to insulated consumers, they search more online, browse more frequently, pay closer attention to pricing, and they commonly have more time to do so. And smart retailers that see this activity, will respond by removing or mitigating further adoption hurdles to ensure all consumers stay online and make a purchase once they find it, even if the transaction shifts back to a brick and mortar environment.

As it has been in other sectors, such as clothing, the online channel in CPG has become a key resource for managing spending, researching value propositions and ultimately buying. The consumer, particularly those facing constraint in spending power, will look to the channel to work even harder for them.

Scott McKenzie is the global head of the Nielsen Intelligence Unit


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Laya

Helping creatives to turn offline experiences into online income At the age of 18, I decided to leave my home and move to Italy. With no plan, no income, no idea what I'm up to. I just wanted to take the leap! Long story short, I ended up getting into a freelance design which later brought me to website design & online courses. Now, proud to be location independent digital nomad, I help creatives to turn their offline experiences into online income!

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