How Has COVID-19 Changed Consumer Spending Behavior?

COVID-19

COVID-19

Why aren’t the purchase preferences of consumers similar to those during the Pre-COVID era?

Since the coronavirus caused COVID-19 was declared as a pandemic, one thing was certain: change in consumer spending behavior.  This stems from the fact that during an economic downturn, there will be high risk of financial insecurity. It is contrary to times where good economic conditions of a nation will bring more spending due to confidence in the market. Factoring the newfound priority on healthcare and medical security, most of the people around the world are still stocking up on essentials items like hand sanitizer, tissues, masks, dry foods and other items with high self-life.

Wall Street Journal had reported witnessing high purchases of Mayonnaise, Sir Kensington’s line of condiments and ice cream brands such as Talenti, in the US during COVID-19. Apart from that, amid such crisis, consumers often resort to panic buying behavior. This can be clearly illustrated by incidents of toilet paper frenzy, which lead to decreased stocks of the same in many retail outlets. To curb this, many US supermarket chains like Wegmans, Shoprite, and Target, had to impose limitations on how much toilet paper one person could buy.

This type of panic buying is a classic example of the herd effect: people tend to be influenced by trends and the buying behavior of others rather than thinking rationally about their necessity of the said product. Apart from that pandemic also brought massive lockdowns worldwide, which directly impacted the industries across all verticals and dealt a major blow to the gig economy. Many people suffered job losses, lay-offs or were forced to survive on payment cuts. With, lower incomes, most people continue to avoid wasteful spending on vacations, luxury commodities, and dining at expensive restaurants, going out for movies and others.

According to data provided by Seattle-based analytics firm Headset, initial state lockdowns and shelter-in-place orders caused recreational sales to drop almost 50% in late March in the US states of California, Colorado, Nevada and Washington. Surprisingly the sales of cannabis remained resistant to COVID-19 impact. In March alone, the weekly sales topped $134 million in California, Washington, Nevada, and Colorado, a 17% increase from the weekly average in 2019. In the second half of March, the average purchase also increased by 47%.

Moving on from proactive and reactive health-minded buying, pantry preparation purchase, and restricted lifestyle spending, consumers also have the opportunity to experiment and form new habits with e-commerce that will last long after the ‘normalcy’ is restored. Simultaneously, with work from home becoming to new normal, aligning with social distance protocols, grocery spending is also surging along with takeaways and online food ordering. Items like granola bars, Oreos, rice, pasta are finding their way into every grocery list. Other than that, it has observed that people are

  • Opting for more transparency in the farms to retail cycle, which is why the inclination for locally sourced items is on the rise.
  • Showing interest in products that are claimed to boost immunity like probiotics.
  • Less bothered about buying environment-friendly commodities and products if they tend to be costlier than others.
  • Some items like vegetable oils, coffee will be purchased via subscription models for higher discounts.
  • Shifting towards products and services that can be shared and enjoyed with others, thereby driving the transition of buyer motive from personal usability to group/ social community usability.

Thanks to sudden consciousness about health and closure of gyms, consumers are also pivoting towards buying equipment for home gym and exercising. Also, in the areas hit by strained supply chain networks, consumers are turning to companies that indulge in D2C (direct to consumer) channels of selling items. These D2C brands engage directly to consumers by bypassing standard distribution channels, effectively gaining direct access to consumers; thus putting agile brands and startups at a competitive advantage owing to their deeper understanding of their customer experience. For instance, Peace, a brand that manufactures high-end bath tissue saw a big shift in big orders, with 24-packs of its toilet papers increasing from 22% of its sales mix to nearly 50% in the early weeks of March.

While, we cannot predict how the COVID-19 pandemic will end, the changes it brought in consumer spending behavior patterns will continue to be steady for a long time. However, irrespective of the constraints, most of these consumers do wish to resume their pre-COVID-19 spending behavior that also includes travel expenses.