Frugality will continue to reign supreme for many consumers, especially if and when government fiscal support recedes.
That’s according to a new report by The Conference Board, which noted that, at the peak of the pandemic, 64% of U.S. consumers reported actively cutting back on spending. After a drop in late 2020, it was back up at 62% in the first quarter of this year.
As in previous downturns, this change in spending patterns may be slow to reverse, with many likely to stick to cheaper products and sales channels over name brands even after their finances recover.
According to the report, Consumer Behaviors and Business Opportunities in the COVID-19 Era, the greater frugality and value-seeking forced on consumers by COVID-19’s economic shock may endure beyond the pandemic in significantly altered spending patterns.
“Consumers’ focus on frugality will reward companies that invent novel offerings and business models catering to more frugal wallets,” the report stated. “These include secondhand markets, rental services, and ‘sharing economy’ businesses—all likely to be facilitated by digital features.”
Other insights from the report are below:
The pandemic accelerated the move to digitized lifestyles, permanently raising expectations for convenience. E-commerce surged during the pandemic, peaking at 16.1% of total retail sales the second quarter of 2020.
“This figure—a metric of where a purchase took place—dramatically understates digital’s true influence, though,” the report stated. “Consumers now expect digital convenience at every stage of the shopping experience, even if the final sale occurs in a brick-and-mortar outlet.”
The health crisis and home-centered way of life brought on by the pandemic motivated many Americans to focus on healthier lifestyles. Regardless of where people fall on the spectrum of current health behaviors, the longer-term legacy of COVID-19 may be that health, wellness, and self-care needs play an even bigger role in consumer decision-making.
“This trend creates opportunities for businesses to cater to people’s health needs,” the report stated. “It has already fed sharply higher sales in natural products, fresh produce, and anti-anxiety products and services—from medication to meditation, CBD, and aromatherapy.”
Already growing categories before the pandemic, digital health and fitness have also surged — from exercise apps and devices to telehealth counseling and therapy solutions.
For American consumers, COVID-19 has accelerated pre-existing trends and crystallized new preferences and priorities,” said Denise Dahlhoff, senior researcher, consumer research at The Conference Board. “The three trends promoted by the pandemic—digitally enabled convenience, frugality, and health and wellness—will continue to drive consumers’ behavior as the pandemic subsides. The most successful brands will be those that address these needs, ideally offering solutions for consumers that don’t force trade-offs but rather balance these three at-times divergent priorities.’”