Consumer Sentiment Survey - April 2020

Consumer sentiment already showing signs of improvement as confidence grows

An upturn in consumer confidence that hints at a steady recovery?

There are few industries more resilient than retail and leisure. And once again, while the COVID-19 has brought substantial difficulties and trauma, we’re seeing signs of cautious optimism for the sector.

Our April 2020 Consumer Sentiment Survey has shown an improvement in UK consumer sentiment since our March survey (-26 to -14). Though overall sentiment in 2020 has been lower than any point since 2013, it is still higher than during the recession (2008-09) and the following austerity period (2011-13).

The March survey results likely showed the impact of the restaurant and pub closures, as well as the uncertainty around the newly announced furlough scheme. Since then, we’ve seen a full lockdown and closure of all but essential retail outlets, but also the announcement and clarification of other government relief schemes, which has given more certainty and security to consumers. This has been reflected in consumer confidence levels. 

Our consumer sentiment indicator has traditionally proven to be a good predictor of future consumer spending patterns, and these most recent results certainly hint at the possibility that once the lockdown is lifted we’ll see the sector recover at a quicker pace than originally predicted.

consumer sentiment 2020 tracker

Increase in sentiment driven by the younger generation

Since our last survey in March, we’ve seen consumer sentiment improve across every age group. But it’s among the younger generations where we’ve seen the biggest upturn, with the under 25 group showing the largest improvement in confidence (+38). With this group being the most likely to work in lower-paid, less secure roles, they have likely benefited the most from the confirmation (and security) of furlough schemes.

This has seen the age distribution of sentiment return to what we usually see, with the under 25s the most positive (in fact, a net number (+15) think they will be better off next year) and 55-64 year olds the most negative (-35).

Once again we’ve seen the over 65s (-16) showing more positivity than 45-64 year olds. The reason is unclear, but one possibility is that those approaching retirement age could be concerned about their pension funds in this environment. Would we see sentiment amongst retirees change again if the triple lock needs to be loosened in order to help pay for the government’s relief measures?

consumer sentiment by age 2020

Consumer trends in this month's survey

Regions show a variation in sentiment

Since March, we’ve seen consumer sentiment improve across every region, but by varying degrees. 

Northern Ireland (+35) and Wales (+33) have shown the greatest improvement and now have net positive sentiment (+11 and +1). This means that, for the first time, London is not the most positive region (-9), as it drops to third. There was also a smaller improvement in sentiment in the Midlands (+8 West Midlands and +9 East Midlands) than the national average (+12).

With both London and Birmingham hit hard by COVID-19, it may be that consumer sentiment in these areas has been impacted by both the economy and the pandemic.

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Lockdown spending cutbacks are likely to reverse

Certain categories have taken a huge hit since the start of the pandemic and the subsequent lockdown: 45% of consumers have avoided booking holidays or spent less on fashion and 22% have spent less on beauty.

However, the good news for these sectors is that the cutbacks appear temporary. Only 18%, 14% and 8% of consumers respectively say they will do so after the lockdown, suggesting spending could bounce back in these areas.

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Is COVID-19 accelerating the “conscientious consumer” trend?

Since the lockdown, consumers are engaging with retailers differently, and favour more responsible operators. We’ve already seen a consumer backlash against some operators that tried to continue trading despite unaddressed safety concerns being raised by employees or in the media.

Our survey confirms this trend. Across all age groups, 19% are buying more from small companies and 8% from brands who look after their staff. These figures are significantly higher in the younger age ranges, with 28% of under 25s buying from small companies and 17% buying from brands who look after staff. 

There’s an even higher percentage across the UK that say they will do more of this in the future (23% and 22% respectively), which hints towards an inflection point for the conscientious consumer trend.

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Online increasingly important but varies significantly by age 

Unsurprisingly, we’ve seen a substantial increase in online transactions since the lockdown, with 38% of consumers buying more things online.

Although only 18% think they will buy more online after the lockdown, this varies by age (29% of under 25s vs 14% for over 45s). It could be that COVID-19 accelerates the trend towards online - for example, in young fashion and beauty - potentially making it more difficult for store-based retailers to regain share post-lockdown. 

We may also see some retailers accelerate their move to online thanks to the success of ‘forced experimentation’. It’s also likely we’ll see the embracing of online grocery deliveries for older generations, particularly those who have had positive experiences over the months.

There’s also been an increase in home delivery of prepared meals, particularly among the younger age groups. While only 12% of all consumers have spent more on home delivery of meals through platforms such as Just Eat and Deliveroo since the lockdown, nearly a third of under 25s and 17% of 25-34s have increased their spend on meal delivery.

And that trend looks set to continue post-lockdown. Though only 6% of all UK consumers say they’ll continue to spend more on home delivery of meals when the lockdown ends, 19% of under 25s and 12% of 25-34s.

consumer sentiment online shopping 2020
shopping differently lockdown consumer sentiment

Could it also provide a boost to local high streets?

Following the conscientious consumer trends, we’ve also seen 16% of UK consumers say they’re spending more on local high streets. This trend is reasonably consistent across the board, but it’s being driven slightly by the middle-aged ranges, particularly 45-54s (21%) and 55-64s (18%)

It’s a trend that looks set to continue after lockdown, with 22% of all UK consumers saying they’ll spend more on local high streets.

As consumers move towards independents, we may see an acceleration of store closures of multiple retailers previously identified in our LDC research. But, more excitingly, there’s also the possibility of a revival in local high streets as independents and other leisure and work activities supplement the offerings of larger retailers and brands, attracting consumers who have rediscovered nearby high streets as a result of lockdown restrictions.

“These survey results may seem surprising at first. But the retail and leisure sector has shown its resilience time and again over the years. We’re seeing greater certainty and employment security having a positive effect on consumer confidence, particularly amongst younger generations. And, as ever, consumers are still keen to spend.”

Lisa HookerLeader of Industry for Consumer Markets, PwC UK

What this means for retail and leisure 

While these survey results may seem surprising, the retail and leisure sector is notoriously hardy. As is consumers' keenness to spend. 

Government support seems to have had a positive effect on consumer confidence, as has the sight of other countries beginning to exit their own lockdowns. With the UK’s timeline slightly behind some countries, it’ll be interesting to see how the retail and leisure industry recovers in those countries. Successes abroad may further improve consumer confidence at home. 

Even at this early stage, there’s hope for the sector that an increase in spending will quickly follow the lifting of lockdown restrictions. 

Target the right customers

While consumer sentiment has been resilient, the lockdown will affect different customers in different ways. Initial indications from China suggest that, while some shoppers are already spending at pre-lockdown levels, others are holding back, whether for economic reasons or because of safety concerns. How will you encourage keen shoppers to spend, while reassuring your non-spending customers that you will be there for them when they are ready?

Invest in your people

Our survey results show that many consumers, especially younger ones, will reward brands that look after their employees. Your colleagues will have experienced the same uncertainty and upheaval as your customers, and may have experienced furloughs either themselves or in their households. How will you mobilise your workforce and ensure they are re-engaged and ready to serve customers in the very different post-lockdown operating environment?

Edit product ranges and rethink demand forecasting

Whatever you sell, consumers are likely to want or need different products from you in a world where they are working, educating and socialising more in the home, postponing their holidays, and unable to go out and about in the same way they have done in the past. What does that mean for your product assortment, how will ensure you have the right items in stock in the right place and at the right time for your customers, and what will you do with the excess stock currently in your supply chain?

Organise your supplier base

Your supply chain has probably never seen as much turmoil as in the past month. Some of your key suppliers may no longer be able provide the stock you need. Even if your suppliers are still able to operate safely and to the required demand levels, they may struggle to get the goods to where they need to be. How can you help suppliers anticipate your needs without interruption, do you need to help them logistically or financially, and what is the back-up plan if key suppliers are unable to deliver?

Expect the unexpected

At least in the short-term, sudden changes in government advice and further geographical lockdowns cannot be ruled out. Demand could shift from stores back to online at a moment’s notice. Stockpiling of essentials or health and hygiene products could emerge at any time. Are your employees, operations and supplier base agile enough to meet sudden fluctuations in demand, and what contingency plans do you have in place that can be implemented at short notice?

Think about the medium- to long-term future

Consumer businesses have spent the last few weeks struggling in unprecedented conditions. But a reset in customer demand and operating environment is also an opportunity to accelerate your progress towards your longer term vision. Most obviously this includes unlocking hard-to-reach costs, rationalising your supplier base and right-sizing your property portfolio, but this could also include everything from implementing changes in pricing or promotional strategy, to accelerating capex investment during downtime.

While business as usual has almost certainly been postponed for the short- and medium-term, also it’s worth considering the benefits of cooperating across and between sectors. Pooling resources may be the answer to challenges such as how to deploy enough staff to meet demand, deliver final mile solutions to meet increased online transactions, or redirect stock from indirect channels, such as foodservice, directly to end consumers. The optimum solution may lie outside your organisation or complementary industries, where you can make best use of their excess capacity.

Contact us

Lisa Hooker

Lisa Hooker

Leader of Industry for Consumer Markets, PwC United Kingdom

Tel: +44 (0)7802 882562

Kien Tan

Kien Tan

Director, Retail Strategy, PwC United Kingdom

Tel: +44 (0)20 721 23910

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