Transformed consumer spending habits. J.P. Morgan Research looked at how COVID-19 has changed consumption trends globally, in many cases for the long-term. In the data from last year, you could see flat growth followed by a huge spike — double digit growth. That is very rare for this industry and was totally prompted by the lockdown and the fact that people couldn’t get out.
There has been a normalization of the panic buying as shoppers have realized things are not going out of stock. In the U.S., it is still very uncertain as different states open at very different rates. You can see the buying spike easing, but demand at retail still remains well above trend. In some categories, we saw pantry de-loading or de-stocking. That was the case for baby food, as concerned parents may have built up stocks at the start of lockdown but are now going through those stocks, said Celine Pannuti, Head of European Staples and Beverages Research at J.P. Morgan.
Online Shopping Leads the Way
E-commerce around the world, across sectors, has surged this year as pandemic-weary consumers looked online for everything from hand sanitizer and groceries to skincare products and cleaning supplies. In the U.S., consumers spent $211.5 billion during the second quarter on e–commerce, up 31.8% quarter- over-quarter, according to the U.S. Census Bureau.
The pandemic has pushed more shoppers online, with e-commerce now accounting for 16.1% of all U.S. sales, up from 11.8% in the first quarter and this trend is likely to stick, even as brick-and-mortar stores open their doors again.
Online shopping has really advanced. This is very obvious in China, where the digital experience for shoppers and online integration is extremely advanced. With everyone stuck at home, there has been a lot more focus on online systems, advertising and delivery from the corporate side and this will reinforce the push to shopping online,” said Pannuti.
In many cases, the boom certain companies saw in e-commerce in the first half of the year offset slower parts of their business, leading them to rethink and invest in their e-commerce abilities in coming quarters. Reckitt Benckiser said along with professional hygiene and their Dettol and Lysol brands, online sales represented a core growth opportunity. E-commerce represented 12% of sales in the first six months of the year, growing over 60% with strong performance across digital channels, including direct to consumer sales and click and collect solutions.
Food and drink giant, Nestlé, said e-commerce grew 49% in the first six months of the year to reach 12.4% of sales compared to 8.5% of sales in 2019. Despite the closure of their Nespresso boutiques, the Nespresso brand was up mid-single digits % in the first half, driven by surging e-commerce sales that offset stores decline.
Amongst European consumer companies, L’Oréal boasts the highest exposure to online, reaching 25% of sales in the first six months of the year, after seeing online sales surge 65% over the same period. After a disappointing second quarter, L’Oreal singled out e–commerce as the key driving factor behind its expected market growth for the remainder of 2020. For the months of May and June, e–commerce sales were up by 75% and 82% respectively, accelerating every month, even as stores are re-opening. In the medium term. The company is expected to be able to derive half of its sales online.
In the past few years, some of the big players have invested a lot to be more digitally savvy, accelerating innovation and refocusing their portfolios, a few of these companies had come into the pandemic prepared to a certain degree, because they had prepared their company to change and pivot more online. We see retailers narrowing their product range, focusing on what matters more and mainstream brands and products, so the shift to e-commerce for big and small brands is key.
L’Oréal CEO Says Embracing The Digital Revolution Is Secret To His Leadership Success
Jean-Paul Agon sees himself as a revolutionary. A forty-year veteran at L’Oréal, the world’s largest cosmetics company, he was one of the first in the beauty business to realize the opportunities of the digital wave and he embraced it wholeheartedly. He transformed L’Oréal into what he calls a champion of “the new beauty tech world”. And Agon considers that his greatest achievement as CEO.
“The digital revolution was a fantastic change,” he says. “From the beginning I saw it as a major opportunity. I thought it would transform, for the better, the relationship with consumers. It would put consumers at the heart of the conception of the product and the development of the product. I thought also it was an incredible opportunity to grow faster than competitors. And that’s what happened.”
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