1、The Cheating Consumer How crisis events can trigger consumer brand switching at a massive scale and what you can do about it 2ND EDITION JUNE 2020 (includes addendum with May 2020 data updates) 2THE CHEATING CONSUMER Executive Summary When the products a consumer loves become unavailable, they dont

2、sit around and do nothing or go without. They look elsewhere, seeking any product they can find that will get the job done. This kind of switching by March it had jumped to 51%. Competition may be bigger than you think: Brands must reassess the competition; youre no longer just competing with produc

3、ts in your categories, but products in any category that can solve a problem or perform a job for consumers. Consumers searching for “disinfectant wipes,” for example, traded out to a totally different category 2.5X more in April than they did in January. Products are the new services: The closure o

4、f restaurants, barber shops, gyms, etc., is driving consumers to seek “products” as a replacement for “services,” creating new growth opportunities for brands. Consumer searches for “hair clippers” on Amazon, for example, were up 90X in late April compared with January. Go digital or be gone: Switch

5、ing from offline to online and digitally enabled shopping is happening fast, exposing digitally unprepared brands to rapid losses in market share. The percentage of grocery sales happening online has increased 150% year-over-year since the pandemic began. Here are 5 key findings from our research at

6、 Profitero: 14 5 2 3 “Its time for brands to challenge all prior assumptions to meet the new shopping behaviors because the genie isnt going back in the bottle.” Sarah Hofstetter President, Profitero Manufacturer switch index % of times consumers switched from buying the originally searched manufact

7、urers product to buying a different manufacturers product 1. Brand loyalty is up for grabs You want loyalty, get a dog because brand loyalty is at risk of going out the window. Consumers arent hesitating switching to other products when their regular favorites are out of stock. Source: Profitero, Am

8、azon; Retailer: A, men shavings data corresponds to Amazon U.K.; Substitution rates consider the top 5 products substituting the original ASIN Disinfecting wipes JanJanFebFebMarMarAprApr Male shaving (disposable razors, double edge razors and blades) 18% 31% 13% 35% 26% 46% 41% 36% JanFebMarApr Dry

9、pasta 30% 40%40% 53% 3 Profiteros data shows some wild substitution and switching between brands taking place during the pandemic, with some categories experiencing a “switching rate” of up to 53% i.e., more than half of consumers bought a brand other than the one they originally intended to buy. Th

10、is level of substitution is primarily because the preferred brand was not in stock when a shopper was ready to buy. The proof point THE CHEATING CONSUMER 4THE CHEATING CONSUMER So what? What does it mean?Now what? What next? Brands spend billions to build equity with consumers. That equity gets wast

11、ed and goes unrealized when consumers seek that brand and dont find it. The unprecedented OOS levels we saw online during COVID-19 underscores the huge brand equity risks involved with not having products readily available for purchase. According to a March 2020 Shopkick survey, a whopping 85% of co

12、nsumers say brand names dont matter during times of crisis. Nearly a third or more of consumers who tried a new brand will stick with them, according to Alix Partners. Thats a lot of lost customers, and sales. BUILD FLEXIBILITY INTO YOUR SUPPLY CHAIN. We recognize every company is hustling to accele

13、rate supply. In the meantime, here are some other things to consider: Ruggedize the supply chain, i.e., take pre-orders if you have reasonable confidence you can deliver; put a restock notification on your product detail page and let consumers know when product will be available; and encourage consu

14、mers to set up a subscription, which helps smooth out supply and demand. Limit the product in your supply chain to items that are most in demand, like Mondelez and Coca-Cola have done. Diversify your supply chain network: Tap third-party logistics, drop-ship capabilities and Seller-Fulfilled Prime (

15、SFP) on Amazon, as needed. And develop or strengthen direct-to-consumer (DTC) capabilities to minimize future distribution disruptions like what happened during the pandemic. This is a key reason why Pepsico launched two D2C sites, pantryshop. com and , in early May. Dont just hunker down until you

16、have more product available; instead continue to communicate with customers let them know youre hustling, and if you know, when youll be back in-stock. “Having a DTC offering has really helped our business float to the top during COVID-19. We have full control of listings and supply chain, and this

17、has helped us to be seen as a reliable brand, and build loyal customers for years to come.” Halee Patel Director of eCommerce in March, this dropped to 49%, creating more opportunities for consumers to switch brands than ever before. 5 Retailer: A; Time period: January - March 2020 THE CHEATING CONS

18、UMER 6THE CHEATING CONSUMER So what? What does it mean?Now what? What next? Imagine if you lost 40-50% of the facing available at Walmart or Kroger. Thats the equivalent to losing share of page 1 on a high-traffic eCommerce site like Amazon or W. Page placement is one of the most critical eCommerce

19、performance metrics: 71% of category sales happen on page 1. So if youre not on page 1, youre basically invisible. This not only has sales implications, but long-term implications on brand perception and brand loyalty. BE AT THE ZERO MOMENT OF TRUTH. Brands will have to work doubly hard to win back

20、digital shelf placement to once again be top-of-mind when shoppers are ready to buy to counteract the risk of further churn. This means: Up your marketing budget and appropriately allocate to digital campaigns. Invest in search placement on Amazon (SEO/SEM) to get products back onto page 1. Make sur

21、e your product content is indexed for relevant keywords and nail all the basics i.e., be in stock, competitively priced, and have enough ratings Retailer: A, men shavings data corresponds to Amazon U.K.; Index 100 = substitution rate of pasta to a different category in January; Substitution rates co

22、nsider the top 5 products substituting the original ASIN 2020 *Disposable razors, double edge razors and blades JanJanJanFebFebFebMarMarMarAprAprApr Original category: Male shaving* Toilet paper Dry pasta Disinfecting wipes Electric shaver Paper towels Canned soup Bleach Beard trimmer Facial tissue

23、Shaving powder Bidet Packaged meals All purpose cleaner Flour Heavy duty cleaning wipes Switched to: (selected categories) 100 139 137 148 100 137 129 181 100 60 121 240 The proof point Product availability issues, and stay-at-home orders preventing shoppers from quick-trip runs to the grocery store

24、, are prompting consumers to seek alternative products and more sustainable solutions. Sometimes this means switching out of a category altogether to find another way to get the job done. Our research shows a noticeable shift away from disposable products to longer-lasting solutions: electric shaver

25、s replacing disposable blades; water filters replacing single-use plastic water bottles; make-your-own disinfecting wipes; even bidets having their moment to shine with toilet paper nowhere to be found. 8THE CHEATING CONSUMER So what? What does it mean?Now what? What next? Remember how not too long

26、ago, the smartphone came along and rendered other categories, e.g., cameras, GPS devices, calculators, etc., obsolete? And how single-serve coffee makers Keurig and Nespresso altered their category? Its too early to tell which of these product switching and replacement behaviors being caused by the

27、pandemic (and related economic downturn) could stick or have long-lasting effects on the category. But when a better mousetrap or a product of better value comes along (without the physical constraints of availability or frequent replenishment attached), consumers may make that switch, and not go ba

28、ck. So, make sure you have a good grasp on whats happening in your category, and how consumer switching behavior may be redefining your competitive set. REEVALUATE YOUR PORTFOLIO. Youre no longer competing against like products. Youre competing for a job to be done. Brands need to evaluate their pro

29、duct portfolios with the following questions in mind: Which of your products fit against the trends you think are likely to continue? And how well are you positioned to serve new needs? If the trend away from disposability to reusability continues, are you prepared with options? Is there an innovati

30、on opportunity? As consumers become more price-conscious during this time, do you need to offer better value options in your mix, or alter the price pack mix? (Dont forget youre increasingly competing with a growing contingent of private labels too.) “Shaving”: A good example of a category competiti

31、ve set being redefined The brand, Magic Shaving Powder, is a great example of how small, almost no-name brands have capitalized on shifts in consumer behavior. To compensate for high unavailability rates of disposable razors, theres been a surge in demand for “shaving powder,” which when rubbed on,

32、can remove hair without shaving. Few people had heard of this product (which has been around since 1901) until a surge of videos on TikTok helped it go viral. Between April and May, the product has seen a 15,000% increase in its ranking on Amazons best sellers list, which is a proxy for how much a p

33、roduct is selling on Amazon. Source: TikTok Rising popularity of keyword search terms on Amazon Note: Numbers represent the increase in keyword search rank on A in the U.S. for the week ended Apr. 18, 2020 compared with the last week in January The proof point During COVID-19, consumers are insourci

34、ng tasks typically done by many service businesses. Weve become our own chefs, baristas, hair stylists and personal trainers. The result is an unplanned surge in demand online for some products and brands think bread machines, cold brew makers, hair trimmers and home exercise equipment. In Profitero

35、s The Quarantined Consumer report, “thinning shears for men” were among the keywords we found spiking on Amazon, up more than 135X the week ended April 18 compared with the last week of January. 4. Products are the new services The closure of restaurants, barber shops, gyms, etc., is driving consume

36、rs to seek “products” as a replacement for “services,” creating new growth opportunities for brands. Source: Profitero, Amazon +135x+30 x+91x +40 x+30 x+13x +19x+7x+12x 9 “thinning shears for men” “semi permanent hair color” “hair clippers” “workout equipment for home workouts” “trampoline”“weights”

37、 “cold brew maker”“bread machine” “blender for shakes and smoothies” THE CHEATING CONSUMER 10THE CHEATING CONSUMER So what? What does it mean?Now what? What next? These are unprecedented times, and you might as well throw your old planning assumptions and sales forecasts in the trash. Things have ch

38、anged, and dramatically. With demand spiking for some “who would have ever thought” type of products, brands must anticipate new demand and be ready to seize the online opportunity. Conversely, demand for other products could be turning south. “COVID-19 has wiped the slate clean your priority produc

39、ts will have changed based on what is relevant to shoppers now, as will the keywords shoppers are using to find them. Sticking to old strategic priorities and pre-COVID thinking is the quickest way to see your online share evaporate,” comments Andrew Pearl, VP of Insights at Profitero. Prioritize le

40、ading indicators of demand Keyword search is among the highest purchase intent leading indicators that brands have visibility to. This example shows how by closely monitoring online search patterns, a manufacturer of office furniture was able to pinpoint early demand signals for “home” office furnit

41、ure, just as lockdown orders were manifesting in many parts of the globe. As a result, the manufacturer was able to quickly adjust its digital strategies, optimizing product listings and product content for relevancy by featuring popular keywords like “desk for home office,” “home office chairs,” “f

42、olding desks for small spaces,” etc. Search themes: Home, foldable, desk, office, small spaces, chair Source: Amazon Vendor Central, Search Term Report. Date Range: January 1-31, 2020; March 1-16, 2020 Source: Profitero A Sales it will be inscrutable during this health crisis. Amazon, however, is a

43、good leading indicator of demand. This means: Pay attention to keyword search patterns as early demand signals. Monitor changing competitive dynamics, since challenger brands can gain share of search if bigger brands are unavailable. Make sure your marketing and brand-building efforts are as nimble

44、as possible to adjust your digital strategies (promotions, product content, etc.) as often as needed, and when an opportunity presents itself. Take LOreal, for example, which moved swiftly to incorporate the DIY trend into its digital content by posting a “homemade film by (Hollywood celebrity) Eva

45、Longoria” that shows her touching up her greys at home using LOreal Paris Excellence Crme hair color. 5. Go digital or be gone Switching from offline to online and digitally enabled shopping is happening fast, exposing digitally unprepared brands to rapid losses in market share. eCommerce sales as a

46、 % of total category sales (March - April 2020 vs. same time period in 2019) 20192020 Source: Nielsen/Rakuten panel data; TIme period: March - April; N = 124 categories; eComm share of total sales median for the categories studied = 6% Baby CareGroceryHealth the second- order effects wont become obv

47、ious until later this year. Brands must be set up to pivot as needed, so it is essential to: “Necessity is the mother of consumer ingenuity, and a lot of resourceful consumers have already switched or substituted outlets, categories and items as a result of new needs and constraints.” “Brands that w

48、ill survive will be flexible with how theyre changing their marketing strategy. Figuring out how you stitch things together to show up with one cohesive voice to the consumer and to help him/her discover brands, stick with those brands, and incentivize those purchases, is a unique opportunity.” Keit

49、h Anderson SVP, Strategy so switching between brands, especially when some arent available, is expected. Key finding % of times consumers switch brands vs. out-of-stock rates Consumer loyalty is making a comeback as out-of-stock rates level out As reported in our first edition of The Cheating Consumer report, online brand switching rates on Amazon reached peaks at the height of the pandemic as out-of-stock