Is the “Now” Normal the “Next” Normal?

There’s been a ton of conversation and debate about what the “new” or “now” normal will look like. There is no dispute that the impact of COVID-19 on local buying behavior has been significant.

Here some data points we think are important to consider around this issue.

  • About 50% of U.S. households have lost jobs/income since March 13. (U.S. Census Bureau)
  • 83% of those who were laid off or had hours or salary reduced expect to be rehired or reinstated in less than six months. (KFF Health Tracking Poll, conducted April 15-20, n=1,202 U.S adults)
  • Buy-online, pickup-in-store orders surged 208% year-over-year in April. (Adobe)
  • Target reported Q1 2020 online sales grew 141% year-over-year. There were 5 million new first-time Target.com buyers and 2 million out of 5 million picked up their orders at Target’s physical locations.

And you’ve probably seen some of these shopping statistics from the U.S. Census Bureau:

  • Online (non-store) retailers: +21.2%  
  • Grocery stores: +13.3% (-13.1% from March)
  • Pharmacies and other health/personal care stores: -15.2%
  • Big-box (general merchandise) stores: -13.8%
  • Electronics and appliance stores: -64.8%
  • Sports, music and other hobby stores: -48.7%
  • Furniture stores: -66.3%
  • Clothing and accessories stores: -89.3%
Shifting Consumer Behavior

There’s no doubt these are major shifts. However, here’s the question. How will these shifts in consumer behavior translate into long-term changes in the operating procedures of local businesses worldwide?

 With pubic safety becoming a top priority, business owners will need to adjust their operating practices to create new, different customer experiences that will sustain them in the coming days, weeks, and months. Yet knowing how these customer expectations will shift and where they will trend is really crystal ball stuff. 

We’ve written previously about some of the interesting data that McKinsey & Company has been generating, specifically its consumer sentiment tracking data.

There is a ton of deep data around consumer buying patterns, how those have changed, and how they will change. 

In order to meet the demands of the consumer and their changing behavior, we are certain that local business owners have rapidly been adopting new practices to meet these emerging and changing expectations.

The most obvious ones would seem to include:

  • Electronic payments
  • Contactless payments
  • Contactless delivery
  • Online commerce 
  • Swift digital presence updates
  • Customer list cleansing and updating 
  • Enhanced customer communication
  • Additional texting communication
  • Addition of chat communication   
Stopgaps vs Permanent Changes

Recently, McKinsey & Company published a piece that again caught our attention. McKinsey lays out an approach for figuring out how new consumer behaviors might evolve going forward. They layout the following considerations on a 2X2 matrix. 

  • Return to old normal Mature or less-relevant experiences that may not sustain COVID-19 growth spurts.
  • Exciting . . . for now Stopgap solutions with the potential for user erosion after the pandemic.
  • Potential to stick New experiences with momentum and the potential to be cemented in the next normal.
  • Fast accelerators High-performing replacements for traditional in-person experiences that will likely persist in the next normal.

Here’s the McKinsey matrix. 

 

The SMB SaaS Landscape

We decided to adapt this matrix to the changes to the SMBs SaaS landscape we expect to see based on the trends we’re seeing among companies operating in the space.

If we changed the matrix to reflect what business owners are doing differently, or more of, because of COVID-19, we could begin to see what the local SMB SaaS landscape might look like in the new or next normal.

Localogy Matrix
Low % of Use Post COVID-19  High % of Use Post COVID-19
High Growth Since COVID-19 Exciting for Now

Contactless delivery

Online commerce 

Fast Acceleration

Electronic payments 

Contactless payments 

Low Growth Since COVID-19 Return to Old Normal

Swift digital presence updating 

List cleansing and updating 

Strong Potential to Stick

Enhanced customer communication

Additional texting communication 

Addition of chat communication

Takeaways: Payment, Communications Have Legs

We believe new payment solutions are the biggest winners in this transition. Consumer concerns will force many businesses that were “ok with checks” to shift to some form of modern payment solutions.

In addition, enhanced communications modes like better email, texting, and chat have the potential to stick. Why? Because business owners will be required to reach out to their best customers and respond rapidly to their inquiries.

On the other hand, we’re not as confident that business owners will become more aggressive about updating their digital presence or cleansing and updating their customer records. These activities require more hands-on involvement. And as business activity ramps up, these may become lower priorities. 

In addition, contactless delivery and online commerce may hold up. Though as consumers adjust to the new normal (whatever that is) these could as easily taper off.

We believe that in the next normal, winning companies will capitalize on opportunities to adapt to evolving customer behaviors, deliver short-term business success, and strengthen their long-term strategic positions.

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