Consumer Spending is Today’s Statistic; Consumer Behavior is Far Longer Lasting
Authors: Dr. Nicole Olynk Widmar, Associate Head and Professor, Purdue University Department of Agricultural Economics
Torrie Sheridan, Communication and Marketing Specialist, Purdue University Center for Food and Agricultural Business
Remember when (in March 2020) society talked about two weeks at home to ‘stop’ the spread of COVID-19, and then we attempted to ‘flatten the curve’ over a month or two? Now, here we are, counting cases in the millions with hundreds of thousands of lives lost. This is no two-week or two-month blip; this is becoming an era in our lives. From an economics and markets perspective, we’re likely no longer talking about today’s spending changes in households, but instead talking about lifestyle adjustments and behavioral changes likely to linger even if we were to snap our fingers and return to our ‘old normal’ tomorrow. From a consumer standpoint, we’re shaping behaviors, teaching new shopping practices (i.e. online shopping for EVERYTHING possible!) and cultivating habits that will impact families for lifetimes (and longer when one considers how food/eating/spending behaviors are taught throughout generations).
Have you ever poked fun at the stockpiling/pantry behaviors of an elder family member? Well, you should probably rethink that with your newly developed toilet paper hoarding behavior. And don’t laugh from over there atop your bed where beneath lies a canned goods forest and paper towel highway. Stress of the pandemic has manifested in a variety of ways in household spending on essentials such as food and daily use supplies.
- Fewer but larger shopping trips
- Not everyone has the cash flow to be able to spend large amounts of household funds stocking up on supplies, which necessitates more frequent trips to stores and may lead to being forced to seek/buy during times when certain items (toilet paper!) are extremely hard to find locally. Even if funds are available to spend, transportation complicates the ability to haul home large purchases for some. In short, stocking up and prepping for disasters when it comes to groceries and household necessities is fraught with inequities, and while the advice to have two weeks of supplies on hand is somewhat ‘one size fits all,’ the reality of implementation is most certainly not.
- Stocking up (okay…hoarding) on non-perishables or long shelf life items
- Ordering bulk shipments
- Buying online items which you previously bought in-store
- Curbside pickup or delivery for groceries
- Speaking of curbside pickup, delivery and other grocery-fetching mechanisms…how many of us have found a ‘new normal’ in the way we have recently been forced to do things? Maybe this isn’t how we did it pre-COVID, but there are certain aspects we have adopted that we’ll keep in the future.
- Cooking at home
- So. Many. Dishes. Simultaneously, spending in restaurants has gone down A LOT. Americans had long been growing the share of their consumption outside the home, eating out at restaurants or doing grab-and-go or on-the-run dining. Then, the abrupt shift in March and April 2020 hit with quarantines and closures. As reported by Fortune, “In March, the USDA’s monthly sales of food figures showed that money spent on food away from home (FAFH) had dropped from $67.6 billion in February to $54 billion in March, a 20% decline, while sales of food at home (FAH) increased $62.9 billion to $79.3 billion, or 26%. But the real shift came in April, when more states were in serious lockdown. Spending on food away from home plummeted 34% over the previous month to $35.7 billion. That’s less than half of what Americans spent on FAFH in December 2019.”
- How long will this last? It doesn’t appear that lifting restrictions leads to an automatic rebound in spending in restaurants. Some restaurants are changing how they serve, adding more takeout, curbside pickup or outdoor dining. The city of Lafayette, Indiana is taking over downtown streets to facilitate outdoor dining (see Dining in downtown Lafayette streets delayed one weekend, now starts Aug. 28), and restaurants around the world are moving diners apart, and outdoors, as much as they can.
- Six plus months of changed dining behavior will undoubtedly have some sticky aspects on human behavior. We’re used to cooking and eating at home now. What is the impact on children and their behavior in a restaurant setting? Six months feels like a long time to me, but it’s 1/10 of my five year old’s lifetime. Anyone who has trained…I mean parented…a child on semi-appropriate restaurant behavior knows it is a practice-repeat-repeat again sort of activity.
Bigger Ticket Annual(ish) Shopping/Spending
Vacation travel, annual visits to far-away family and other non-normal but expected events are up for question. Some people traveled by car instead of flying, and some chose to stay home. Some people changed plans and stayed at the beach house or cabin longer, aided by working remotely and/or homeschooling. Some people attempted business as usual and traveled to distant locations with kids in tow, and others are horrified at the prospect. Regardless, there are a multitude of economic questions to be addressed.
- Are we postponing or canceling our travel plans?
- Are we postponing large expenditures, appropriating those funds for other spending or saving that money instead?
- What are the implications for spending on ‘goods’ versus ‘experiences’? What about spending on types of goods?
- There had recently been movement toward spending on experiences, but without the ability to go out into the world and experience, are we moving back toward buying ‘stuff’? Are we postponing our spending for another day, or are we still spending on experiences, but different experiences than we would have previously?
Once in a Lifetime Happenings/Events
Sure, COVID-19 has impacted how we live our day-to-day lives, but we can’t forget what has it done to those “once-in-a-lifetime, live-in-your-memory-forever” types of events either, like weddings, babies and more. Weddings are being cancelled, postponed and altered, and births can no longer be celebrated with visitors at the hospital.
There has been a fair amount of reporting on weddings, and Martha Stewart can even teach you how to get married on Zoom (which was/is apparently legal in California and New York, although this is most certainly not intended as legal advice). There are also a number of considerations with the birth of babies, many of which have been explored in popular press and are related to the risk involved with bringing multiple people together in a medical facility and around newborn babies. Getting less broad discussion/attention, although also economically important, honeymoons are not just any trip as they elicit the willingness to spend more, do more and travel further than we would on an ordinary vacation.
- What happens to spending on the honeymoon when the wedding is cancelled or scaled down? In normal times, one might posit that wedding spending is reallocated to a longer or more elaborate honeymoon. Given travel restrictions and health concerns, that seems unlikely now.
- Are newlyweds spending on durable goods instead? Are they getting new cars or making down payments on a house instead of taking a honeymoon?
- Are they saving cash instead of doing the big wedding and/or honeymoon? Are they refraining from taking out a loan for a wedding and honeymoon and forgoing the experiences?
The long-anticipated honeymoon is a prime example of changing spending/economic behavior in light of current conditions, and it is one in which we have some first-hand reporting. I (Torrie) married an accountant in December of 2019 (you know, right before crazy tax season), so it was decided that our magical honeymoon would have wait until directly after tax day in mid-April (before COVID influenced the change of tax day to mid-July). We were planning a getaway cruise out of the country visiting tropical islands, taking part in adventurous excursions and filling our days with activities from sunup to sundown. Little did we know our long awaited cruise ship that was supposed to sail us away from post-wedding and post-tax season stresses would become a prime breeding ground for the global pandemic the world was experiencing. Needless to say, our plans took an alternate course and we stayed on dry land.
Instead of taking our original honeymoon, we waited until late July to take a trip, opting to stay closer to home and out of the airports. We chose to hop in the car, and even decided to go with another couple whose honeymoon plans were cancelled too. We split the cost of a rental house instead of booking a busy hotel filled with strangers, and while we would normally grocery shop at our destination, we shopped at home and packed as many groceries as we could into a cooler and hit the road to avoid crowds and shopping at unfamiliar places. There were no big excursions or experiences aside from dinner at restaurants (wearing our masks) and sitting (socially distanced) on the beach for a week.
While we saved money by taking an alternative trip, we’re still considering sailing off on our honeymoon cruise at a later point (an anniversary trip was considered, but it’s looking more and more like December may not bring any more normalcy). When we look at it this way, I suppose we’re really spending more money in the long run. Regardless, COVID has caused us to spend our time, money and efforts differently than we ever imagined on our once-in-a-lifetime events.
In the long run, we don’t know what will happen. But we do have questions…
- What is the new normal of spending on household essentials? I’m spending more on my weekly grocery shopping than I did previously – for sure (I checked the data!) — but far less on eating out. What will the coming year bring in this regard?
- Sharing economy was VERY vogue in recent years, in particular among younger consumers who didn’t necessarily want to own items they used infrequently. But sharing isn’t simple in pandemic times. Even ride sharing and public transportation may be different moving forward, as many of us have been using our cars as ‘personal bubbles’ in many settings with drive through and pick up everything lately.
- Tiny houses and itty-bitty big city dwellings got awfully tight after a few weeks indoors. When you are never home, it makes sense to keep small spaces and live your life out in society, but when society sends you home and your home is built for sleeping and the occasional lazy Sunday afternoon, do we rethink those living arrangements? Quarantine with children in the backyard running laps is very different than quarantine with children running laps in your living room apartment (perhaps without direct outdoor access), or without outdoor space of any kind if parks were closed where you live.
- If you are going to work remotely for the long haul, where do you want to do it? Seasonal rentals (longer stays than the usual few-day vacation) went up significantly as people flocked to vacationy locations to spend their time this spring/summer. That’s already ‘in the books,’ as they say. But what’s next? Are companies going to have workers remote indefinitely? If so, will they choose to live differently or elsewhere? One could certainly posit that workers may seek cheaper places to live, especially if their sole reason for living in high-cost areas was to be near their place of employment. But is it too early for these discussions? It’s more complicated than some of the early headlines would suggest. A single individual moving apartments may be in process (or already happened), but buying and selling real estate may take more convincing that one’s job is secure even if they move away. And will they be called back in physically? We have no answers, but many questions in this regard. Additionally, the markets impacted are many…restaurants, real estate in a variety of geographies, transport-related industries and public utilities (INTERNET ACCESS!).
- If you are the adventurous type…Barbados is now accepting applications for the “Barbados Welcome Stamp,” a special Visa that will allow foreign visitors to work from home for up to a year on Barbados. There is even a family bundle option (bring the kids!). See, it’s a whole new economic opportunity for Barbados, and a year-long beach vacation for you. It’s a whole new world…