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Alison Brook notes there is much being written about the long term effects of the pandemic on consumer behaviour. But will recent changes be permanent once the pandemic threat has passed?

Alison Brook notes there is much being written about the long term effects of the pandemic on consumer behaviour. But will recent changes be permanent once the pandemic threat has passed?
Photo by Markus Spiske on Unsplash

There is much being written about the long term effects of the pandemic on consumer behaviours and values. But will people’s behaviour really change permanently once the pandemic threat has passed?

Consumer behaviours tend to be remarkably stable and past pandemics and disasters have shown us that for the most part people snap back to old habits once the immediate risk recedes.

A recent survey of 15 countries by Accenture suggests that consumers certainly expect some of their new habits to stick, particularly the focus on buying local, cost-consciousness, concerns for health and safety and sustainability (for example a desire to reduce food and packaging waste). However, it is more likely that any enduring changes in consumer behaviour will occur as a result of structural changes set in motion by the pandemic – increased working from home, adoption of online shopping and in many cases the impacts of reduced incomes - rather than the behaviours themselves.

Digital commerce gets a shot in the arm

All of the recent studies on consumer behaviour since the pandemic agree on one thing: consumers have decisively switched to online purchasing and now they have made the shift, they intend to stay that way. And it is not just individual consumer behaviour. McKinsey finds that B2B customers are also changing their purchasing patterns, preferring to conduct business online where possible.

In New Zealand, online sales spiked as a result of social distancing and health concerns, with NZPost receiving a record-breaking number of parcels a day.

Google trends result “Online shopping” in NZ

Source: Google Trends

Online purchasing has almost doubled in the last four years (according to a Boston Consulting Group survey of Australian consumers). However, the pandemic has also encouraged many more Baby Boomers and older consumers to make first-time online purchases, while all age groups have purchased goods from a new category online since the onset of the pandemic.

Online grocery shopping, which had experienced slow adoption pre-pandemic, has seen a huge spike in demand. In mid-2019 online food and beverage shopping accounted for just 3 percent of the sector spend. By April of this year, Countdown’s e-store in New Zealand saw growth of 300 percent. The predictions are that once people are comfortable with online shopping the convenience and time-saving advantages means they are unlikely to revert back to previous behaviours.

The work from home revolution

If working from home permanently increases post-COVID it will be one of the biggest changes in workplace practice since the industrial revolution. The signs are there that it will be a permanent shift with a number of NZ companies announcing new ongoing work from home arrangements, and if so it will have dramatic impacts on where and what we consume.

There won’t be the same need for corporate clothes or luxury goods and according to a KPMG study, people will increasingly seek out larger homes with space for work and home offices, while the demand for smaller central city dwellings will decline.

More white-collar workers spending more time – and money – close to home will also see services popping up in suburban areas that previously would have been previously clustered around office buildings.

As people become accustomed to spending more time at home they are also more likely to cook and eat at home which is not good news for the already struggling restaurant industry.

Embracing a simpler life

Unlike basic necessities such as groceries, many people are delaying making big purchases. Luxury brands and products are also suffering a big hit, with the Boston Consulting Group survey suggesting 64 percent of consumers will continue to avoid premium or luxury products in favour of basic or simple alternatives. However will there be a long term move towards a more frugal existence?

Whether this is a trend that continues will ultimately depend on wage growth and security. Past recessions have shown that there tends to be long term downward pressure on wages long after the recession has technically passed so these purchases could be depressed for some time. As was seen in New Zealand after the Global Financial Crisis wages continued to rise during the recession (particularly in the public sector), but fell away and stagnated in the years that followed:

As Utpal Dholakia points out in Psychology Today there were similar predictions after the GFC that consumers would continue to buy cheaper brands and pursue a more minimalist lifestyle indefinitely. However, purchasing habits and tastes are ultimately very hard to break and people tend to revert back to normal when they can “once the economic and social conditions in which they thrive return”.


*Alison Brook is from the Knowledge Exchange Hub at the Massey University campus at Albany, Auckland. She is on the GDPLive team. This article is a post from the GDPLive blog, and is here with permission. The New Zealand GDPLive resource can also be accessed here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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16 Comments

Excellent article. Pretty much agree with all observations.

I guess we will see growth in demand for 3/4 bedroom homes and a drop in demand for bolthole apartments.

Those who invest in leaky inner-city apartments are taking a risk......

TTP

Yes good article. I certainly agree with the "Embracing a simpler life". There's been way too much focus on constant consumerism and buying "stuff" that we simply don't need.

I do find it ironic that people calling for the "simple life" like the Author, Were six months ago calling for more immigration and more graduates and more students and consumerism. You can't have it both ways when the tide goes out. Either way people struggling will not fit into her plans.

I don't disagree with what the author is saying though..

Guess it sometimes takes a shock to adjust folks' perspective.

Change may be slow, however, and I'd agree with the comments at the end where many people returned to excess consumption. Younger generations are the most advertised to generations ever, hit from a young age with messaging that buying stuff will fulfill them. It's hard to break away from this. Hence the resort to shopping for pleasure.

On the other hand, many luxury brands are almost meaningless these days...labels on generically manufactured products, with no connection to any heritage or craft. Why bother forking out for a "luxury" brand that is the same "designed in ___, made in China", "made in ___ from local and imported ingredients", or sunglasses made in the same Luxotica factory but with a different brand label, just for a few examples.

That's why the west is best. They have heritage institutions and foundations that other parts of the world do not have.

I think she offers a balanced view, and I think she is right that many old habits will return.
Conversely I think she provides a good outline of some of the things that may change permanently. The work attire comment is a good one, I know I will need to spend less on it now that I work from home 2-3 days per week.
I don't know if city cafes will be that hard hit. Many people bring their lunches 2-3 days per week, that will be replaced by eating at home on the days people work from home. I can't speak for others, but I know that on the days I do go into the office I like to eat out , it's a nice break from home!

In the GFC, Proctor & Gamble moved to start tracking their brands versus store brands as their hypothesis was that consumers would shift to cheaper brands / store brands based on price to value perception. We have witnessed the shift to store brands across the U.S., Japan, and Europe. This has long been the new normal and will only accelarate. NZ and Australia are way behind the curve for a number of reasons: economies of scale, lack of retailers ability to develop an appropriate model for store brands, and the pesistence of the stupid bubble (the wealth effect is an important driver in shopper behavior). In the context of NZ and Australia, the picture is not good. The incidence of price discounting and promotions is already the highest in the world. And that was before Covid-19. Discounting and promotion are not signs of a healthy consumer economy.

https://www.nielsen.com/nz/en/insights/article/2018/the-470m-opportunity...

My nana grew up in the depression and as a result remained frugal all of her life. That frugal habit certainly stuck long term with her.

RS
Agreed.
Pre-1987 crash there was considerable excessive spending on the likes of high-end restaurants, long lunches, and wines.
"Dom Perignon" and "Bollinger" became the standard daily bottle(s) for many, and - even if one couldn't afford them - the names certainly became very much part of the popular vocabulary.
Post-1987 things were very much different as many of the high-end restaurants disappeared, Dom Perignon and Bollinger were only for special occasions, and we returned to home-made bagels for lunch.

During lockdown we quaffed all of the random cheap bubbly left at our place over the years. Some was downright nasty, even the youngest wouldn’t have more than one glass of it, but the surprise find was Lindauer Brut, which we would buy for family use. The only downside is to find someone else’s recycling bin to put the empties in.

We've got a 5 bedder in the burbs. Any offers?

Join the rentier class if you are not one already. Sounds like an ideal flat mates place to rent out. Might have to cut the rental somewhat in these uncertain times.

So, is Covid-Corona going to be as life changing as the Computer/Internt in the long term ? Don't think so.
It will be business as usual once a vaccine is developed and distributed.

The intetersting thing in all of this is that we have been largely unscathed by Covid whilst the rest of the world (Oz included now) continues to deal with massive numbers. So the question really is, how long will this last globally? And with the new working from home being well encouraged by employers (who see a financial silver lining in this), should Council and Govt relook at where their money is being spent, as some central city 'improvements' may well become unused white elephants in our refreshing new normal. It is nice to see a move from consumerism.

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Days to the General Election: 38
See Party Policies here. Party Lists here.