I’d never heard of a K-shaped recovery until this week, but it makes sense. It predicts more affluent professionals being less affected by the Covid recession, and recovering more quickly; while those in retail, leisure and manual jobs are more severely impacted, recovering at a much slower rate. This trend would appear to be emerging in our lockdown households with wave 4 showing increasing concerns around job losses. If you haven’t read it yet, click here.
This ‘great divide’ of money is being matched, during Covid-times with a ‘great divide’ in confidence around safety too. Older consumers in particular are uneasy about going out, and with local lockdowns in place across areas of the country, and the arrival of winter weather, it’s all looking a bit depressing.
When things are starting to get tough, I like many consumers look for comfort in food form. Whether it’s sharing something baked on Instagram, cooking a romantic meal, or making a simple family meal, food connects us as well as giving us a sense of purpose.
Every category is different, but for me, this concept of a K-shaped recession is an interesting way to think about changing consumer missions within categories. It suggests that categories are likely to need to meet the missions of two distinct consumers with polar opposite needs. On the one hand those highly motivated by value for money, and on the other will those driven by quality and premium products. Common to all, is a change in lifestyle i.e. less frequent eating out, either because of restrictions, anxiety or financial constraints
This all suggests to me, that now is not the time to stop innovating. Rather, really understand how your consumers’ needs are changing and evolving, and how you can meet their needs. It is becoming increasingly likely that this isn’t going to be a short sharp V-shape recession so we need to prepare for the long haul and ensure that in retail at least, categories thrive through innovation.
There are a few simple examples of retailers innovating to suit this K-shaped recession. Iceland with their increased promotion of their exclusive Greggs range, while Co op and Asda have concurrently launched a new range of ‘takeaway at home’ meal kits, developed during lockdown. We’re all familiar with this concept for ethnic food, but their Piri Piri boxes feels inspired to me.
The other end of the spectrum is where Foodservice outlets have had an interesting impact. While many have been forced to close (especially in Scotland), the return of restaurant meal-kits is very much to the fore, with average prices for cook at home meals of £40-£50 for 2. It’s a level of spend detail and personalisation we just don’t see in food retail and is likely to appeal to those less impacted financially by the recession.
So, what’s the big message? Think about how a K-shaped recession would affect your business now, do you know where do your consumers sit in terms of likely impact, and in a year from now what can you say you’ve done to help them weather the storm. Be clear what your role is in the categories you operate in.