Consumers remain cautiously optimistic about the economy and their financial situation. The jolts that happened at the height of the pandemic have become part of everyday life. A report by McKinsey and Company points to three significant changes that changed consumers’ behavior in 2020—the homebody economy, digital transformation, and reduction in brand loyalty. However, an increase in discretionary spending is one sign of a gradual recovery.
- Spending and out-of-home activities increased among people who have been vaccinated.
- In the past six months, credit card spending is equal to the year before the pandemic.
- Since October, 40 percent of consumers remain consistently optimistic
- Two-thirds of consumers remain hesitant about regularly leaving home
What People Are Buying
Pandemic fatigue has set in, and 50 percent of consumers are ready to spend their disposable income on clothing, beauty, and electronics. The renewed interest in purchasing closing and beauty supplies will help these categories recover from steep declines in sales due to COVID-19. The remaining people are waiting until the pandemic is over to splurge on travel or dining in restaurants.
Vaccinations Speed Up Recovery
The report also found that 33 percent of vaccinated people participate in more activities outside of the home. This number drops to 22 percent for those who intend to be vaccinated but have not already done so. There is a direct correlation between a higher rate of vaccination and increased spending on out-of-home activities. Baby Boomers are less motivated to spend than younger consumers. It’s expected that spending will continue to grow as more young people get vaccinated.
New Digital Behaviors Here to Stay
After federal and state governments issued stay-in-place mandates, only essential businesses were allowed to remain open. Companies engaged in e-commerce experienced a dramatic increase in sales and acquired a diverse group of new customers. From January 2020 to January 2021, online spending increased 35 percent. Although restrictions are gradually being lifted, many consumers will continue to practice behaviors they adapted during the pandemic.
- Curbside pickup increased 30 percent—about half of those currently using this option will continue to do so post-pandemic
- Seventy to eighty percent of consumers will continue using online health and wellness tools
Consumers Invest in their Homes
The homebody economy has led people to make structural changes to their homes to add workspaces, gyms or update their outside entertainment areas. According to NPD Group’s checkout information, one in 10 consumers tried their hand at landscaping, maintenance, repairs, or remodeling. “Housebound in March, consumers noticed opportunities to make their personal spaces more livable as they not only provided shelter but became office spaces and schoolrooms for many,” said Shay Kraft, NPD president of U.S. home improvement and major appliances. The McKinsey & Company survey results also indicate the current or upcoming remodeling activities consumers have already done or plan to do soon.
- 28 percent renovated their homes, set up a gym or workspace
- 30 percent plan to splurge on items for their home after the pandemic
- 19 percent have changed their living situation
Consumers are Changing Brands
Before the pandemic, many consumers remained loyal to specific brands. However, brand loyalty took a big hit in 2020, with the rate of brand switching doubling compared to 2019. The main drivers behind this shift in behavior are related to the need for convenience and value—especially among younger generations. Whereas larger companies were driving growth at the beginning of the pandemic, smaller businesses are gained prominence in 2020 and 2021.
- 44 percent of Gen Z and millennials have tried a new brand
- 35 percent of boomers have changed brands
- 40 percent of younger consumers are seeking brands that match their values
These shifts in behavior will have long-term implications on how retailers conduct business in the future. Three-quarters of Americans have changed their shopping behavior because of COVID-19. While behaviors that are not beneficial for consumers in the long-term will eventually disappear, others will become part of their everyday routines. Retailers may find it challenging to keep a handle on the many shifts in consumer behavior. However, those who do will be rewarded for their efforts.