Shoppers wearing protective masks leave a Hennes & Mauritz (H&M) store in the Herald Square area of New York, United States, on Thursday, August 6, 2020.
Nina Westervelt | Bloomberg | Getty Images
As more people get the Covid-19 vaccine, business leaders and investors are asking themselves a new question: what will consumer spending be next?
About a third of the US population has received at least one dose of the Covid-19 vaccine. Traffic to airports and shops is increasing. And some economists are predicting a big boom that could last for years.
Even so, the global health crisis will continue to affect the mindset of consumers and their purchases.
Here are four predictions of post-pandemic trends based on surveys and reports from experts:
Consumers are still concerned – and that can affect what they buy and how they shop.
Even after a stab, Americans’ health and safety concerns are likely to linger. According to a January survey and analysis of more than 7,000 consumers in nine countries by consultancy AlixPartners, the US has the highest number of consumers “most concerned” about their health and finances, and China has the lowest number.
In the US, almost one in three consumers said they were extremely or very concerned about their physical health, and about one in four said they were extremely or very concerned about their mental health, according to the report released in early April.
For retailers, these concerns can increase the importance of following safety protocols such as more rigorous cleaning.
Target said it will incorporate security into its future store design. John Mulligan, chief operating officer, said on an investor’s day in March that the retailer will be adding more contactless features to toilets and other locations, and making more space for people to move between shopping and checkout alleys.
Grocery shopping can be one of the stickiest habit changes of the pandemic.
Home offices, roadside pick-up and lots of cooking practice – all of these will influence people’s shopping habits in the future.
According to the AlixPartner survey, dining and restaurant travel will be the slowest to regress. Among U.S. consumers who reported permanently changing habits, 30% said they would spend more on food and 44% said they will spend less on post-vaccination food than in those pre-pandemic areas.
Jeff Harmening, CEO of General Mills, said many Americans ate in restaurants or dined in the work cafeteria while on business trips. This dynamic of frequent jet-setting, frenzied commuting and lunch by employees across the table has disappeared.
“People want flexible schedules,” he told investors on a profit call last week. “While consumers may now be making more vacation plans than before, business people won’t travel as much because technology is catching up and we are realizing we can do a lot of things remotely.”
The way people store their pantry is also different. Prior to the health crisis, around 7% of food was purchased online, according to a report by the Mastercard Economics Institute. This proportion is expected to rise to around 9% of food sales in the future. In this case, the food industry will keep 70% to 80% of the digital profits it made during the height of the pandemic.
Grocery stores and discount stores such as wholesale clubs and dollar stores are expected to see the most dramatic and lasting e-commerce gains from the pandemic, according to a report from the Mastercard Economics Institute.
Customers are warming up to the approach, although there may be a barrier of trust, Mastercard chief economist Bricklin Dwyer said in an interview on CNBC’s Worldwide Exchange Tuesday.
“You have to trust someone else to pick your peaches,” he said. “You have to trust someone else to deliver your goods and still have them good when they arrive. So these are really some of the barriers that we overcome.”
Teenagers and 20s may be the first wave of avid buyers.
Young consumers want to go out again – and they are starting to spend and dress accordingly.
Much like after the Great Recession, teenage girls lead the way when they open their wallets after the recent pandemic-related recession. This is the result of a poll by Piper Sandler among teenagers and 20 year olds 41. Biannual “Inventory with teenagers”. Nearly 30% of higher-income teenage girls’ wallets go into clothing – a high that has not been seen since 2013, according to the report. Handbag spending rose to $ 93 per teen, up 4% year over year.
Chip Bergh, CEO of Levi Strauss & Co., told CNBC on Thursday that the pandemic had inspired fashion that young shoppers also appreciate. Instead of squeezing into skinny jeans, he said they wanted wide-leg jeans with baggier.
“This is not the first time this has caught on with consumers,” Bergh said. “Cycles come and go. And I think the pandemic definitely contributed to consumers looking for a more comfortable and relaxing denim.”
Nearly half of the young buyers surveyed by Piper Sandler said they would like to fly on an airplane in the next six months, up from 33% in the fall.
According to a survey by the IBM Institute for Business Value of more than 15,000 people in nine countries, Gen Z among the generations is most enthusiastic about spending time with people outside their homes when they are vaccinated. Nearly 30% of Generation Z respondents said they want to interact with other people more than they did before the pandemic, compared to Gen X and those 55+ who plan to return to interpandemic interaction levels.
Contactless shopping and dining modes will remain popular even after the virus goes away.
Customers may have opted for drive-thru and curb pickups in the past year for safety reasons. Still, they have discovered the convenience of the approach and that will keep them coming back again and again as they juggle fuller calendars, commutes, and carpooling children.
Retailers have increased their investments to adapt their stores for e-commerce. Best Buy tests stores in which more space is used for fulfilling online orders than for the presentation of flat screen televisions and smartphones. Walmart and Kroger both announced plans to invest in automation to keep up with the volume of online grocery orders. Walmart is adding high-tech automated systems to dozens of its stores, and Kroger plans to open at least 11 huge facilities with Ocado. The first two of Kroger’s sheds will open in the next few weeks.
“With the company’s entry into a new digital age, Kroger has also entered,” said CEO Rodney McMullen on an investor’s day last week. He said the company will double its digital sales by the end of 2023.
Restaurant chains have also adopted the keyword. McDonald’s is closing hundreds of restaurants in Walmart stores, and chains like Sweetgreen and Shake Shack have announced plans to add drive-through lanes as diners choose to order inside their car. Chipotle Mexican Grill said it is accelerating plans to add more “chipotlanes” to its footprint.
Even after the dining rooms reopened, Jack Hartung, Chipotle’s chief financial officer, said online sales remained strong.
“The pandemic has of course really put some turbocharger behind our digital business, but when we see that Covid is behind us – and we still have a long way to go – we keep most of this digital business, about 80%”, Hartung said in an interview on CNBC’s “Closing Bell” on Friday.