American consumers are making some significant lifestyle changes in the wake of the COVID-19 pandemic.
As social distancing becomes the new normal and economic concerns continue, consumer habits are undergoing an unprecedented transformation. While many of these changes in buying behavior are likely temporary, some practices may remain in place long term.
In this article, we’ll recap some of the key patterns that are emerging and what they could mean for businesses and for your wallet.
Consumer shopping behavior is evolving. According to a recent study conducted by IBM, more than half of consumers say they are spending less given the current economic environment. The money that is being spent has shifted largely to e-commerce, with Amazon leading the way in online delivery services. Prominent big box retailers like Walmart and wholesale clubs like Costco offer one-stop-shopping for essentials, which has continued to attract consumers both online and in physical locations. Even as the COVID-19 pandemic winds down and the focus moves to reopening, it is expected that consumers will be slow to come back to brick-and-mortar retailers and that the majority of the e-commerce business will continue to go to major players like Amazon. Brands and organizations that haven’t historically had a presence online must rapidly adapt to this “new normal” or they won’t survive.
Brand loyalty has weakened. Faced with the limited availability of many products and services, particularly during the earlier stages of the coronavirus pandemic, loyalty to specific brands has largely gone by the wayside. Most consumers now say they would rather purchase from a less familiar brand rather than wait until their first choice is restocked.
Discretionary spending has taken a hit. Luxury purchases will likely continue to take a hit for the foreseeable future. For example, although people are using their personal vehicles more and relying less on ridesharing and mass transit, automobile purchases are not high on the list. More than 25 percent of consumers surveyed said that a lack of confidence in the economic outlook will impact their decisions to buy a vehicle for at least the next six months. Instead, people are expected to continue to spend above-average amounts on products related to health, food, medicine, and disease prevention. And bikes. If you’re looking to purchase a bicycle, be prepared for a long wait. Anxiety over the safely of public transportation, combined with a renewed interest in outdoor exercise, has created a surge in demand for these two-wheeled vehicles.
Our consciousness has awakened. Consumers have become more mindful of what they’re buying. Limiting food waste, choosing more health-conscious fare, and purchasing with sustainability in mind have emerged as priorities. The pandemic has also created an emphasis on buying local. More people are shopping at locally owned stores and their buying preferences have shifted to locally grown or locally sourced products.
What does all of this mean for you? These fundamental shifts can have widely varying impacts on people, depending upon financial standing, attitudes toward money, personal values, and more.
Still, there are some general recommendations regarding spending during these unusual times:
- Don’t squander your gains. Without the usual expenses of fine dining, sports, travel and entertainment, you may find yourself with extra money on your hands right now. If you’re in this fortunate position, use these resources wisely. Consider reinforcing your emergency fund or growing your retirement nest egg.
- Take advantage of discounts and rebates. Most major auto insurance carriers have announced payback plans for customers who were sheltering in place and may still be working remotely. If your carrier hasn’t announced a similar rebate, check their website or contact them to request a refund. And if you are in a position to purchase a new vehicle, now may be the time to get a killer deal as the auto industry creeps out of the coronavirus shutdown and begins to ramp up.
- Examine your spending carefully. We have transitioned not just in where we spend, but also in how we spend. Online purchases mean a reduction in the outlay of cash but an increase in credit card spending. If you have a budget in place, review it carefully, comparing your current expenses with your pre-pandemic payments. You may be spending more than you realize.
As restrictions ease across the U.S., we’re all hoping that economic recovery is on the horizon, even if it looks different than it has in the past. If you’re seeking sound guidance in the wake of the pandemic, our seasoned advisors are here to help. Please contact us today to get started.
About FAI Wealth Management, Inc.: Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life’s uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $350 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at https://www.faiwealth.com or call 410.715.9200.