Categories of goods that consumers will spend more money on in the future include online shopping, fresh and organically grown food, packaged food, preventive healthcare, vitamins, household maintenance items, pet products, as well as savings and education.
Categories of goods that they plan to spend less money on than before include luxury brands and products, fashion, transportation and travel, restaurants, gambling, tobacco products, home decor, and out-of-home entertainment.
These are the responses from surveys regularly conducted by the Boston Consulting Group regarding consumer attitudes in North America and Europe, aimed at better understanding their perceptions, attitudes, behaviors, and changes related to consumption during the COVID-19 epidemic.
The article on the survey results and changes in user behavior that we witness daily was written by Melanie Seier Larsen, CEO and partner at BCG, and Sunčica Zdunić, senior associate at BCG. They emphasize that with the gradual easing of restrictive measures in countries across Europe, economic activities are slowly resuming, and consumer optimism is increasing. There is noticeable stability in planned spending, albeit with some new patterns. This is not surprising, considering that similar crises have previously influenced changes in consumption patterns. For instance, the SARS epidemic in China in 2003 fundamentally changed consumer attitudes towards purchasing and led to a rise in e-commerce.
More money is being spent on savings and education
Since its emergence, COVID-19 has been associated with fear, illness, and isolation, awakening a sense of apprehension in consumers. Attitudes towards hygiene, health, social relationships, travel, and crisis preparedness have fundamentally changed and further influenced behavior and changes in consumption patterns.
Consumers, in general, tend to spend less on usual items and travel during uncertain and recessionary times, while increasing spending on ‘essential’ goods. The crisis situation with the COVID-19 epidemic has confirmed this and has also created another trend – a shift to online platforms and a redirection of a larger amount of money into savings and education.
The authors also explored recent events in retail, among retailers selling essential and non-essential products, such as department stores and clothing, cosmetic, and home decor shops. The trend confirmed expectations – retailers of essential products (groceries) did not particularly feel the crisis, but rather recorded an increase in sales, mainly due to home cooking and stockpiling groceries. However, after grocery sales in stores across Europe peaked in mid-March, they are now slowly returning to levels of the same period last year, and the decline in traffic has been partially offset by an increase in the average value of individual transactions. At the same time, online grocery shopping continued to record growth in traffic and sales. However, growth rates vary from country to country, depending on the development of e-commerce and delivery in each of them.
Soaps and toilet paper replaced juices and sweets
Interesting changes in the ‘essential’ grocery basket have also emerged. Globally, the most popular products during the crisis have been flour, eggs, dairy products, rice, sugar, fruits and vegetables, as well as over-the-counter medications and basic hygiene items (soaps, shampoos, toilet paper, and oral care products). This has also reflected local consumption patterns, with sales of flour, rice, bakery products, soaps, and toilet paper experiencing dizzying growth. Additionally, products that consumers have largely given up during this crisis include juices, alcoholic beverages, sports drinks, bottled water, sweets, snack bars, and chewing gum.
Unlike retailers selling essential products, retailers of non-essential products faced difficulties, as evidenced by the decline in sales during March and April (for example, a drop of about 40 percent in mixed goods stores and a drop of about 60 percent in clothing, accessories, and cosmetic stores in the U.S. market). It is likely that retailers of non-essential products will remain in a disadvantaged position, even after the recovery of overall broad consumption. Furthermore, it has been shown that such retailers are significantly more vulnerable during recessions. For instance, after the 2008 crisis, non-essential retailers never regained their previous momentum, unlike overall retail consumption, which returned to pre-crisis levels on average in 2.5 years.
Less than 35 percent of consumers return to old habits after restrictions are lifted
These days, everyone is trying to answer one question: can we expect a return to old patterns of broad consumption? The answer is twofold.
The first concerns the potential for infection and consumers’ willingness to continue previous activities, which is directly related to their perception of whether the virus is under control. The two strongest indicators for this are vaccine possession and the absence of new COVID-19 cases, both of which are currently unattainable for us. Additionally, the lifting of restrictive measures is a valid reason for resuming previous activities for less than 35 percent of consumers. Governments may be able to accelerate recovery by implementing various health and safety measures, such as social distancing or the availability of hand sanitizers, or through regular antiviral cleaning. These measures have been cited in the survey as having the greatest impact on consumer behavior and the return to daily activities.
More than 80 percent of consumers believe that a recession is inevitable
Secondly, from an economic standpoint, the crisis seems inevitable. The recent expansion cycle was one of the longest in recent economic history, and signs of vulnerability were already visible in trade relations, political instability, and corporate debt. COVID-19 has dealt an additional blow to demand and confidence, which will likely push the economy into a recession lasting several years starting this year. Various forecasts regarding GDP decline confirm this. The International Monetary Fund (IMF) expects Croatia’s GDP to fall by nine percent this year, while Slovenia’s is expected to fall by eight percent. Moreover, consumers are showing a lack of confidence: more than 80 percent of consumers surveyed across Europe believe that a recession is inevitable.
Thus, even if the spread of COVID-19 can be contained, this pandemic has already left indelible consequences on the economy and usual consumption patterns. It is particularly interesting for Croatia to see how the COVID-19 epidemic is changing consumer behavior and consumption patterns in tourism. This is, of course, one of the categories most affected by this crisis and one of the most important sectors for the local economy.
According to the findings of the BCG survey, most consumers expect it will take at least a year for consumption in the travel and tourism service sectors to return to normal, while consumption for everyday activities will only need a few months to recover. Furthermore, consumers expect the introduction of certain health and safety measures before deciding to travel, such as temperature checks, antiviral cleaning between rides or flights, protective equipment, and social distancing (empty middle seats). One of the measures that has been increasingly discussed recently is the introduction of mandatory health certificates (for example, EU COVID-19 passports) for all travelers. It seems that, at least in this case, consumer attitudes are already changing into a permanent adjustment, thereby imposing a new normal on service providers.
Fear of physical contact present in more than 40 percent of people
Although we can see that China is already recording some recovery, there remains considerable uncertainty about future events and a return to normal, mainly due to the obvious risk of multiple waves of infection. After the outbreak of the epidemic, we saw how personal consumer experiences influence their expectations regarding long-term changes. The most prominent are social distancing and changes in routine, as more than 40 percent of consumers indicated that they would find it difficult to return to normal, especially regarding their comfort level in close contact with others. Furthermore, European consumers stated that they generally enjoy activities they started engaging in during isolation (such as cooking and virtual education) and miss activities they did not engage in (traveling, out-of-home entertainment, and dining out). The most divided feelings were evoked by shopping, both online and in physical stores, indicating a high likelihood of a general decline in personal consumption.
In other words, we will have completely different consumers, and each category of store will need to take specific steps to make consumers feel comfortable again; there will be no simple solutions. Many new behaviors that emerged during the crisis are likely to continue (such as working from home, more frequent online shopping, distance learning, video conferencing, setting up home offices, e-commerce, and using delivery services). New solutions will also emerge to reduce physical contacts and interactions during travel, prompting us to master effective remote collaboration and socializing.
After this crisis, those who not only adapted timely to the new normal circumstances but also proactively shaped perceived needs and outcomes through innovation, education, and promotional activities will be in leading positions.
