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How has consumer spending changed because of the pandemic? – Part 2

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How has consumer spending changed because of the pandemic? – Part 2 ©iStockphoto.com/alexialex

We live in a world where marketers spend their working lives trying to persuade us to buy their companies’ goods and services. But look beyond the noise this creates and, in the broadest terms, consumers purchase goods and services that can be split into three categories:

  • Goods and services essential to survival, such as food, shelter and medicine
  • Goods and services that keep us entertained, such as subscription services and hobby items
  • Goods and services that help us connect: we’re social creatures and we need to reach out to others, to share experiences

The amount consumers spend in each of these categories changes over time and because of personal circumstances. This was something that came into clear focus in early 2020, when Covid-19 was first identified as a threat to health worldwide. Abruptly, our spending patterns changed.

In the early stages of the pandemic in 2020, when the first lockdowns started to be imposed, anxious consumers reviewed their spending as they tried to cope with the new restrictions caused by the pandemic. Consumers focused on purchasing items necessary to survive and to protect themselves against this new, unseen threat.

But this initial phase of reaction to the pandemic lasted for only a few weeks. As lockdowns reduced transmission and people adapted to their new situations, consumer behavior changed. When people’s lockdown waistlines expanded, for example, so did the purchase of home fitness equipment.

In 2021, as vaccination programs rolled out, more and more consumers began to be confident enough to socialize and to book holidays. That’s not to say this has been a consistent march forward. Influences such as seasonal factors, levels of government support, changes in peoples behavior, spikes in the number of cases and fears over new variants have all played in here.

But despite all the variables, certain patterns have emerged. These are important because, as the world gradually ‘emerges’ from the pandemic in a stop-start manner, recognizing these patterns can help brands and retailers navigate their way through the months and years ahead, a good reason to look at consumer behavior over 2020 and 2021 in more detail.

What did consumers buy in the first lockdowns?

In the early days of the pandemic, consumers reacted to stay-at-home orders by stocking up on essentials such as food and medicine. Statista also reported an increase in spending on health and hygiene products, frozen goods and cleaning materials across the UK, USA and Germany. In an uncertain time, these were items seen as essential to surviving the pandemic.

As the demands for these items surged, retailers were forced to limit consumer purchases as panic buying began to take hold. JP Morgan reported increases in consumer spending on:

  • Cleaning wipes: 100%
  • Disinfectants: 100%
  • Dishwasher detergents and kitchen cleaners: 50%
  • Vitamins and supplements: 50%

Once the initial shock wore off, people realized that essentials were not running out, and panic buying subsided. By early 2021, consumer spending had shifted. Ecommerce received a boost and overall spending had returned to something more like pre-pandemic levels.

How did consumer spending change after initial lockdowns?

Although many of us were spending more time at home, we still wanted to be entertained. As the pandemic curbed leisure activities (travels, tourism, get-togethers), Netflix reported a surge in revenue of almost 25% in April-June 2020.

Computer software and gaming-related spending also increased. In the year ending 31 March 2021, Nintendo reported its most profitable ever year, with operating profits rising 82% year-on-year to ¥640bn ($5.9bn).

But entertainment didn’t just mean sitting around consuming media. Indeed, fears over what this was doing to our health resulted in many of us spending money on home fitness equipment. Fitness subscription services such as fixed-bike cycling challenges also boomed. The global market for connected gym equipment was estimated at $255.7m in 2020. This figure is predicted to rise to $1.5bn by 2027, boosted by the pandemic.

In contrast, many consumers even now remain nervous about going to the gym. Connection, a sense of the communal, is something we will reluctantly forego.

When will the services sector recover?

The pandemic continues to affect those sectors that rely on face-to-face contact most strongly. In October 2021, Bali, Indonesia reopened to visitors from China and 18 other countries, but two months later came a spate of news reports about how normally crowded beaches were still empty. The recent spread of a new Covid-19 variant, Omicron, has only added to the travel sector’s worries.

There are caveats here. With video conferencing and video-calls now a normal part of everyday life, it may be that business travel patterns have irrevocably changed – especially in a world where so many of us are concerned about the environmental impact of travel.

What lies ahead?

Taking all these changes in consumer behavior together, one idea recurs: the post-pandemic economy, when it finally emerges, can already be glimpsed and it will not be the same as the pre-pandemic economy.

While it’s likely, for example, that reports of the death of shopping in person are exaggerated, the shift to more ecommerce is real. The same is true of the shift to working from home. In early 2021, ONS research revealed that, of adults in the UK working from home, 85% wanted to use a ‘hybrid’ approach combining home-working and office-working in the future.

Seen in this context, a key task for brands in the years ahead will be to work out which changes in consumer behavior have been solely down to unique and time-specific circumstances and which will endure. To return to where we began, the pandemic has thus offered a chance to take a step back and to look beyond business as usual.

And when brands do this, they are far more likely to be able to react nimbly and offer consumers the goods and services they want via channels that suit them and when it suits them. 

PIM can help you control your product data, and deliver these goods and services across multiple channel.