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75% Consumers Anticipate Financial Impact Effects of COVID on Consumer Behaviour

effects of Covid on consumer behaviour

Published on May 01, 2020

The emergence of COVID-19 has drastically influenced consumer behaviour and sentiments. Right from reduced shopping to paying less importance to brands, consumer behaviours have shifted rapidly in recent months. 

While the markets were moving towards a customer-centric  paradigm, the coronavirus outbreak has conveniently  disrupted  consumer sentiments putting marketers in an  unfamiliar and unexpected situation marking the beginning of an uphill road for retailers, supply chains, and businesses. 

Let’s dive in to know a little more on how the COVID-19 crisis has changed consumer behaviour and sentiments. 

The transition from luxury buying to panic buying  

As WHO announced the spread of the novel coronavirus,  people responded by stocking daily household  essentials like toiletries and groceries and medical supplies like hand sanitizers and masks. This sudden shift in consumer preferences  created a problem for online and physical stores  to  stock their inventory. 

panic buying

In simple terms, consumers tend to respond differently than usual in the face of an uncertain and uncontrollable situation. Paul Marsden, a consumer psychologist at the University of London has disseminated interesting  information about panic buying and explains it as a fundamental  psychological need.  According to him the needs can be classified as below: 

  • Autonomy – the need to feel in control of your actions 
  • Relatedness – the need to feel that we are doing something to benefit our families 
  • Competence – the need to feel like smart shoppers and make the right choice 

These psychological factors aren’t new and are the crux of retail therapy (a response to various types of personal crises). However, in a pandemic situation, they come with added layers. 

According to Nielsen’s study, consumers are going through six behavioural changes as a result of the COVID-19 pandemic. 

  1. Proactive health-minded buying: Buy preventative health and wellness products 
  2. Reactive health management: Purchase protective medical supplies like masks and hand sanitizers 
  3. Pantry preparation: Stocking groceries and household essentials 
  4. Quarantine preparation: Fewer visits to brick and motor stores for shopping 
  5. Restricted living: Online shopping to stock essentials 
  6. A new norm: Altered supply chain post quarantine and coronavirus 

The market research company, Nielsen, claims that as consumers follow the above mentioned behavioural trajectory, their buying personas alter significantly which in turn disrupt inventory and product categories. The product categories that are most likely to be affected are health and safety products, shelf-stable goods, food and beverage, digital streaming, luxury goods and fashion and apparel. 

How the fear of recession influenced consumer behaviour 

The advent of the coronavirus has created volatility in the economy, much more complex than the 2003 financial crisis. This has led to high levels of anxiety regarding unemployment among the global population and consequently has reduced the shopping frequency of consumers. Additionally, the unstable economy has made them rethink their usual cart items to save money for the future.  

In other terms, consumers are functioning on a “Hibernate and Spend” mode, mostly the ones aged between 18 to 44(EY). The people who are above 45 have suffered the highest degree of anxiety regarding the recession. While 78% of the aged crowd are shopping less frequently, 64% of them are only purchasing essentials, and 33% of them are less concerned about brands at this point (EY). 

COVID-19 impact on consumer sentiments & online consumer behaviour 

Consumer sentiments are the driving factors of consumer buying behaviours. COVID-19 has deeply impacted consumer emotions  which  has dramatically changed their shopping behaviours. Looking through a generation lens, Gen Z’s and millennials are more concerned about the impact of the pandemic on the economy than the Boomers. A study of the U.S and U.K consumers has revealed that 96% of the youngest generation is greatly concerned about the Coronavirus and its impact on the global economy compared to older generations. Consequently, they are spending less on travel experiences and unnecessary items (Bigcommerce). 

Looking at the situation in a more granular way , shopping behaviour of men and women has differed in the light of the COVID-19 pandemic. Men seem to prefer online shopping more than women. The lockdown rule which was posed as a primary measure to contain the spread of the coronavirus has led to an upsurge in eCommerce sales. Grocery eCommerce, subscription and convenience services have seen a significant upward curve in revenue and conversion in the course of lockdown. 

Change iin daily e-commerce spending

Source: Bigcommerce

Vietnam witnessed the largest upswing in e-commerce shopping – 57% of consumers have shifted their purchase to online, whereas 55% in India, 50% in China, 31% in Italy has also seen a rapid increase in online shopping (Warc). 

The road ahead: Consumer behaviour post COVID-19 

According to a global survey conducted by Mckinsey, 75% of consumers anticipate a long-term impact on their routines and finances.

Personal effects of COVID-19 to be long lasting

Source: Mckinsey

The COVID-19 pandemic has not only disturbed consumer buying behaviours but also has created a ‘waste nothing’ sentiment among consumers. The pandemic situation has caused mankind to pause and reflect on their spending behaviour and has made them conscious about the aftermath of the COVID-19. Significant changes will be reflected on consumer behaviour and sentiments in the next normal post COVID-19 crisis and companies will recover as per their adaption capabilities.