How COVID-19 Has Impacted Consumer Behavior
Read on to discover:
- McKinsey & Co.’s ongoing COVID-19 consumer behavior tracking over the last year
- 3 fundamental shifts in consumer behavior that are forecasted to endure post-recovery
- Insight into who is spending and how this knowledge can inform your 2022 strategy
The COVID-19 pandemic is a humanitarian crisis at its core, with thousands of healthcare heroes on the front lines battling a virus we still know so little about. Even with the deployment of vaccines, the dangerous new delta variant threatens to shut down the nation once more.
Much remains to be done to rebuild our newly opened economy as government leaders struggle to determine if we are out of the woods just yet. No matter what the future holds, one thing remains true: COVID has transformed the way we live, work, and shop, possibly for good. This article will discuss the implication of the pandemic on consumer behavior and what business leaders need to know based on data from the McKinsey & Company COVID-19 US Consumer Pulse Survey.
3 Fundamental Shifts In Consumer Behavior Caused By COVID-19
During the height of the COVID crisis in 2020, many Americans worked from home without childcare or schools for their children to attend in person. Families that were once rushing around to get to work, school, soccer practice, the grocery store, and the dentist were now confined to their homes with wi-fi as their only solace in an uncertain world. This dramatic change in daily life and anxiety about social contact meant that consumers needed to shop differently, and they did.
E-commerce grew by a whopping 30% in the first and second quarters of 2020 as Americans ordered groceries, restaurant fare, home gym equipment, home improvement items, and even toilet paper online. In the early days of the pandemic, online retailers were overwhelmed with orders and delivery companies could hardly keep up with such a dramatic rise in demand. Researchers expected the need for digital goods and services to decline in 2021 as most states across the nation are open and mask-free. However, that has not been the case. Online credit and debit card spending is up 18% since January 2020, with curbside pickup being a dominant factor. Research illustrates the increased importance of omnichannel convenience.
Beyond retail consumer goods, the entertainment, healthcare, lifestyle & fitness, conferencing, education, and personal care industries have increased their digital offerings. In 2021, telemedicine, video meetings, workout streaming, and digital classrooms are the norm, and most will continue to thrive in the long term.
The second shift in consumer behavior is the rise of the homebody economy. Though some US workers have returned to the office, many employers have stayed with the remote or hybrid model. As America’s view of work has changed, so has the need for multi-functioning living spaces. We’ve seen a sharp increase in consumers looking to utilize their living spaces for new purposes. For example, 28% of McKinsey survey participants renovated their homes in the last twelve months to have a work-from-home space, home gym, or other upgrades.
The rise in home renovation projects makes sense as 32% of participants worked from home, changed jobs, or went back to school last year. Moreover, a hot real estate and investment market led to 26% of participants buying a car, reassessing investment portfolios, or buying/selling property.
The Evolution Of Loyalty
The third shift in consumer behavior is the evolution of loyalty. As COVID lockdowns turned everyone’s lives upside down, consumers deviated from their routines and, ultimately, the brands they purchased. 39% of consumers tried a new brand over the course of the pandemic, and 77% tried a new shopping behavior altogether. Gen Z and Millenials appear to be somewhat more likely to try new things, with 84% trying out a new shopping behavior since the beginning of COVID versus 77% of consumers as a whole. With an uncertain economic outlook throughout the last year, consumers across all income levels “traded down” their purchases to save money.
With three stimulus checks doled out and the pandemic winding down, research shows that customers are optimistic about the economy and may even want to splurge. 51% of consumers stated that they planned to treat themselves now or after COVID subsides. This extra spending is expected across categories, and over half of it is planned before the pandemic is over. The top five categories in which consumers plan to splurge include:
- 46% – Restaurants & Dining Out
- 44% – Travel & Vacation
- 43% – Apparel, Shoes & Accessories
- 37% – Beauty & Personal Care
- 32% – Electronics
Convenience and value were the main drivers of shopping behavior change; however, quality and seeking brands that match their values also inspire change for about 40% of Gen Z and Millennial shoppers.
Vaccines Are Leading The Way
By and large, COVID vaccines encourage more out-of-home activity (travel, entertainment, restaurants) and spending, with 33% of vaccinated adults engaging in outside events versus 22% of those who want to get vaccinated but have not yet. As vaccination rates climb and more people feel comfortable eating out, going to concerts, traveling on vacation, and watching movies on the big screen, consumer spending will continue to recover.
Consumer Spend Is Normalizing
Beyond current consumer behavior patterns, data from the McKinsey & Company COVID-19 US Consumer Pulse Survey gives an idea of what’s to come post-pandemic. Between February 2020 and April 2021, “essential” consumer spending on grocery, pharmacy, home goods, and electronics normalized while discretionary spending on travel and apparel started to recover. Credit-card spending reflects elements of growth, and more than half of US consumers expect to spend extra to treat themselves starting now and post-COVID-19. In addition, out-of-home activity and spending are accelerating among those who have been vaccinated. With all of these changes, there is a unique opportunity for brands to connect with consumers who want to spend and are open to change.
To learn more about COVID’s impact on consumer behavior and the McKinsey Pulse Survey, view our webinar “The Great Consumer Shift: How Has COVID Impacted Consumer Behavior?” led by Customer & Market Insight Lead Tamara Charm.