By Jim Magats
The way people shop and eat has been completely upended due to the pandemic. In a study done by PYMNTS and commissioned by PayPal, we examined the shift in consumers' shopping, eating and payment preferences and how retailers and restaurants can adapt to meet these rapidly evolving consumer demands.
While the transition from physical to digital commerce has long been underway, the pandemic has drastically accelerated the shift to online shopping. According to McKinsey & Company, U.S. ecommerce penetration saw 10 years growth in three months alone. The PYMNTS study further proves this acceleration – revealing that 40% of consumers have shifted from shopping in stores to shopping online. In fact, online grocery has increased by 4.5X, online retail has increased by 3.2X and online food ordering has increased by 4X.
These changing consumer habits are here to stay. Half of the retail shoppers who once planned to return to their pre pandemic in-store shopping routines now say they will keep their digital shopping habits, even after the pandemic is over. While these routines will soon be the new normal, businesses need to be vigilant and diverse in their thinking of how they’ll adapt, especially when it comes to payments.
Let’s take a look at some of the other habits we can expect to stick as part of retail and restaurants new reality.
It’s digital payments or bust
Consumers worry about the impact of COVID-19 on their health and see digital payments as an essential tool in keeping them safe. In fact, 57% of consumers say merchants’ digital payment offerings impact their willingness to shop in their stores and one-third of respondents would not consider making purchases in a physical store without digital payments.
Of the payment options available to consumers, many would not make a purchase at a physical store without contactless payment options including digital wallets (40%) and QR Codes (34%).
These numbers are even more pronounced when viewed generationally. While millennials and Gen Z are most accustomed to the ecommerce shopping experience, digital payments options in-store are far more important to them than to Gen X, baby boomers or seniors. Seventy percent of millennials and 71% of Gen Z report digital payments impacting their willingness to shop in store, compared to Gen X at 55% and baby boomers and seniors at 46%.
These findings paint a vivid picture of the need for not just digital options, but a variety of options for consumers to choose from in the checkout process.
Brand trust and loyalty reign supreme
Consumers are starting to place more of an emphasis on shopping directly with brands. A major reason for this being because they prefer to shop with brands they trust, according to 40% of respondents. Thirty three percent of respondents indicated they find better deals on a brands website and that it’s easier to find the offerings they are looking for when shopping direct. Toilet paper shortage anyone?
The desire to shop directly from a brand increases when examined by income bracket. Forty-four percent of consumers earning more than $100,000 per year are very or extremely interested in direct to consumer retail options. Compared to 31% of consumers earning less than $50,000 in annual income who expressed interest in shopping from a brand directly.
The difference in generations continues as 29% of baby boomers and seniors indicate they are interested in shopping directly from brands, while nearly half of millennials (48%) and Gen Z (40%) report a desire for shopping directly with brands.
Consumers are watching their finances closely
In addition to health concerns, consumers are strapped for cash and cutting back on spending is top of mind. Nearly half (47%) of unemployed respondents indicated they have less than $2,500 in their savings accounts. And 17% of consumers have no money in savings whatsoever. Consumers expect the pandemic to last 240% longer now than they did in April, further exasperating the financial strain and making credit solutions that much more in demand.
This is one of the reasons why PayPal has just launched Pay in 4, a short-term installment offering for customers in the U.S. Pay in 4 is part of our growing suite of Pay Later products, and comes at no additional costs to the merchant or consumer (if paid on time). With this product, merchants get paid upfront while enabling customers to pay for purchases between $30 and $600 over a six-week period.
With consumers financial security in flux, being able to leverage flexible financing solutions can make all the difference.
Advice for retailers and restaurants
The last several months have forced consumers both online and to demand digital solutions when in-store. And these shifts in behavior are here to stay.
This convergence of the physical and digital world has created a need for solutions to meet these changing demands. To start, retailers and restaurants need to provide payment options that offer consumers choice and cater to a wide variety of demographics. This means providing customers with digital and touch-free payment options, as well as money saving tools like flexible financing. All these strategies combined will help retailers and restaurants maintain customer trust and loyalty, maximizing conversion rates and boosting their bottom lines.
To access the full report, visit PayPal’s Business Resource Center.
The research was conducted by PYMNTS and commissioned by PayPal. It examines survey data collected from 2,163 U.S. consumers between June 22 and June 24, 2020. The report summary is supplemented by findings from a series of studies conducted by PYMNTS since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues.