Consumer Spending And Demand Has Changed Due To The Pandemic

Optimism and gloom lead to different behaviors: Prosperity leads to confidence while a downturn results in humility and financial insecurity. A negative outlook also affects what shoppers will buy (and won’t). The Commerce Department says GDP shrank by 4.8% in the first quarter of 2020 – the worst decline since 2009. However, business owners can take advantage of massive shifts in demand and behavior to serve new customers. 

Consumer spending, which accounts for 70% of the U.S. economy, fell by 7.6% from January to March, the largest decline since 1980 according to Commerce Department. Due to lower incomes, most people will avoid wasteful spending on vacations, luxury cars, and dining at expensive restaurants. They’ll also work and play from home because of restrictions.

As everyone shifts to survival mode, entrepreneurs must ask what the new normal looks like. And ask how to induce spending when humbled citizens will be more careful with how they spend their earnings.

Americans Are Seeking Bargains

It is said that price is what you pay but value is what you get. More consumers are seeking value purchases and avoiding high prices. Back in 2008, discount stores like Walmart and Dollar Tree performed well, and they’ll stay popular in 2020 and beyond as Americans stretch smaller budgets.

Are there opportunities to sell bargain goods and services in your area? These can include used clothing and household items, second-hand cars, refurbished electronics, one dollar products, and discount services. While the pandemic has lowered overall demand, the economic effects are spread unevenly across sectors: Generally, consumers will buy staples like cleaning products, water, and basic supplies while shunning fancy clothes, gym memberships and the newest iPhone. 

Swag is out. Frugal is in. 

During the 1930s, our great grandparents ate cheap but savory food. According to Great Depression survivor and author Clara Cannucciari, her generation ate “poor man’s meals” like fried potatoes and sliced hotdogs, fried mushrooms, dalandan salad, and cabbage mixed with pasta. In our era, Americans spend approximately 10% of income on food.

New Economic Realities Bring New Winners And Losers

Seasons of feast and famine bring different winners and losers. The airline industry will lose $252 billion in revenue this year. Other sectors are also bleeding red: hotels, casinos, cruises, sports, movies, carmakers, theme parks and others. Prompting Congress to bail out some industries.

As mentioned, discount providers are capturing disposable incomes that struggling industries are losing. There is also a psychological adjustment occurring during an election year: Many Americans now have a renewed sense of patriotism. That means “Made in USA” will mean more during purchase decisions.

“We see the crisis as a transition phase for many clients who must now rely on social media and digital footprint to survive. Investing in the client is crucial during these times,” says Ernesto Antonio Gaita, executive director of Neighbourhood, a digital marketing agency based in Toronto, Canada. He says the pandemic is forcing companies to get immediate results from marketing campaigns, and therefore agencies must deliver the numbers.

Gaita advises marketers to remain one step ahead when clients are experiencing high stress levels. “The pandemic has made online and social media extremely important. Now is the time to think outside the box, to get out of your comfort zone, and to connect with people outside your circle. Opportunities are always around the corner.”

Mandates Impact Delivery Services And Gig Jobs

Executive orders, travel bans and other mandates are benefiting work-from-home lifestyles, such as home gyms, home office equipment and video-conferencing tools. Manufacturers and distributors of personal protective equipment (PPE) and medical devices are also seeing stronger demand as hospitals around the country beg for supplies.

Meanwhile, we have yet to see how disruptive the current business landscape will be to delivery services and gig workers. On one hand, people are staying home as much as possible and therefore utilizing home delivery services for groceries, restaurant orders, and even prescription medicine. And if public transportation is deemed too risky, people may prefer car-share services, increasing demand as a result. However, on the other hand, many drivers or delivery people may not want to expose themselves by serving the general public, and could choose to quarantine at home. This could lead to a decline in the functionality of the sharing economy, and could also cause a significant increase in the costs of these services.

There are 53 million gig workers in the U.S., according to a 2018 survey by Staffing Industry Analysts. Organizations are assessing whether to keep employees or hire independent contractors given the high cost of health insurance and other employee benefits. Government mandates and bailouts are also key factors in picking winners and losers during this historic period. It’s prudent to envision how the new landscape impacts business risks and opportunities going forward.