COVID has disrupted the systematic and pre-determined demand curve. This demand curve started following an unexpected pattern. Previous assumptions of demand, no longer prevailed. This period can be explained with the help of “Maslow’s Hierarchy Of Needs”. “Maslow’s Hierarchy Of Needs” has five divisions. they are
- Physiological needs: These are the needs for food, shelter, clothes etc. It takes the base of pyramid.
- Safety needs : Once the psychological needs are satisfied safety and security needs comes up.
- Social belongingness: This comes with affection and interpersonal needs.
- Self esteem: This is the need for status and are of egoistic nature.
- Self Actualization: This refers to realisation of one’s full potential. it is the desire to accomplish everything that one can be.
Now, in this situation psychological needs took the front seat. Anything other than that, was considered non-essential. Hence the demand graph was promising for items at the base of the triangle. Whereas, the demand graph of other items fell flat. The demand behaviour of this kind was unexpected even a year ago. All forecast by different companies and economic machineries used stands discarded.
One more reason for temporary and unimaginable demand curve behaviour, was due to sudden panic. The panic lead to over-purchase of certain items. Panic button got pressed due sudden lockdown. Consumers started stocking essential items fearing the shortage in supply.
The whole situation changed the consumer behaviour which led to :
- Shift of brand preference
- Shift of price brand selection
- Shift of purchase preferences
- Change in frequency of purchase
- The consumption habits
This led to complicated change of consumer behaviour. Change in behaviour of consumers too resulted in shift of demand graph.
Product category wise study too revealed interesting trends. The product like toiletries, food items, cleaning supplies, medicines took the priority seat. Whereas cosmetics, appliances and electronic goods where de-prioritized. A study by McKinsey and Company has revealed an interesting trend, by comparing sale over first three weeks of pandemic vis-a-vis 2019.
- Household supplies: Sale in 2020 increased by 76 % P
- Package food : Sale in 2020 increased by 46%
- Children products: Sale in 2020 increased by 45%
- Dairy products sale in 2020 increased by 39 %
- Skincare and makeup products : Sale in 2020 declined by 4%
- Automotive additives : Sale in 2020 declined by 7%
- Electronic Products : Sale in 2020 declined by 36%
As per McKinsey and Company report for demand Archtypes emerged during the period
- Pantry load and consume – Consumptions Increase – The consumers stock the products fearing the shortage in supply. This includes cleaning supplies, vitamins and supplements
- Pantry load and preserve – The consumption does not change – The consumer purchased fearing shortage. However consumption did not increase. Hence leading to decline post-crisis period. This includes food, toiletries etc
- Now at home – Shift of preference – The situation forced consumer to shift from on the go pick ups to online retailers. For example : The shift of coffee and alcohol from in-person pick up outlets to online retailers.
- Not now – Consumption declines – Decrease in purchase of certain goods during crisis lead to decline in their demand. For example beauty products.
McKinsey report also highlighted some more shifts :
- Consumers did 15% fewer shopping during crisis.
- Frequency of purchase too got reduced. People bought for 2-3 weeks at a time.
- Another noteworthy change of consumers, is shift to E-retail outlets. E-retail’s market penetration jumped to to 31% in late March from 13 % before pandemic.
- Brand switching was another behaviour noted, which lead to demand graph change. The research says 30 to 40% of consumers been trying new brands. Half of them switched due to unavailability. 19% switched due to cheaper price. Of the consumer who switched, majority are expected to continue with newer brands.
- Economic stress of customers too affected their behaviour.
As per Hindustan Times report, agri-sector will carry on as it is. Other sectors will show little or more decline. As per Economic Times report, this pandemic will have “a severe demand shock” for economy. As per Dun and Bradstreet Chief the closure of business had lead to global supply chain disruption, leading to steep fall in demand.
Overall demand graph during and post-COVID will be a deviated one. Hence an entrepreneur should always check and study the graph before taking any strategic decision.