The Evolving Consumer Journey

It takes anywhere from 18 to 254 days to form a habit1, and given that we have been living in a pandemic for almost 2 years now, it is safe to say that COVID-19 will leave a lasting impact on what and how we buy. The long-term trend of consumers increasingly spending on experiences instead of products was flipped on its head simply because it was not possible to experience much new while sitting at home, resulting in strong performance for brands and retailers that focus on products. But change was not limited to the shift in spend – how we discover, evaluate and decide on what to buy also changed, with the voice of experts and other customers online becoming our primary source of information.

Shift in Consumer Spend

During the pandemic we have seen a shift in consumer spend from out-of-home experiences to products, at-home hobbies and DIY activities, which has provided both an immediate uplift in revenues for e-commerce players operating in these categories as well as a more long-term increase in customer base that will continue to drive strong performance even in a post-Covid environment. While the overall increase in e-commerce activity is expected to somewhat normalise post-Covid and return to annual growth rates more in line with historical averages, this still represents a significant increase in absolute terms that is driven by an increased willingness of consumers to purchase more categories online.

Figure 1: Percentage of Retail Sales Online – Estimates Pre and Post Covid-19 Pandemic [%].

SOURCE: ONS, Lightspeed

Products

Niche & Premium: During the pandemic a large proportion of consumers found themselves with more disposable income, which facilitated a larger proportion of the consumer base to embrace existing trends around pampering and self-indulgence, especially given the increase in time that we spend at home. As consumers were willing to upgrade from mass market versions across a number of products categories, the key categories that benefitted were niche and premium products that we use in our everyday lives, ranging from food & beverage (e.g., premium food, craft beer and gin) to personal care (e.g., higher-quality clean, natural skincare and make-up) and household care (e.g., local, premium scented candles and diffusers).

Discount Buying: Nevertheless, strong performance was not limited to higher-end products. There was a significant increase in consumer appetite to find good deals, which drove strong performance for players that focus on discount buying and use of vouchers (e.g., Groupon, Wowcher, GoGroopie). Some of this increased activity was driven by consumers being more cost conscious due to the general uncertainty in the economy; however, there was also a significant number of first-time adopters that historically have not considered using discount buying sites, but during the pandemic found themselves with more free time and decided to look for a good bargain. While some of these new customers will drop off once the pandemic is over, the rest will return as they will be hooked by the thrill of finding a product or a service at a fraction of the cost even if they can afford the full price item.

Figure 2: Products Purchased Online in the Past Year – 2019 to 2021 [%]

Chart by Visualizer

DIY and Hobbies

While a significant proportion of consumer spend shifted towards products, the underlying desire for experiences did not go away. Consumers increasingly took up new hobbies, primarily for fun, but in some instances also as means to generate additional income (e.g., by selling home-made products at a local market), driving demand for e-commerce businesses that provide starter kits as well as supplies for various arts and crafts (e.g., Hobbycraft, Candle Shack). As consumers return to the office, the amount of time they can spend on hobbies and DIY activities decreases; however, the increasing prevalence of flexible working is likely to result in a higher long-term base of consumers that have a hobby as well as those that have developed it into an additional source of income.

Increased Importance of Online Reviews

The pandemic has also forced the consumer journey to evolve. If historically consumers would have been able to walk around a shop and talk to a sales person to discover and narrow down the consideration set, and even touch and feel physical products before making a decision, during the pandemic consumers had to solely rely on information available online. The importance of customer and expert reviews had been increasing over the last few years, but the pandemic accelerated the trend as brands and retailers found new ways to leverage this data. There are a number of use cases for reviews:

  • Helping consumers decide what and where to buy – the core use case where prospective customers can see feedback from verified existing customers (e.g., Feefo, Reevoo) or industry experts that have evaluated a product (e.g., Which?)
  • Generating incremental demand – retailers use reviews in their marketing messaging, suggesting new, highly-rated products to customers who could be interested but have not necessarily considered buying a particular product (e.g., a parent that has bought a new pram gets recommended accessories that have been highly-rated by other customers that have bought the same pram).
  • Generating actionable feedback to improve products and service levels – reviews used to improve product design for upcoming models (e.g., changing sensitivity of buttons on a dishwasher) as well as to improve service levels (e.g., by asking for feedback after scheduled car maintenance).
  • Tracking attitudes towards the brand in general –  open reviews (e.g., TrustPilot) as well as specialised solutions (e.g., YouGov’s BrandIndex) used to track general consumer attitude towards the brand, including views from non-customers.

Figure 3: Illustrative Consumer Journey


SOURCE: Fairgrove Partner
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Our Experience

Fairgrove has recently supported a number of transactions in the e-commerce / customer journey space, including Maven’s investment in Candle Shack, Feefo’s investment in Reevoo, as well as growth strategy and sell-side support for multiple on-going transactions. Besides these recent projects, our team also has extensive experience in the broader retail and consumer space.

If you are an investor looking to understand the key trends in e-commerce and consumer journey further, or an investor considering an opportunity, please contact Paddy Woods Ballard or Viesturs Bemhens for further information.


About the Author

Viesturs is a Director at Fairgrove Partners, and has 8 years’ experience as a strategy consultant, with a particular focus on Consumer, Retail and TMT sectors. Prior to joining Fairgrove Partners he worked for EY-Parthenon, where he advised a range of private equity and corporate clients on strategic issues.

If you are an owner, manager or investor looking to drive profitable growth or execute successful transactions in a consumer sector, please contact Viesturs Bemhens to find out how we can support you.


Footnotes and Sources
  1. Lally, P., van Jaarsveld, C., Potts, H. and Wardle, J., 2009. How are habits formed: Modelling habit formation in the real world. European Journal of Social Psychology, 40(6), pp.998-1009.

Photo: Bench Accounting / Unsplash.com