- The COVID-19 pandemic has had a multi-dimensional impact on the shopping patterns of the people due to economic slowdown.
- Since the coronavirus outbreak, consumers have had to resort to different modes of shopping while adhering to the lockdown restrictions and physical distancing norms.
- Economies worldwide are reopening, and consumer sentiments are improving, but there are looming fears of a second wave of disease infections.
It is said the COVID-19 has done what major economic crisis could not do, and it is turning out to be true. Since the outbreak of SARS-CoV-2, we have witnessed several changes in the buying patterns of consumers across the globe. From panic buying to buying only essentials and then seeing a startling boost in online shopping, COVID-19 has emerged as a strong force to alter the buying behaviour of customers. Moreover, consumer sentiments are still evolving as countries across the globe are reopening their economic as well as social movement.
As the news of the coronavirus outbreak surfaced around the globe, economy-wide lockdowns and strict social distancing measures were imposed, and people were found in a state of high ambiguity while rushing towards the stores to stockpile essential items in preparation of staying indoors.
One of the most prominent buying behaviours that emerged at the earliest days of the virus outbreak across several countries was panic buying, where the consumers were seen flocking to the stores gathering whatever they could in unnecessary quantities just out of anxiety.
Australia entered into lockdown restrictions in March 2020, and various events of panic buying emerged across Woolworths (ASX:WOW) store in Chullora, NSW Australia, where a scuffle arose between shoppers who were in a race to buy the toilet paper amidst the supply crisis.
The event of COVID-19 emerged as an anxiety fuelling event among the people for panic buying clearing shelves at the stores, and retail sales jumped dramatically by the end of the quarter. This was supported by the report from the Australian Bureau of Statistics (ABS), which showed an increase of 8.2% in seasonally adjusted terms in preliminary retail turnover for March 2020 quarter.
Seasonally Adjusted Retail Turnover, Current Prices (Source: ABS)
ABS also mentioned that this was the biggest ever rise in the publication of retail sales, surpassing the record of 8.1% that was recorded in June 2000 when households in Australia made advance purchases owing to GST implementation in the later time.
With the economic downturn caused due to COVID-19, there have been significant challenges for the sellers as well. Retailers were forced to devise innovative strategies to tackle the situation of panic buying and keep store operations under control.
Initial Decline in Consumer Spending, Sentiment and Spending Getting Back on Track
With the imposition of the lockdown, only essential services remained open for customers, and all the non-essential businesses remained closed. With firms shut and economic activities at a halt, organisations and its employees were placed at high risk of losing jobs or getting a cut in their pay.
As an effect of the pause in economic activities, millions of people lost their jobs, and innumerable people have seen a cut in their pay as the uncertainty surrounding the COVID-19 remains in place. With such a catastrophic scenario, consumer sentiments took a deep dive and plunged to fresh lows.
With declining optimism across countries about an economic recovery, consumers are anticipating for a long-lasting impact of the COVID-19. This is in line with the speculations surfacing in the market in connection with the un-estimated duration of the COVID-19 and the increasing unquantified burden on economies and individuals.
The hard-hit people have become more cautious in spending their money and have deferred several planned and firmly believe that their finances shall be impacted for coming several months. Moreover, a considerable number of customers are abstaining from spending on discretionary items and are only considering spending on essential items.
In a nutshell, accumulated spending intent has fallen throughout several economies, and most consumers across countries still show a strong tendency to keep the reduced spending in coming times as well.
However, demand for groceries and at-home entertainment continues to show positive momentum and spending on the same is likely to remain stable in coming months as people intend to spend on basic categories, such as household supplies and personal care also.
Shift towards Online Shopping
Another interesting trend that has emerged in recent times is the shift in consumer preference to shop online. Marketers and retailers have been trying to change the preferences of the customers for a very long time. However, COVID-19 has done what marketers and retailers could not do over the past decades, changing the buying preferences of the consumers towards online buying.
Positive trends have emerged across several countries where people have shown a strong response towards online shopping across various categories. Retailers selling online have witnessed a dramatic surge in their sales within the past months, all thanks to the stay at home measures deployed with the outbreak of COVID-19. Accent Group Limited (ASX:AX1) and Redbubble Limited (ASX:RBL) are two retailers that have witnessed impressive online sales of late.
Although economies are now opening and social distancing measures have been eased across countries, yet people seem unwilling to go for in-store shopping. The Australian Government’s efforts in controlling the spread of the COVID-19, allowing a further easing in social restrictions over the last month have resulted in a 16.4% rebound in the Westpac-Melbourne Institute Index of Consumer Sentiment for May 2020, bringing it back close to pre-crisis levels.
Consumer Sentiment Index (Source: Westpac)
Moreover, there are indications that consumer sentiments on shopping look like returning to normal. However, buyer sentiments are still a long way from pre-crisis levels. The consumer sentiment index for time to buy a major household item reflected a reading of 106.3 for June 2020, which might be a good indicator but is some way of the long-run average of 127.
With businesses closed and millions unemployed, retailers are feeling the heat from declining incomes and mounting uncertainty regarding the duration of COVID-19. The stringent actions by the Government are leading towards improving the situation of COVID-19 in Australia. However, there is a fear of the second wave of COVID-19 and consumer sentiments shall take time in returning to normal levels. It shall be interesting to see if another trend emerges in the shopping behaviour of consumers while things get back to normal.