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How COVID-19 Consumer Spending is Impacting Industries
[size=1.1]Consumer spending is one of the most important driving forces for global economic growth.
[size=1.1]Beyond impacting some of the factors that determine consumer spend—such as consumer confidence, unemployment levels, or the cost of living—the COVID-19 pandemic has also drastically altered how and where consumers choose to spend their hard-earned cash.
[size=1.1]Today’s graphic pulls data from a global survey by McKinsey & Company that analyzes how consumers are reining in their spending, causing upheaval across every industry imaginable.
[size=1.1]While some industries are in a better position to weather the impact of this storm, others could struggle to survive.
The Link Between Sentiment and Intent to Spend[size=1.1]As consumers grapple with uncertainty, their buying behavior becomes more erratic. What is clear however, is that they have reduced spending on all non-essential products and services.
[size=1.1]But as each country moves along the COVID-19 curve, we can see a glimmer of increasing optimism levels, which in turn is linked to higher spending.
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[size=1.1]India’s consumers, for example, are displaying higher levels of optimism, with more households planning to increase spend—a trend that is also evident in China, Indonesia, and Nigeria.
[size=1.1]Meanwhile, American consumers are still more optimistic about the future than Europeans. 37% of Americans believe the country will recover in 2 or 3 months—albeit with optimism levels at the highest for people who earn over $100K.
Strategic Consumer Spending[size=1.1]Globally, consumers continue to spend—and in some cases, spend more compared to pre-pandemic levels—on some necessities such as groceries and household supplies.
[size=1.1]Due to changes in media consumption habits, consumers in almost all countries surveyed say they will increase their spend on at-home entertainment. This is especially true for Korea, a country that already boasts a massive gaming culture.
[size=1.1]As restrictions in China lift, many categories such as gasoline, wellness, and pet-care services appear to be bouncing back, which could be a positive sign for other countries following a similar trajectory. But while consumers amp up their spending on the things they need, they also anticipate spending less in other categories.
The Industries in the Red[size=1.1]Categories showing an alarming decline include restaurants and out-of-home entertainment.
[size=1.1]However, there are two particularly hard-hit industries worth noting that are showing declines across every category and country:
Travel and Transport[size=1.1]The inevitable decline in the travel and transportation industry is a reflection of mass social isolation levels and tightening travel restrictions.
[size=1.1]In fact, the U.S. travel industry can expect to see an average decline in revenue of 81% for April and May. Throughout 2020, losses will equate to roughly $519 billion—translating to a broader $1.2 trillion contraction in total economic impact.
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[size=1.1]According to the World Travel and Tourism Council, a staggering 50 million jobs are at risk in the industry, with 30 million of those jobs belonging to employees in Asia.
[size=1.1]Considering the travel and tourism industry accounts for 10.4% of global GDP, a slow recovery could have serious ramifications.
Apparel[size=1.1]Apparel is experiencing a similarly worrying slowdown, with consumption 40-50% lower in China compared to pre-pandemic levels. Both online and offline sales for businesses the world over are also taking a major hit.
[size=1.1]As consumers hold back on their spending, clothing brands of all shapes and sizes are forced to scale back production, and reimagine how they position themselves.
[size=1.5em]“It’s an unprecedented interruption of an industry that has relied on speeding from one season’s sales to the next. And it is bringing with it a new sense of connectedness, responsibility and empathy.”
[size=1.1]—Tamsin Blanchard, The Guardian
Towards an Uncertain Future[size=1.1]Clearly the force majeure that is COVID-19 has not impacted every industry equally.
[size=1.1]For some, rebuilding their customer experience by appealing to changing values could result in a profitable, and perhaps much-needed revival. For other companies, there is no other choice but to play the waiting game.
[size=1.1]Regardless, every industry faces one universal truth: life after the pandemic will look significantly different.
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