RESEARCH REPORT

In brief

In brief

  • New patterns of consumer behavior may endure long beyond the COVID-19 pandemic.
  • The ripple effects will reshape value chains―redistributing more than US$3 trillion of value to other sectors.
  • Businesses that best anticipate the impacts will reap the benefits.
  • Leaders can prepare for this fundamental shift by asking five critical questions.


Countless stories and articles have examined the massive impacts of the COVID-19 pandemic on industries and economies. Behind each of these―often overlooked and underestimated―is an intertwined network of second- and third-order effects that are rippling through value chains.

Accenture Strategy estimates the most important impacts will result from a reshaping of interconnected value chains and a fundamental restructuring of the global economy driven by long-term shifts in consumer behaviors.

To bring this interconnectivity to life, we analyzed three trends characterized by significant shifts in value: people avoiding public spaces, flying less, and spending differently.

We discovered that more than US$3 trillion may either shift to other sectors or be lost entirely, creating losses for many but opportunities for those that best anticipate the impacts.

Value chains are being reshaped—redistributing more than US$3 trillion to businesses that best anticipate the impacts.

Under pressure

As a result of behavioral changes, corporate liquidity and revenue streams across a range of industries may suffer. This will also create opportunities for others.

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1: The decade of the home is here

After months of adapting to the pandemic, some new consumer habits may become permanently entrenched. As individuals continue to avoid restaurants, gyms, and other public spaces, we estimate more than US$2 trillion of annual value may shift from sectors such as restaurants, retail, and commercial real estate.

For example, demand for office space has already declined sharply. This is driving second-order effects for shops and eateries that rely on office workers, as well as for companies that manage corporate real estate. Retail and leisure sectors are seeing value redistributed too, as consumers increasingly switch to eCommerce and digital entertainment options.

Consumers will still spend money on food, recreation, and entertainment. Where and how they spend it will highlight which companies are best prepared to capture consumers’ future share of wallet.

2: Travel gets (re)grounded

Since the start of the pandemic, suppressed demand for air travel has sent ripples of disruption across airline ecosystems. We could see travel volumes picking up once an approved vaccine is widely available and travel restrictions are eased. However, it is now also likely that we will see moderate drops in longer-term demand, such as for business travel due to a shift towards online meetings.

Even a moderate drop in airline demand could trigger second-order effects across the entire airline ecosystem―impacting company earnings outlooks, bankruptcies, and industry consolidation.

If the continued slump in air travel persists, then the industry will be redefined, with up to US$318 billion of annual value flowing to different industries and ecosystems.

3: Savvy, sustainable consumption is sustained

As the economic downturn persists, several international statistics agencies are warning of "consumer scarring," where there is greater permanency to consumer behavioral shifts. Consumers are saving more money than usual, and they are looking for bargains. Our COVID-19 Consumer Research found that 29% of respondents expect to spend more on budget brands, and 42% of respondents expect to spend less on premium brands.

Reduced consumer spending may extract up to US$687 billion in annual value from consumer-facing industries. For many consumer-facing companies, these trends create new risks as they shrink addressable market sizes. Companies with budget or value brands are likely to benefit.

Before the pandemic, we saw growing demand for sustainable and ethical choices. As the economy moves through this crisis, we expect responsible consumption to persist as a long-term trend. Companies that keep sustainability and purpose central as they make their shifts will position themselves well for market share gain and long-term growth.

Changing shopping preferences may cause consumer-facing brands to lose up to US$687 billion of value annually.

Prepare to shift

The current pandemic could potentially redistribute trillions of dollars in value between industries and their ecosystems if even small changes in consumer behaviors become permanent.

To prepare for this value shift, companies should assess where there will be new pockets of value in the economy. The following questions can be used to help identify and capture the value, and anticipate the impact of second- and third-order effects:

1. Are we truly consumer obsessed?

While businesses today may collect vast amounts of data, what’s crucial is to translate this data into insight-driven decisions. This requires strong analytics capabilities―from data collection, to aggregation, to insight generation―allowing businesses to conduct "dynamic demand sensing" and shift operations in real time.

2. Are we rethinking our value structure?

The pandemic has the potential to fragment demand and profit pools, causing many industries to restructure significantly. By following the data, businesses can anticipate and get ahead of looming changes to their industry value structures.

3. Is our business model still relevant?

Companies need to ensure their business models stay relevant and cost effective. eCommerce and direct-to-consumer models are accelerating in importance. These business model shifts will create new challenges, such as providing last-mile delivery at a cost-effective rate while keeping environmental implications in mind.

4. Is our operating model modular and flexible?

Companies need agile operating models to respond swiftly to market changes and adapt to new ways of working. This means having the flexibility to turn data-generated insights into organizational change and built-in modularity coupled with adaptiveness to scale up and down as consumer demand changes.

5. Do we have the right capabilities?

As value is redistributed, certain capabilities―such as digital―will become more essential and others less so. To create long-term strategic success, companies must be able to identify and access necessary capabilities. Ultimately, leveraging the wider ecosystem expands a company’s ability to align to shifts in consumer behaviors.

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The COVID-19 pandemic has been the most significant exogenous shock that we have seen in decades. To navigate their way out of this crisis, it is imperative that business leaders re-evaluate how they think about value chains. To do so, they will need a data-driven, analytical approach to improve visibility over their interconnected value chains. This will allow businesses to truly understand the Big Value Shift and act with urgency.

About the Authors

Kathleen O’Reilly

Lead – Strategy


Karen O’Regan

Managing Director – Accenture Strategy, Ireland Lead


Oliver Wright

Consumer Goods & Services Global Lead


Jill Standish

Senior Managing Director – Global Lead, Retail


Emily Weiss

Managing Director – Strategy & Consulting, Travel Lead


Katherine Dunn

Senior Manager – Accenture Strategy​


Chris Tomsovic

Senior Manager – Accenture Strategy

Contributors

Jeffrey Berry

Managing Director – Accenture Strategy


Tomas Castagnino

Thought Leadership Research Sr Principal & Economic Modeling and Data Science lead – Accenture Research


Nicole Kozlak

Consultant – Accenture Strategy


Andreas Kyprianou

Consultant – Accenture Strategy


William Snowden

Consultant – Accenture Strategy

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