Pivoting to the contact-free economy

As the government publishes its recovery strategy and lockdown measures across Europe ease sooner than many would like, the long-term impact of COVID-19 is only now beginning to be understood.

At Great State we have been investigating the impact of social distancing measures and the tactics that clients should be deploying to drive their recovery as this new socially distanced and contact free economy emerges.

In a series of articles and events over the coming weeks we will be presenting our findings, exploring changing consumer behaviour, business challenges and the important role that digital will have in helping businesses transition to the ‘next normal’.

In this first article, Pivoting to the contact-free economy, we explore the macro themes that will shape the consumer and business behaviour and the challenges that business will face in returning to operational effectiveness.

Consumer behaviour will be impacted in the mid and long-term

The evidence is mounting – social distancing will continue to have a substantive impact on consumer behaviour beyond the easing of lockdown measures with increasing likelihood that consumer behaviour will continue to be affected even after a vaccine potentially becomes widely available. Although as Boris Johnson suggests this still may be a long way off.

With the Government's recovery strategy laying out the process to ease the lockdown, a tranche of people returning to work tomorrow and the phased reopening of shops potentially beginning next month, there is a pressing need for businesses to quickly pivot. As in both the immediate and long-term, contact-free strategies that ensure we are “COVID-19 Secure” are likely to affect every aspect of business behaviour.

Consumers continue to be fearful

Consumer fears of catching COVID-19 do not appear to diminish greatly as countries exit lockdown.

Looking at public sentiment in the UK and across the world people are still, understandably, fearful of infection. Over half the British public are ‘very’ or ‘somewhat scared’ they will contract COVID-19 right now. Looking at the same YouGov data for countries who are ahead of the UK and have already relaxed some lockdown measures (China, Germany and Australia for example), there appears to be little decline in those levels of anxiety. The same is likely to be true of people avoiding crowded public places – continuing to do so even after lockdown is loosened.

In addition, there are early signals that public behaviours will be changed in the long-term (post vaccine world too). Driven by a range of drivers:

• Health fears now present in people’s minds will likely remain for many for the long term, suppressing demand for foreign travel or exposure to risk of infection from new viruses.
  
• Working from home, works. As office workers and businesses have acclimatised to remote working, many will question the wisdom of returning to a costly office-based working environment.
  
• New values structure, globally the lockdown has created new behaviours, family bonds and reduced value placed in consumerism (leading to less conspicuous consumption, love for the climate and daily exercise).

In our next article we will explore long-term behaviours further, presenting findings from our proprietary research into this area.

Impact of the contact-free economy

As business owners grapple with the challenges of getting staff back to work in safe environments they will need to review all interactions with customers.

In the retail sector (which employs 2.9m people and accounts for a third of all consumer spending in the UK), shoppers are unlikely to want to purchase in crowded shops and malls as they once did. This change in consumer preference is likely to accelerate the demise of the high street in favour of online sales (which were 19% of total retail sales in 2019) or a need for very different retail environments. Investing in better e-commerce solutions and innovative practices – particularly around delivery and returns – will enable some high-street retailers to sail against the economic headwind but the reality is that many companies reliant on traditional bricks-and-mortar sales will be unlikely to change quickly enough to survive.

A similar challenge remains for a whole host of non-retail brands – B2C, B2B and public sector alike- whose goods and services are more difficult for buyers and users to buy or interact with remotely - leisure companies, sports arenas, car dealerships, higher education institutions, engineering consultants, private healthcare providers, etc.

Here again, the organisations best placed to succeed are likely to be those who offer a great contact-free (and likely digital) experience for their audiences, throughout the entire customer journey. And the losers will be those who can’t adapt quickly enough. Moving quickly and successfully does of course need a proper understanding of your audiences’ needs, attitudes and behaviours across that journey; not to mention a coherent plan for multiple internal stakeholders to work to.

Adapting internal operations

With most companies already well into planning for a return to the workplace, or tentatively already back, there are many challenges to overcome. Whilst social distancing measures and being COVID-19 Secure will be formally required in the short term, we expect these to remain well into the medium term as employees also remain fearful. For many organisations to operate at all will require new, distanced and ‘contact-free’ ways of working internally as well as externally. Beyond opening the doors, the challenge for many will be how to operate effectively at anywhere close to full capacity or productivity. Although, as Diane Cole, Bennett Professor of Public Policy at the University of Cambridge points out, this “pandemic and its aftermath will raise profound questions” around how we measure productivity.

All of this is expected to drive a strong need to rapidly assess high contact areas of businesses and find new tools or ways of working which can reduce or remove contact. Leading to a further rise in innovation and acceleration of digital transformation.

Seizing potential opportunities

With some 6.3m workers currently furloughed, worrying indicators of job cuts from economic powerhouses such as HSBC, Rolls Royce and Virgin Atlantic (to name a few) and a drag on productivity due to social distancing in the workplace, it seems unlikely that the UK economy will come “roaring back” as Boris optimistically predicted in March.

However, even during a downturn there are pockets of opportunity. Whether that be certain groups having more disposable income (the 1.7 million people able to work from home, many of whom have seen their living expenses reduce) or increased demand for certain product and service categories (e.g. to improve wellbeing and productivity) – some businesses will benefit from this change. Some organisations may see this as an opportunity to ambitiously transform their traditional ways of working; particularly those mindful of the threat of disruptive start-ups such as Lick paint, whose innovation in samples, D2C model and fast delivery are seeing them flourish while traditional retailers and brands are wrestling with stores and warehouses full of stock they can’t sell.

Whether you’re optimistic or pessimistic about how well your organisation will be able to cope with the changes brought about by long-term social distancing, the reality is the contact-free economy will demand change and there will be opportunities for growth as the economy opens up.

In the coming weeks we will be presenting the findings from our proprietary research Consumer behaviour in the contact free economy. We will also be hosting two virtual roundtable events to uncover what key shifts in consumer attitudes and behaviours businesses need to consider and how organisations are adapting their operations to meet the needs of the contact free economy.

If you would like to sign up to either our consumer roundtable or our operations roundtable webinars, simply get in touch for further information.