Consumer spending is one of the main drivers of global economic growth.
Beyond the impact on some of the factors that determine consumer spending – such as consumer confidence, unemployment levels or the cost of living – the COVID-19 pandemic has also radically changed how and where consumers choose to spend their hard earned money.
Today’s graph is based on data from a global survey by McKinsey & Company that analyzes how consumers are cutting back on spending, causing disruption in every sector imaginable.
While some industries are better positioned to weather the impact of this storm, others may find it difficult to survive.
The link between feeling and the intention to spend
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 goods and services.
But as each country moves along the COVID-19 curve, we can see a glimmer of rising levels of optimism, which in turn is linked to higher spending.
Indian consumers, for example, have higher levels of optimism, with more households planning to increase spending – a trend that is also evident in China, Indonesia and Nigeria.
Meanwhile, American consumers are even more optimistic about the future than Europeans. 37% Americans believe the country will recover in 2 to 3 months, but with the highest levels of optimism for those earning more than $ 100,000.
Strategic consumer spending
Globally, consumers continue to spend – and in some cases, spend more than pre-pandemic levels – on necessities such as groceries and household supplies.
Due to changes in media consumption patterns, consumers in almost all of the countries surveyed say they will increase spending on home entertainment. This is especially true for Korea, a country that already has a massive gaming culture.
With the lifting of restrictions in China, many categories such as gasoline, welfare and animal care services appear to bounce back, which could be a positive sign for other countries on a similar path. But as consumers increase their spending on the things they need, they also plan to spend less in other categories.
Industries in the red
Categories showing an alarming decline include restaurants and out-of-home entertainment.
However, there are two particularly affected sectors that deserve to be noted and which show declines in each category and country:
Travel and transportation
The inevitable decline in the travel and transportation industry reflects levels of mass social isolation and tighter travel restrictions.
In fact, the US travel industry can expect an average 81% drop in revenues in April and May. Throughout 2020, losses will be approximately $ 519 billion—Translation to a wider $ 1.2 trillion contraction of the total economic impact.
According to the World Travel and Tourism Council, 50 million jobs are at risk in the industry, of which 30 million are owned by employees in Asia.
Whereas the travel and tourism industry represents 10.4% of global GDP, a slow recovery could have serious ramifications.
Clothing is experiencing an equally worrying slowdown, with consumption 40-50% in China compared to pre-pandemic levels. Online and offline sales for businesses around the world are also enjoying major success.
As consumers hold back, clothing brands of all shapes and sizes are forced to cut production and reinvent their positioning.
“This is an unprecedented disruption to an industry that has relied on accelerated sales from one season to the next. And it brings a new sense of connection, responsibility and empathy. “
—Tamsin Blanchard, The Guardian
Towards an uncertain future
Obviously, the force majeure that is COVID-19 did not affect all sectors in the same way.
For some, rebuilding their customer experience by using changing values could result in a profitable and perhaps much-needed recovery. For other companies, there is no choice but to play the waiting game.
Either way, every industry faces a universal truth: life after the pandemic will be very different.
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