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How brand share volatility is affected by COVID-19

by Norbert Herzog , 10.06.2020

Strong brands are the lifeblood to generate aspirational demand and to foster trust among consumers. But how are brands affected by the radical change in buying behavior caused by COVID-19? Do consumers keep their preferences for known brands in times of crisis—or do they change their loyalties, leading to volatility in brands’ share of the market?

What is brand share volatility index?

Brand share volatility index is used to measure the volatility of market shares among top brands in each product category. It is the sum of absolute values of all positive and negative brand share changes of these top 30 brands per category.

To understand this better, we designed an index to measure the volatility of market shares among top 30 brands per product group. It shows how much market shares differ compared to a normal period, the benchmark being week 1-9 in 2020.

Brand share volatility of top 30 brands in Germany

Germany’s shutdown of physical stores started in week 12 (March 16-22), creating a whole new purchase journey for tech and durable consumers. At the same time, demand patterns were changing radically. Some product categories show sustained alterations in brand share preference. What we have seen is that the coronavirus lockdown triggered massive changes in brands’ market shares in quite a few product groups – but reopening stores has not necessarily resolved this, depending on the product category. Some changes have continued, meaning that the crisis triggered sustained brand preference alterations as seen in the infographic below.

COVID_Graphics_June-01-version 2

Significant shifts in TV brands

TVs reveal quite unexpected brand share dynamics. Like other categories, brand shifts for TVs peaked during the lockdown period and recovered once stores reopened. But then, during weeks 19-21 (May 4-24), there was another shift in brand shares–and it was significant. Notably, this second wave is not due to a value-for-money demand kicking in but rather the opposite, as it is the large screen sizes that continue to grow.

Not all leading brands have been able to fully exploit this opportunity. In fact, challenger brands from China are gaining traction in times of high brand volatility. This threatens established players at an accelerated pace – triggered by crisis times.

Brand share shifts in the photography industry

The photo market also experienced similar massive shifts in brands’ share of the market, despite this being a very concentrated industry (top 3 brands share 67% of the market).  Some of the challenger brands gained traction during weeks 10-18. Certain unique segments like kids' camera witnessed traction during these weeks whereas the leading brands displayed a mix effect. Some leading brands bounced back very strongly, gaining shares post-lockdown while certain others lost share compared to pre-coronavirus weeks.

Vacuum brands remain stagnant

The vacuum cleaner market remained relatively stable. Vacuum brands, on the other hand, behave quite differently in general. Here, we have seen little to no change in brand shares compared to the benchmark, despite this market being less concentrated: the top 3 brands only account for 31% of the market. Certain online dominant robot brands experienced positive traction during and post -lockdown weeks owing to the channel effect. Meanwhile, some highly offline dominant brands witnessed fluctuations before and after the COVID-19 lockdowns.

Does brand share volatility open an opportunity to challenge leading brands?

In many large categories, leading brands have experienced a big threat of losing market share during country lockdowns, and that threat is not over once stores re-open. Times of disruption open doors for change and competition intensifies as retailers may be forced to try new alternatives and will then judge the brand based on their sales performance. According to sales in week 21 vs. weeks 13-16, Asian brands (particularly Chinese brands) are taking advantage of the crisis and have upped their brand share growth in post-lockdown Germany.

COVID_Graphics_June-03 -version 2

It would also be crucial for leading brands to understand the impact and power of a brand switch by consumers who end up trying a new brand during crises and would go forward with that new brand in the future. At the same time, collaboration during times of crisis offers unique opportunities to enter a new level of business relationships that can then be sustained going forward.

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