Higher School of Economics
Akku Yelamanova Assyl Alkeyeva Karlygash Yessimova Khilola Shabdurakhmanova
Malika Bergaliyeva
New patterns in Customer behavior and marketing tactics of brands in Retail and HoReCa industries during pandemic in Kazakhstan
Thesis submitted for the degree of Bachelor in 6B04101 Accounting and Audit
6B04104 Finance 6B04106 Management
Supervisor: Azamat Gimranov, MBA, LLM
Nur-Sultan 2021
2 Abstract
The COVID-19 has greatly affected all people’s lives around the world as in Kazakhstan. The purposes of this study are to compare how much the pandemic has affected the consumer behavior of Kazakhstan citizens with regards to food purchases and take-away food before and during the COVID-19 outbreak and to determine what marketing tactics were used by cafes, restaurants and supermarkets in order to stay alive during the pandemic that forced them to implement digitalization in their business processes.
On the basis of problems that people and businesses have encountered with the advent of coronavirus in 2020, a mixed method research was conducted in the form of interviews and an online survey among Kazakhstanis. According to the answers obtained from the interview digital marketing got the most attention. Marketing strategies of the Retail and HoReCa brands in Kazakhstan have changed towards digitalization due to the COVID-19. From the survey analysis, on the whole digitalization and online shopping is taking place in Kazakhstanis’ everyday life. The vast majority of Kazakhstanis are reevaluating their consumer habits and adapting to the changes that the pandemic has resulted.
It is a practical research that allows us to have a fresh look on how slowly but steadily digitalization is ingrained in people’s daily life as well as affecting business operations within the companies.
Keywords: Kazakhstan, pandemic, COVID-19, consumer behavior, marketing tactics and activities, supermarkets, cafes, restaurants, digital.
3 Acknowledgments
We would like to thank the following people without whom we would not have been able to complete this research and without whom we would not have made it through our bachelor's degree!
The HSE office of our university, especially to our supervisor Azamat Gimranov, whose insight and knowledge into the subject matter steered us through this research and whose support allowed our studies to go the extra mile. To CEOs, co-founders, marketing and brands managers of all cafes, restaurants and supermarkets who agreed to give us an interview and, moreover, set aside time for online meetings to provide more detailed information about their business as well as thanks to all the people who took the time to participate in our online survey without which we would not have the content of our thesis.
Our biggest thanks to our families for all the support they have shown us through this research, the culmination of four years of learning. To each other - the authors of this study, for all support and teamwork, without which we would not have coped with writing the thesis. It is the best team we could ever ask for.
4 Table of contents
1. Introduction 6
1.1 Research questions 7
1.2 Significance of the study 8
1.3 Hypothesis 8
2. Literature review 9
2.1 Background 9
2.2 Statistics 10
3. Methodology 15
4. Research results, findings and analysis on marketing activities of brands in Retail and HoReCa
industries 17
4.1 Marketing tactics of Retail during the pandemic 17
Galmart 17
Magnum 18
4.2 Marketing tactics of HoReCa during the pandemic 20
Jasyl coffee 20
Asiatiq 21
Svoy 22
Take Eat Easy 22
Del Papa 23
5. Research results, findings and analysis on consumer behaviour patterns during the pandemic 25
Conclusion 39
Recommendations 42
Bibliography 43
Appendices 46
Appendix A: Interview and survey questions 46
Appendix B: List of cafes, restaurants and supermarkets 48
5 List of Abbreviations
COVID-19 ... Corona Virus Disease 2019 WHO ... World Health Organization CEO ... Chief Executive Officer
HoReCa ... Hotel, Restaurant, Café/Catering iOS ... Iphone operating system
PwC ... PricewaterhouseCoopers QR ... Quick Response Code
6 1. Introduction
Pandemics have the potential to cause extensive illness and deaths rate, and also social, political, and economic disruption. (Jamison D et al., 2017). The COVID-19 first appeared in China, the virus spread extremely quickly and, in a few months, the coronavirus covered other countries and hundreds of thousands of people were infected. (MphOnline, 2020). In Kazakhstan the first case of COVID-19 was detected on March 13, 2020, after that official lockdown started on 19th of March and ended on May 11th 2020. When in Kazakhstan the first case of infection was detected and announced, citizens were stuck in panic and most of the people were afraid to leave their houses. People were encouraged to keep the social distance and follow recommendations that were given by WHO and the government. The pandemic significantly changed the lives of people all over the world. People's daily habits are changing as a result of living in a new normal. The pandemic has affected not only individuals but also small, medium, large businesses and corporations since nobody was able to predict the start of the pandemic.
Businesses were negatively affected as a result of the country's lockdown. Many citizens learned to adapt to the conditions that led to COVID-19. Cafes and restaurants and supermarkets have begun to adapt to the new market rules. Businesses had to create safe and comfortable conditions for customers to buy and order products and goods. Both for consumers and for business owners the start of pandemic was a surprise and a challenge. For many businesses, this event became a tipping point and for others it was a growth point for rapid development for digitalization. According to the findings of a survey conducted by McKinsey & Company (2021) states that consumers have shifted rapidly to online channels since the beginning of pandemic, in response, businesses and industries have reacted. The findings of the survey reinforced the fast-growing trend of engaging with customers across digital channels. (Aneesh Reddy, April 14, 2020) claims that businesses in the retail industry were aimed at boosting growth and gaining market share for physical stores. Promoting and increasing traffic to their online shop was not a top priority for them.
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In our research work we analyzed the new marketing tactics and consumer behavior in the HoReCa and Retail industry. HoReCa is one of the fastest growing and changing fields. According to a research report Eurofound (2018) the HoReCa industry is divided into two subsectors: (1) hotels and accommodation and the second, (2) Food and Beverage in bars and restaurants.
Food and Beverage is the largest sector in this industry, for this reason our research team has agreed to focus only on this sector, also businesses in the Food and Beverage sector greatly suffered. During the peak period of coronavirus infection in Kazakhstan, the retail industry was under great pressure. Such large retail grocery stores as Magnum, Small and Galmart had to take active marketing measures in real time without planning all their ideas.
Consumer behavior is a complicated field. Nevertheless, prior buying decisions can be used to predict how a person would act in a purchasing situation. Consumer behavior is changing constantly over time.
A variety of factors influence consumer purchasing decisions. (Chand, S. 2014). The outbreak of the pandemic and its subsequent consequences have led to changes in consumer behavior. Many patterns have adjusted, some have disappeared and new ones have appeared.
The fear has forced people to shop online and they began to visit supermarkets less often, once or twice a week. At this time, delivery of food from supermarkets and cafes and restaurants began to develop rapidly among the population. In the work Donthu, N., & Gustafsson, A. (2020) argue that consumers learned to adapt readily and undertake new approaches in order to deal with government-imposed restrictions.
1.1 Research questions
The main research questions of the study are following:
1. What actions did Kazakhstani brands undertake to survive during the pandemic and how did the pandemic affect their businesses?
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2. What marketing activities were run from the beginning of the pandemic by supermarkets, cafes and restaurants in Kazakhstan?
3. Did pandemic change consumer behavior of Kazakhstani people, therefore shifting people to online purchases and ordering?
4. How has the pandemic changed consumer behavior in relation to food purchases?
1.2 Significance of the study
The importance of this research is to identify the new patterns of consumer behavior in Kazakhstan and reveal new marketing tactics that brands have performed in a crisis situation. Combined, this research will enable local businesses to adjust their marketing strategies to new habits and patterns of consumers, increasing effectiveness of campaigns and improving internal operations.
1.3 Hypothesis
H1: During the pandemic Kazakhstani citizens are making a vast majority of their food purchases online than ever;
H2: Kazakhstani citizens are intended to shift their spendings largely to essential food products;
H3: Brands in Retail and HoReCa industries increased their budgets on marketing activities;
H4: Businesses in Retail and HoReCa industries developed delivery services only when a pandemic has started.
9 2. Literature review
2.1 Background
A substantial number of sources were considered before starting the research. It was recently revealed, according to one of the credible Internet sources - Forbes.kz , how much Kazakhstanis spent on food during the 2020 pandemic.
Household cash expenses totaled 566.3 thousand tenge in the second quarter of 2020 year, up 4.2% year on year. Food expenditures accounted for 53.2% of overall household expenditures or 301.1 thousand tenge. It's worth remembering that a high percentage of family spending on food is a bad sign. The food basket accounts for less than 10% of expenditures in countries such as the United States, Singapore, the United Kingdom, Ireland, Canada, Switzerland, Australia, and Austria. Food occupies a smaller portion of a country's budget as it becomes more industrialized and wealthier.
COVID-19 lockdown has witnessed a sudden rise in the online sales of consumer goods like groceries through the emerging online platforms. Long before the pandemic, the e-commerce industry was slowly gaining traction, however since the implementation of the pandemic lockdown, e-commerce firms have been under pressure for vital products like food and drugs, which can be seen as both a challenge and a larger opportunity. (Mukherjee.W, Bailay. R, Srivastava.A , 2020)
According to the research of McKinsey (2020, July 7) which states that consumers in the United States and most European countries expect to use online platforms after the crisis ends. In China, a large number of respondents are going to continue to shop online after COVID-19 by increasing the spending on online purchases. The way people worked, went shopping, and interacted with others has changed as a result of the COVID-19 pandemic. Since they are increasingly concerned about infection, people have started going out just to buy basic necessities at retail stores. (Aneesh Reddy, 2020). Despite the fact that global customers are losing income, the extent of the loss varies greatly between countries. Consumer income in Brazil, South Africa, and India has been hit the hardest. Also, in China, where many people have returned to work, 55 percent of people say their income has decreased. (McKinsey, 2020, July 7)
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In the research from Accenture (2020, April 28) it was found that consumers’ buying patterns are shifting, and many of these new models of behaviors will persist after the outbreak of COVID-19. Moreover, people are shopping more consciously, buying only basic needs and e-commerce.
2.2 Statistics
In the six months since the start of the COVID-19 pandemic, Kazakhstanis have developed certain consumer habits. During this time, the lifestyle, preferences and priorities in expenses have changed, people have focused on basic values: health, family, home and healthy, high-quality food. Several statistics, compiled from various sources, have been examined in order to understand how the consumer purchasing behavior has changed and how Kazakhstan has demonstrated itself in a crisis situation.
The presented combo chart above compares the volume of consumer spending on food and non-alcoholic beverages starting in the first quarter of 2019 and ending in the fourth quarter of 2020, covering the transition of pre- and post-COVID-19 life. According to the calculations of Ranking.kz based on the data of the Bureau of National Statistics of the Agency for Strategic Planning and Reforms of the Republic of Kazakhstan, expenditures on food, on average, per household in the Republic of Kazakhstan in the fourth quarter of 2020 amounted to 319.4 thousand tenge, which is 15.8% more compared to the same period
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last year. The share of food expenditures in all consumer spending reached 52.7%, against 49.2% a year earlier. Mainly, for 2020, the figure was 54.2%, against 49.4% in 2019.
The provided chart above gives information on the percentage of food and non-alcoholic budget spending and the results are broken down into 14 regions of the Republic of Kazakhstan and three major cities in Kazakhstan (Forbes Kazakhstan, 2020). In the regional context, residents of the capital spend the least on food: 44.3% of the total expenditures. The best indicators were also noted in the North Kazakhstan and Kostanay regions: 45.3% and 45.5%, respectively. In just 5 out of 17 regions of the country, residents spend less than half of their total expenses on food. At the same time, the largest share of food costs is observed in Turkestan (65.6%), Mangistau (62.5%) and Atyrau (61.5%) regions. Meanwhile, in the cities of republican significance - Almaty and Shymkent - the share of household expenditures on food was 49.6% and 52% of total expenditures, respectively. The highest expenditures on food were incurred by households in Atyrau (404.7 thousand tenge in the fourth quarter of 2020), Turkestan (393.2 thousand tenge) and Kyzylorda (383.6 thousand tenge) regions.
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Conforming to the Ranking.kz (Bureau of National Statistics, 2021), figures 3 and 4 above show that 18.6% of consumer spending on basic food products fell on meat and meat products in the fourth quarter of 2020. Another 7.8% falls on bakery products and cereals, 5.2% - on milk and dairy products. Moreover, each Kazakhstani consumed on average 21.3 kg of meat and meat products, 35.5 kg of bakery products and cereals, 63.4 kg of milk and dairy products from October to December of the same year.
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In January-December 2020, food prices increased by 10.6% compared to January-December 2019. The largest increase in prices was noted in the capital and Pavlodar region (by 11.2%), as well as in Shymkent (11.1%). Prices for meat and meat products increased in Nur-Sultan by 12.7%, in Pavlodar region - by 11.2%, in Shymkent - by 10.9%. On average in Kazakhstan, meat and meat products rose in price by 12.1%.
Figure 5: Price of alcohol and convenience food
Two charts above represent information for specific consumer goods such as alcohol and convenience food provided by the оofficial Statistics committee of the Ministry of National Economy of the Rеpublic of Kazakhstan. We can see that in 2020 the average price fоr alcoholic drinks slightly increased by 3% in May compared to February. Furthermore, the average price for convenience food had 3.3% growth during the COVID-19 pandemic.
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Pandemic has escalated popularity among large food delivery aggregators and online supermarkets. The chart above reflects the favour of food delivery services in Kazakhstan. The most well-liked services are Glоvо, Wоlt, Arbuz.kz and Yandex food. It is clearly seen that the popularity of such services quickly increased during the pandemic. Fоr instance, the need for Glоvo, Wоlt and Аrbuz.kz services increased by 50%.
Statistical data provided above will assist to compare and balance the actual case in Kazakhstan with results of the survey and disclose some insights.
15 3. Methodology
A mixed research method was used in the study, which is a combination of qualitative and quantitative research methods. These two types were chosen to build a full picture of the research. For identifying and analyzing new patterns of consumer behavior a quantitative research method was used. To scrutinize changes in marketing strategies and how the pandemic affected the brands in Retail and HoReCa industries, a qualitative research method was applied.
In quantitative research an online survey was conducted among Kazakhstani citizens. The questionnaire was conducted with the help of Google Forms. It was used due to simplicity and accessibility of the use.
The survey was spread through social media channels like Instagram, LinkedIn, Telegram and WhatsApp.
The total number of respondents was 720 people. The survey consisted of 32 multiple choice questions, 10 rating scale questions from 1 to 10. Questionnaire was anonymous, it took approximately 5-7 minutes of respondents' time to answer the questions. The survey questions can be divided into three groups: (1) 22 questions for identifying respondents’ preferences and new behavior pattern during food shopping before and during the pandemic time, (2) 14 questions about respondents experience, preferences and new eating habits in relation to cafes and restaurants during and before the pandemic, (3) 6 socio- demographic questions (age, gender, marriage status, city, occupation, income level). The survey was tested by authors, drawbacks were identified and a couple of questions were improved.
The qualitative part of the research consisted of in-depth interviews. We conducted online interviews through the Zoom platform with CEO’s and marketing managers of brands. In the retail industry, the largest and most popular supermarkets were selected among the citizens: supermarkets that are actively working on their marketing tactics. Additionally, restaurants and cafes were not selected randomly, they were chosen based on the popularity and the great demand during the pandemic. Since from the beginning of the pandemic they were active on social media and quickly adapted to the new standards that were required. The interviews were taken from five cafes and restaurants and two supermarkets. The interviews
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were semi-structured and lasted from 15 to 40 minutes. Only two interviews were recorded, others requested not to make the recording.
During the interview phase, the research team faced obstacles. Four retail companies and four restaurants rejected the request and refused to provide necessary information. In addition, the research team wanted to conduct video interviews with each companies’ CEOs and marketing managers but due to their workload, they were not able to give video interviews, therefore interviews were taken through voice messages.
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4. Research results, findings and analysis on marketing activities of brands in Retail and HoReCa industries
4.1 Marketing tactics of Retail during the pandemic
During the research work interviews were conducted with the help of large retail companies such as Magnum and Galmart. These companies are engaged in sales of food and non-food products of universal range mainly in the form of self-service. Throughout the interview process, questions were asked regarding their marketing strategy, the financial part and connecting to aggregators. An interview was conducted with CEO Azamat Osmanov of “Magnum Cash & Carry”, as well as with Marketing Manager Almira of “Galmart”.
Galmart
Galmart is a family-run supermarket that delights its customers with the unique taste of home-made food, quality service and pleasant interior. It has a wide range of Kazakh and imported food products, elite alcoholic beverages and stylish home goods. Galmart is positioning itself as a premium supermarket, consequently the main target audience is the above-average earning customer, as well as for foreign customers.
During the pandemic, people developed a fear of leaving home and purchasing freely. Customers' habits and behavior have changed and, in this situation, Galmart focused primarily on improving customers' well-being and loyalty programs. Galmart decided to change its marketing strategy during the pandemic by focusing on digital activities, where it built trust with customers through content marketing in order to increase the audience. Accordingly, social media content was useful and entertaining: reminders about sanitary norms and wearing masks, tips on choosing products that are important for maintaining and improving immunity, tips for improving the interior of one's home or apartment, there were also surveys and posts in a game format to directly connect with the audience, as well as actions to attract new audience and increase engagement in social media.
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In addition to social media activity, Galmart was quick to refocus during the crisis and within two weeks created a website where customers could shop from home. More than half of the customers began buying more groceries on reserve because of the "panic demand". This increased the number of sales, even though the price of certain products increased. Shoppers tended to reduce the number of visits to the supermarket and online shopping became a great alternative. Galmart also decided not to connect to any aggregator but to connect its own delivery service to maintain quality service.
Magnum
Also, one of the leading retail companies in Kazakhstan - Magnum. Magnum is the largest retail and business network in Kazakhstan and is one of the ten largest private companies in the country. They sell consumer goods. The chain owns 94 retail complexes of different formats (hypermarkets, supermarkets and "Magnum-express" stores). Magnum chain stores follow the policy of "democratic" prices for the most popular consumer goods. Thus, it positions itself as a supermarket of economy class for the average or below average salary client.
One of the main positions of the company is to make decisions quickly and flexibly and rebuild processes.
Magnum, in its marketing strategy for attracting more customers, constantly launches various promotions and sales, discounts could reach 70%. But during the pandemic, in addition to permanent promotions, Magnum decided to change its marketing strategy by focusing on digital marketing. Thus, began to develop a website, an application for online shopping, coordinate delivery service and develop a marketing plan where the main objective is to provide support, to improve the well-being of people in social networks, as well as to attract new customers to shop at Magnum.
Most of the content on social media was propertyand entertaining: constant warning about sanitary norms and wearing masks, heading with recipes for home cooking, eco-section, and there were also surveys and
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mini games in instagram stories to directly connect with the audience. A frequently asked question on social media was about a platform where customers could buy products online, primarily for health purposes. Following customers’ feedback, Magnum launched the Magnum Go mobile app. Magnum Go is a grocery delivery service operating in major cities of Kazakhstan, in which the Magnum Cash & Carry retail chain is represented. Orders can be placed through the mobile application Magnum Go, available for download on iOS and Android. Products can be found in a specific section or go to the "All Products'' tab and enter the name of the product in the search bar above. For the delivery, Magnum trained its employees, who had more free time. They were quickly retrained in the so-called "University of Professions" (a structural subdivision of the company). The training process, by the way, takes place remotely. This helps to cover a large number of people in all the cities where Magnum is present without breaking quarantine and without spending money on offline activities (travel to and from the training center, accommodation, meals).
The leaders in sales are essential goods, which themselves are low-margin and in addition, require extra- operational costs to ensure their continued presence on the shelves. At the same time, higher margin goods have become less sold which has affected the financial part of Magnum.
In the end, pandemic made a big contribution to the development of the retail companies, as they had a situational marketing where they decided to move towards digital marketing. Retail companies changed their marketing strategy to personalize and tailor their offerings to the ever-changing needs of consumers.
For example, before the pandemic, online shopping lagged far behind; the pandemic accelerated its growth during the isolation. And express delivery services have saved time and brought online and offline services closer together. The high popularity of social media has allowed Magnum and Galmart to take advantage of these channels as a way to share experiences and product reviews. To build consumer trust and attract customers to their online stores, the companies focused more on content. At the same time, half of consumers are not ready to completely switch to online shopping and prefer to go to the store.
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Therefore, for further turnover growth, retailers will have to undergo a digital transformation that considers current online and offline trends.
4.2 Marketing tactics of HoReCa during the pandemic
The pandemic has brought big shifts to the HoReCa industry. During the lockdown and the pandemic peak in Kazakhstan, all public catering facilities were closed.
Jasyl Coffee, Asiatiq, Svoy, Take Eat Easy and Del Papa restaurants were interviewed to find out how the pandemic affected them and how they were dealing with quarantine constraints.
Based on the analysis of all interviews stand out a series of general issues. First, rebuilding the business under new conditions was a quite complicated task for the industry. All restaurants in the context of the pandemic have switched to digital marketing, thereby starting to expand their business by delivery services. At the same time, another crucial challenge was to understand how it is advisable to implement modern technologies, while distinguishing them from their competitors.
Jasyl coffee
The founder planned to promote the new business through selling green Japanese matcha tea. The pandemic made a big adjustment to his plan. The main obstacle was panic. The owner said that when there was a quarantine, everyone was staying at home, they did not know what to do. The entrepreneur studied everything through the Internet. The pause in business was helped by the fact that he had to learn from foreign representatives with interesting chips via the Internet. Features of Jasyl coffee were the recipes for making our signature coffees. For example, the recipe for strawberry latte attracted a lot of people's attention.
The business has evolved. The removal of quarantine restrictions has aided in the expansion of business.
People began to stroll through the parks and boulevards, but the restaurants were still closed. The cafe's
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excellent position on the boulevard helped in increasing sales. People began to arrive and order drinks.
The cafe quickly adjusted and began preparing food, including sandwiches for picnics.
After analyzing the market, business aggregators were not connected due to unfavorable conditions for small businesses. The founder attributes the success of his cafe to two factors: (1) the pandemic, and (2) the ordinary, unique nature of his product.
Asiatiq
Asiatiq was opened before the beginning of the pandemic and lockdown. One of the first challenges was finding medical supplies: antiseptics, masks, protective suits for employees. At the peak of the pandemic, medical supplies were in a short supply in Kazakhstan. Whеn the quаrаntinе wаs announced, the restаurant tооk advаntage of the opportunity to start working on delivery.
Work with business aggregators began during the pandemic. Zhannat, founder of the restaurant, entered into cooperation with Glovo, the terms of other business aggregators were not favorable. Cooperation with Chocofood was not profitable. Their terms were the first month of their company's customers a discount of 70-80% on all the products of the restaurant.
Before the pandemic Asiatiq launched marketing activities through Instagram without the help of social media bloggers and advertising agencies. There was a good influx of customers after a few months of campaigns. The first weeks brought them $1 million in revenue.
During the pandemic, the income dropped significantly. Since a percentage of the revenue was allocated to delivery, the revenue did not exceed 150 thousand tenge in 8-9 days. The restaurant was operating at a loss.
Svoy, Take Eat Easy and Del Papa restaurants were more successful than others during the lockdown and the pandemic.
22 Svoy
When the pandemic and lockdown began in mid-March, the Svoy restaurant made a large purchase of vegetables and meat. The restaurant has its own brewery and more than 5 tons of beer were brewed for the Nauryz holiday. One of the first obstacles was where to stock it. The restaurant found a way out of the situation by giving all of their items to their workers at cost price as part of their salaries.
During the pandemic, the restaurant reacted rapidly to the change in working conditions. The staff was reorganized. Waiters and bartenders doubled as food couriers, delivering in vehicles. Svoy arranged sales and deals as part of active delivery. The manager attempted active promotion prior to the pandemic.
In addition to the promotions and discounts, the restaurant has begun to engage in marketing campaigns such as social media mailings to loyal customers. It was only possible to stay afloat because of loyal customers. It's been 5 years since the restaurant first opened its doors. Regular customers appreciate the loyalty due to the high quality of the products, the interesting menu, atmosphere and customer service.
Besides the staff changes, the restaurant has joined business aggregators such as Glovo, Yandex Food.
Glovo agreed to lower its commission rates. There was no cooperation with Wolt; their office is in Barcelona and negotiating concessions was difficult.
According to the co-founder, the success of Svoy in several factors: (1) loyalty of regular customers, (2) availability of own premises and (3) staff restructuring.
Take Eat Easy
For Take Eat Easy, the obstacle was conditions of quarantine. The co-founder said: “The only way is delivery. Either you work hard, invest in delivery, or you shut down." The restaurant started investing in delivery. The new menu was designed specifically for the delivery requirements.
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Main promotion channel was Instagram. The website was professionally designed, aggregators were connected additionally. Take Eat Easy quickly adapted to the consequences of the pandemic. A month later, the delivery made up 60% of the total revenue before the pandemic. Formerly, delivery made up from 3% to 5% of revenue.
The co-founder believes that the pandemic has changed people's habits and a very small number of people go to restaurants and cafes in Kazakhstan. Delivery itself began to grow, even if people did not go to restaurants before, they began to order because they began to get tired of constantly cooking at home.
Take Eat Easy tried to add an emotional twist to their delivery that made people feel like they were receiving a product from a restaurant. For example, they made notes, postcards or sent vitamin teas. One of the interesting tricks invented during the pandemic is breakfast sets, which immediately attracted the attention of the audience, increasing the demand for the meal. The restaurant was the first to use the QR based menu (contactless menu) during the lockdown. This boosted sales and demonstrated to customers that the restaurant cares for them.
People started to walk more after the pandemic, which resulted in a major rise in the HoReCa industry.
After coming out of quarantine, sales indicators of cafes increased by 20-30% as a result of the impact the restaurant received because of the pandemic.
Del Papa
Before the outbreak of the pandemic, Del Papa launched its own delivery service, which has been vigorously promoted since the start of the 2020 winter season. By the spring of the lockdown announcement, the restaurant chain was able to declare and aggressively promote its own delivery even more. During the COVID-19 Del Papa restaurants were able to remain operational, providing both jobs and maintaining the integrity of the business.
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The restaurant quickly adapted to the demands of the market. Through the app and delivery, they sold the necessary goods like wet antibacterial wipes, reusable masks, antiseptics, which were not enough in the city. In addition, the product line included such topical products as breakfasts, coffee, burgers and "cook it yourself" sets, which were in great demand among the guests. During the lockdown, there were many challenges and new challenges for growth.
The restaurant has adapted its product to the outcomes of the pandemic. Owing to the difficulty and duration of preparation, some meals were excluded from the menu. Additional employees were recruited to the restaurants as assistants to the pizza men (pizza is the most common commodity in the business), order collectors are a different individual who collects only delivery orders. A combo collection of some of the most common dishes was created and launched at a lower price than the separation.
Restaurant sales dropped by 80-85% from its expected level during the rough lockdown. The delivery was able to produce revenue in the range of 15-20% of the anticipated turnover. Prior to the pandemic, the marketing campaign emphasized dining out, so there were small, regular special deals (weekend offers), collaborations with Ticketon (ticket buyers received dessert at Del Papa restaurants).
Throughout the pandemic marketing efforts grew in size and frequency. More emphasis was placed on delivery services. The restaurant held raffles for delivery. They also introduced "Art. There is," a collaboration with the Kasteev Museum where customers were able visit the virtual museum while having a meal at Del Papa restaurants.
Del papa is connected to the business aggregators like Glovo, Wolt and Yandex. Due to frustration with the company's operation, the company left Chocofood in the summer of 2020. Its delivery part accounts for 65% of the total profit.
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5. Research results, findings and analysis on consumer behaviour patterns during the pandemic The coronavirus situation has had a great impact on consumers around the world, as in Kazakhstan. As the majority of Kazakhstanis are faced with a decrease in disposable income due to unemployment, reduced working hours and an increase in the cost of living, the expected costs of Kazakhstanis have changed significantly.
According to the study conducted by PwC Kazakhstan, if in January-September 2019, Kazakhstanis bought goods for 198 billion tenge through online channels, then for the same period of 2020 it was already for 382 billion tenge. Online sales almost doubled in 2020 and it is no secret to anyone that the pandemic is transforming the e-commerce market in Kazakhstan. Most often, Kazakhstanis began to buy everyday goods and food products online. Through our survey we wanted to determine what was the attitude towards buying groceries online before the pandemic and the present day.
The rise in unemployment and the decline in disposable income also significantly affected consumer behavior. Decreased confidence in stability, the desire to save money, restrictions on movement, the widespread shift to online work - all this has led to a change in the values and behavior of consumers.
Using the first two questions of our questionnaire, we wanted to find out how much the preferences of Kazakhstanis differ from the actual place of food purchases. The figure 7 above illustrates that 72.1% of our 720 respondents prefer to buy groceries in the supermarkets, 124 (17.2%) in the local grocery stores,
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67 people in bazaars or markets and 1.4% prefer none of them. However, the number of people following their preferences in terms of supermarkets decreases by 10% (62.5%), which is indicated by the figure 8 above, while the “minimarkets and local shops” option, on the contrary, increased by 10%. This can be explained by the fact that convenient stores are direct competitors of most retailers, since their main customers are: those consumers who buy something for immediate consumption, people who buy most of the necessary goods in supermarkets once a week and people who make all their purchases near their home. It should also be noted that people in Kazakhstan also really prefer to buy groceries in bazaars and markets as the percentages of respondents in the figures 7 and 8 do not differ much.
According to the figure 9 above, Magnum was the most visited supermarket in Kazakhstan before the pandemic (41.2% of the respondents) and continues to lead even now, despite the fact that the number of customers has dropped to 36.2% now. As for Small, the percentage of people buying groceries has increased by 2.5% (from 33.2% before the pandemic to 35.7% now) due to the significant increase in stores throughout Kazakhstan in 2020 and numerous marketing activities after the lockdown till nowadays. The top most visited retail stores also include Galmart, Anvar, Gastronom, Kenmart and Astykzhan supermarkets, the percentage of which almost have not changed since the beginning of quarantine.
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Based on the figure 10, the number of people shopping one or more times a week has dropped from 48.2%
(217 before the pandemic) to 40% (180 now), which on the other hand has increased the number of people shopping one or more times every two weeks from 74 to 100. Analyzing this graph, it is clear to say that Kazakhstanis have reduced visits to supermarkets since the beginning of the lockdown, which is explained by the strengthening of sanitary standards and restrictive measures on movement in all cities and regions of the country during the pandemic.
To the question "Have you changed your usual shopping destination due to the pandemic?" 94 people, which is 20.9% of our 450 respondents, answered positively (figure 11). However, the remaining 79%
(356 people) have not changed, that is clearly seen in the figure 12 above, which shows “average
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satisfaction rate of going to the supermarkets” before the pandemic and now and make up 7.9 and 7.3, respectively. Furthermore, those 79% of respondents indicated the reasons for not changing the supermarkets they used to buy groceries. For 105 (23,3%) people the main reason is the “wide range of products”, 21.3% chose the “price” option. Marketing activities such as “discounts, promotions and bonuses” play an important role for 16.4% of respondents, 4.4% indicated “quality” and 2.8%
“comfortable premise”. The largest number of responses in the "Other" category was the "convenient location" option.
According to the survey among Kazakhstanis, it can be seen from the graph on the left above that the average value of the frequency of alcohol consumption with the onset of the pandemic decreased by 0.1%, which indicates a low level of interest in alcohol among the Kazakh population both now and before COVID-19, which can most likely be explained by the increase in average prices for alcoholic drinks during the pandemic.
Meanwhile, regarding the question of how often respondents purchase semi-finished and fast food products, we can see that demand is quite low and remained unchanged at all, as the averages before and during the pandemic are only 3.3%. The figure 14 on the right side above explains the reason for consumer behavior discussed in the previous two paragraphs by the fact that, apparently, due to the COVID-19 pandemic, Kazakhstanis, having reduced the consumption of alcohol, semi-finished and fast food products, began to take care of their health as 366 (53%) respondents of our survey began to consume
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more vegetables, fruits and greens in order to avoid weakening the immune system and lowering the risk of getting infected with the coronavirus.
Moreover, during the survey it was observed that 410 people, which is 59.3% of our respondents, began to prefer less crowded places of public catering more. Indeed, it cannot be ruled out that the coronavirus has a huge impact on social interaction, which became completely impossible during the lockdown and influenced the behavior of many consumers.
Two graphs from our survey demonstrates otherwise: people have continued to spend money on non- essential food since the pandemic began which is proven by the figures above where more than half of the respondents (54.6%) answered “No” to the question whether they started to save on food since the beginning of the pandemic. 241 (34.9%) people started to save money and the remaining 10.6% were unable to answer this question by selecting the "I am at a loss to answer" option. Furthermore, it is noticeable from figure 16 that 22% of the respondents reduced and 15.3% on the contrary increased the consumption of non-essential foods with the onset of the pandemic.
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The pie chart above shows that 85.8% of people have never bought their groceries online before the pandemic even though some internet supermarkets existed even before it. For instance, Arbuz was founded in 2011 which is 10 years ago but was not yet widely known before the pandemic. Purchasеs of products at the Kazakhstani supermarket Arbuz grew up to 7 times betwееn April and June compаred to 2019. Nowadays in Kazakhstan it’s the only market leader after which Magnum, SMALL and other hypermarkets picked up and began to do their online grocery delivery. Internet supermarkets were not always in demand as they are now and only 14.2% of people were using their services before the pandemic. Figure 18 illustrates that the majority of our respondents still do not buy groceries online as of now but it is worth mentioning the slight change that happened in percentage. If there are 85.8% of people who have never bought groceries online before, now there are 80.6% of people who still do not use online supermarket services. The group of people who buy groceries online increased from 14.2% (Figure 17) to 9.4% (Figure 18). In Kazakhstan, there is a trеnd of reorientation of purchases from offline to online format. Even if it is happening more slowly than in other developed countries, Kazakhstanis are undoubtedly showing interest in it.
Those who replied “Yes” to the question “Did you buy groceries online (in online supermarkets) BEFORE the pandemic?” (Figure 17) were redirected to another question in a survey where they were asked whether or not they keep buying groceries from online supermarkets these days. Interestingly, 44.9% of people refused to continue buying online for some reasons and 55.1% of respondents are continuing buying food products online nevertheless like they did before the COVID-19. There are various reаsons fоr why thеy are doing what they did. The pandemic contributed to the main rule of self-isolation - to keep contact with people to a minimum. Firstly, the website of the online supermarket, as a rule, has a wider range of food products than on real counters. This is due tо the fact that the stores differ in size.
Therefore, what is in some is not always represented in others and the order for delivery is completed at the warehouse. Secondly, courier delivery excludes contact with people on the way to the hypermarket and among the counters. Thirdly, you can buy whatever you want and not think about how to carry the bags home. The courier will deliver the groceries directly to the door of the apartment.
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Continuing with asking those who have had experience with online shopping and are still buying products online, we decided to ask them if they generally enjoy the process itself. The given pie chart above expresses that, overall, the majority of people (70.3%) like this new grocery shopping experience, narrowly 12.2% of people dislike it and 17.4% found it difficult to answer. Despite the fact that grocery shopping in Kazakhstan is not yet widespread, it is noticeable that the number of citizens using its services is growing.
Respondents who answered “No” to the question “Do you buy groceries online (in online supermarkets) NOW?” (Figure 18) were redirected to the question “Are you planning to start shopping for groceries online?”. 60.9% of people are not planning to make it in the near future, 22.5% found it difficult to answer and only 16.6% of people who have never bought groceries online are now willing to give it a try. In connection with the completed lockdown a little more than a month ago in 2020, shopping centers and retail sales networks resumed their work throughout Kazakhstan. From the first day of the opening of the mall and large retail chains, one could observe a considerable congestion of people willing to make purchases. The queues formed very quickly, and not only because of the restrictive requirements of sanitary standards, but, first of all, in connection with the opportunity to purchase the necessary goods.
Why do many Kazakhstanis, having the opportunity to make purchases without leaving their homes, still return to malls and supermarkets? Kazakhstanis are used to buying everything in a store, trying on clothes
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and shoes in place, and assessing the quality of goods by touch. Not all residents can get used to shopping online. Imperfect work of courier delivery, a complicated ordering procedure, a discrepancy between expectations and reality, trust issues also take place. The main barrier is an established habit.
Hence, we set the intention to decipher what exactly discourages respondents from online grocery shopping. The most common answer appeared to be the inability to assess the quality of the goods, which is to try touch in hands and feel it. The inability to “touch” the product while shopping online is basically a huge disadvantage for 68.8% of Kazakhstani citizens. 31% of people responded that products may not be the same just like on the website. 20.1% of people complain about delivery time. Indeed, delivery time may not be consistent and for those people that visiting the nearest supermarket is much faster than waiting for the ordered drinks and food to be delivered from the online store. 5.2% of people pointed out the poor service. There were also other replies since there was an opportunity to enter their own answers:
inconvenient navigation on the site in the search for products (0.4%), overpriced products (0.3%), inability to use Kaspi Red (0.1%), distrust for food manufacturers (0.1%). A small minority of individuals (0.7%) claim that they just do not know how to use it.
27.2% of people would not recommend their friends and others to shop online for groceries, slightly less than one quarter of people (24.8%) would suggest and approximately half (48%) of people found it difficult to respond. Restrictive measures in connection with the COVID-19 pandemic in many countries
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around the world have led to an explosion in the popularity of online orders and delivery services, which report that they are struggling to cope with the flow. In Kazakhstan, where the state of emergency has been in effect for a month, this business has seen a modest increase.
The figures above represent the amount of money spent on food before and after pandemic. According to the results obtained it is clearly seen that Kazakhstanis spend about the same as before the pandemic. In the big picture, people did not save or spend more. There were 43.8% of people with the 30 000 - 50 000 tenge budget before and now 44.3% of people are spending the same range of money. The percentage of people with a 50 000 - 100 000 money budget increased from 22.3% to 26.5%. Meanwhile there are not so many people who spend less than 30 000 tenge per month on groceries, the percentage drop down from 25.9% to 18.8%. Kazakhstanis spend almost 50% of their income on food. According to the Bureau of National Statistics of the republic, the average monthly wage in the country, as of November 2020, is 211,033 tenge. Thus, one average resident spends 104,250 tenge on food, 5,064 tenge on tobacco and cigarettes, 6,120 tenge on cafes and restaurants, and 3,587 tenge on leisure time.
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Regarding food delivery services in Kazakhstan before and during pandemic there is definitely a growth but in general people seem not to use such services that often since both average numbers are not over 5.
Before the COVID outbreak the average number on scale was 3,42 and it increased to 4,26 nowadays.
The market courier activities in Kazakhstan over the past year in monetary terms has grown by 21%. Last year, Kazakhstanis paid over 42.9 billion tenge for delivery. Following the next question in the survey, it is obvious why not a lot of people use food delivery services. Narrowly 36,2% of people order ready- made food with home delivery while 61,6% of people prefer to visit cafes and restaurants themselves.
On the scale from 0 to 10 it was necessary to choose the importance of a contactless menu on the choice of cafe and restaurants and contactless delivery. The average number for each was 5,8% and 6,04%
respectively. It is more or less important for Kazakhstanis that cafes and restaurants take measures to eliminate the spread of coronavirus. QR menus can be attributed to the so-called life-saving innovations.
It has its own advantages for the guest such as safety during a pandemic, no need to wait for a waiter with a paper menu, visibility (vivid photos and detailed descriptions of dishes), cost calculator. Regarding contactless delivery: this type of delivery minimizes the risk of contracting a coronavirus infection. Both the employee of the service and the customer are safe.
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During the severe quarantine, Kazakhstanis increasingly began to use food delivery services. According to the results of only the first month of lockdown, market participants noted an increase in orders of 20- 30%. The ready-to-eat food delivery market is fairly new, but at the same time, rapidly gaining popularity.
According to the graph above most of the people (34,9%) order food directly from cafes and restaurants together with slightly more than one quarter of people (26,5%) who do not use any of the services at all and probably cook at homes. Besides these two answers Wolt is the most popular food delivery service.
In Kazakhstan Wolt is the dominant leader in the middle and upper middle price segment, and in the lower middle segment they share the leadership with their closest competitors. Wolt estimated their share in the market of delivery aggregators from 40 to 50%. After Wolt goes Glovo with 20% of people voting for it.
The least popular tech food delivery companies became Yandex Food (10,1%) and ChocoFood (9,4%).
Respondents were asked to pick an approximate amount of money per month they have spent on eating out before the pandemic and right now. The outcome of our survey summarises that Kazakhstani citizens started to spend less money on that when COVID occured. The state of emergency in the country and quarantine have deprived many Kazakhstanis of the opportunity to work and earn money. The risk of catching the virus in densely populated areas is also the reason for the low attendance of catering establishments, because, as it turned out from our study, for many Kazakhstanis it is important to have a
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contactless menu and contactless delivery. <50000, 5000 - 10 000, 10 000 - 40 000, > 50 000 options were provided for respondents and there is a decreasing trend on each of these categories.
The last six sociodemographic questions were places at the end.
More than half of the participants in our online survey are 15 - 21 years old and followed by respondents in the age group 22-29 (22.9%), 30-40 (19.2%) and over 40 (15.8%). From the figure above, it is also clear that the number of 530 females who completed our survey significantly outnumbers 161 males.
Moreover, the vast majority of people surveyed are single (61.4%), followed by 33.4% of married and the remaining respondents, including people who are in a relationship and are divorced, make up 5.2%.
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Figure 26: Respondents by cities
The figure above demonstrates 17 various regions in Kazakhstan and how many respondents from each city have passed the survey. As for the various cities in Kazakhstan, the survey was equally spread throughout Kazakhstan but it occurred that more people passed the survey from the Astana and Almaty cities. Mainly, Karaganda, Shymkent, Zhezkazgan, Aktobe have nearly the same numbers. A small number of people have passed the survey from Atyrau. 40,1% of our respondents are employed, 31% are students, 12,3% are school students, 8,5% are jobless and 2,6% of people are pensioners.
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The monthly salary of our respondents differs and there are many people who fall into different money categories. On the whole, more people passed our survey who have no income at all, 18,9%. It is predictable because the 15-21 age group prevails in the survey: they could be school and university students. After that go people with salaries starting from 50 000 - 100 000 tenge (17,7%) and only 4,9%
of people have income above 500 000 tenge.
39 Conclusion
This research was aimed to determine the new customer behavior patterns and marketing tactics of brands in the Retail and HoReCa industry. Analyzing what actions brands undertake to survive the pandemic and how the pandemic affected their businesses, it can be said that most of the businesses tried to quickly adapt to the new standards, therefore developing new digital channels. In order to adapt to the new conditions businesses started to develop delivery services. Half of them had delivery before the pandemic, however delivery had very little demand. Nevertheless, now it brings the majority of the revenue. Overall, from the financial point of view, pandemic negatively affected businesses but it was a great reason for new opportunities and digital channels development. The major obstacles were regular lockdowns and decrease in consumers’ income. Being flexible, adapting fast, looking for trends, being creative and having the courage to keep working - all of these were essential parts of surviving during the pandemic.
Most brands connected to the aggregators, some of them did not due to a high commission fee.
During the interviews, it was determined what types of marketing activities have been carried out by supermarkets, cafes and restaurants since the beginning of the pandemic. As it was mentioned before, all brands in both industries have started to actively work on digital channels: making posts on social media, developing websites, creating mobile applications and others. Only a few restaurants decided to change their menu to more convenient meals that are quick in preparation and suitable for delivery.
Through instagram, businesses wanted to show to their customers that all sanitary standards were met. In addition, businesses cared about their clients, by giving them presents, publishing posts with health care tips and posting entertaining content. One of the great examples of adaptation were Del Papa and Take Eat Easy restaurants, they started to offer new special sets. In general, all brands in both industries were able quickly adapt to new standards and market requirements, creating websites and new offerings in a short period of time.
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Based on the interview, it is noticeable that companies were moving to online service for the convenience and safety of customers, but according to the survey it was found that the majority of the population bought food in supermarkets. There were also people who had never bought groceries online but were willing to try. However, even after the pandemic began, Kazakhstani customers are not ready to return to online shopping. This is due to the fact that people in Kazakhstan do not trust and are afraid of being deceived. Additionally, before the pandemic online shopping was not popular. The abrupt transition to online services scared the residents who are used to purchasing products in supermarkets. Though there are people who during the pandemic, on the contrary, were buying only online and this habit has remained with them even after the pandemic.
Customers have also begun to change their shopping priorities: now they are buying more fresh food, during the pandemic people began to monitor their health, drink vitamins, buy more vegetables and began to cook more at home. Furthermore, they began to change their mindsets and become conscious of their health, subsequently acquiring new habits.
One of the main hypotheses was that during the pandemic Kazakhstan citizens are making a vast majority of their food purchases online than ever. According to our survey the number of people who buy groceries online increased slightly (Figures 17 & 18), the overall spending on online purchases also increased among the citizens, thus hypothesis number one can be approved. We suggest that the demand for online purchases of products will continue to rise, gradually changing the attitude of people to online shopping, though businesses should remain to provide high-quality service and memorable experiences for customers. One of the reasons why there is no strong shift to online grocery purchases is that for citizens going to supermarkets was the only entertainment and place to go out. It will take enough time to change the habit of buying products offline to online purchases.
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The second hypothesis was that Kazakhstani citizens intended to shift their spendings largely to essential food products. The results of research showed that people have continued to spend money on non- essential food products, thus this hypothesis is not confirmed.
The next hypothesis claims that retail and HoReCa brands have increased their budgets for marketing activities. During the interviews, the companies’ representatives said that marketing plays a big role in building and retaining business. Because during the pandemic, it was necessary to stay in the marketplace and the shift to digital marketing and a change in marketing plan was to attract customers during the pandemic.
Another hypothesis is that retail and HoReCa companies only developed delivery services when the pandemic began. During the quarantine, most companies started to develop delivery services or cooperate with aggregators. People were sitting at home, so cafes and restaurants didn't have the traffic, which affected the financial part. And to connect the delivery service was a necessity. Couriers at that time began to carry out contactless delivery - left orders on the doorstep, without contacting customers. There were notifications on websites and in applications about the availability of contactless delivery, which immediately raised the ratings of these companies.
42 Recommendations
Based on our analysis, following recommendations can be given. First, there was a link between why people do not prefer online shopping in supermarkets due to the inability to touch and see the quality of the product. In order to solve this problem, supermarkets may use social media, making more live content, videos and emphasizing the freshness of fruits, vegetables and other products. In fact, there are a huge amount of advantages for clients and executives to run online supermarkets. For consumers, using groceries online saves time and offers a wide-range of products, for founders it reduces the cost of purchasing and keeping all goods in supermarkets.
The next recommendation is for cafes and restaurants. There is a future trend in managing Dark kitchens due to the growth of demand for delivery and ready-to-eat food. It means that restaurants and cafes only prepare and sell food for delivery, without having places to seat for customers. According to our results, the majority of respondents prefer to order food directly from cafes and restaurants.
Based on the results of our research, which showed that people started to care about their health by buying more fruits, vegetables and decreasing the consumption of semi-finished and fast food, supermarkets, cafes and restaurants may offer and actively promote healthy food.
Constantly consider new strategies and loyalty programs in digital channels to maintain and strengthen customer contact, as the customer needs to feel that they are interested and feel cared by the companies, it is recommended to invest in data and customer relationship management technologies to improve the customer experience at the same time as regularly monitor how customers' priorities are changing, paying more attention to price and value of goods.
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46 Appendices
Appendix A: Interview and survey questions
Interview questions for the large retail stores, cafes and restaurants
1. What problems and difficulties large supermarkets faced during the pandemic?
2. What were the consequences from those difficulties?
3. What decision have they made in order to operate efficiently?
4. How COVID - 19 has affected their income and sales?
5. What was the marketing activity before and during pandemic?
6. What marketing campaigns did they launch during the pandemic?
7. Have they considered introducing delivery services and did they have it before?
8. Have they considered developing the delivery service and have they connected their businesses to food delivery aggregators? ( Such as Wolt, Glovo, ChocoFood, YandexFood)
9. Why did they start developing their own delivery service and not continue using food delivery aggregators? ( Such as Wolt, Glovo, ChocoFood, YandexFood)
10. What were the results of connecting their business operations to such aggregators?
11. Have they thought about the development of their own mobile application or the website? If yes, then is food delivery and payment possible there?
Survey questions
1. Where do you prefer to buy groceries?
2. Where do you mainly buy groceries?
3. How often did you shop in supermarkets BEFORE the pandemic?
4. How often do you shop in supermarkets NOW?
5. What supermarkets did you shop at BEFORE the pandemic?