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How COVID-19 has impacted consumer spending and behaviour
27 Nov 2020
With Australians facing widespread economic impacts due to COVID-19, shopping behaviours have transformed dramatically.
2020 has been an unpredictable and disorienting year for all and tough for many. Each and every one of us has endured strict restrictions across our social, cultural, working and economic lives. The COVID-induced economic downturn has hit hard, uncertainty is at an all-time high, and for many this has resulted in tightening purse strings and eliminating discretionary spending.
But the pandemic hasn’t just impacted spending levels, it has also impacted
we’re spending our money. This year has been transformative and while we all want to see the end of the virus, the new habits, attitudes and behaviours we’ve adopted are likely here to stay.
Household income and spending levels have declined due to COVID-19
According to the
PayPal 2020 eCommerce Index
, almost two-in-five Australians
(37%) have experienced a decrease in household income due to the pandemic. For those that saw a drop in income, the average reported decrease was 25% and the average reported decrease across all respondents was 7%. A further two-in-three Australians (65%) said they are concerned about their current household cashflow and a similar number of Australians of working age (63%) are concerned about their future job security.
While everyone has been impacted differently by the pandemic, our research showed that younger generations are more likely to be experiencing financial pressure. Over half of Gen Z (54%) and nearly half of Gen Y shoppers (45%) said their income has decreased, compared to only a quarter of Older Australians (23%). And younger generations are also significantly more concerned about their future job security (Gen Z: 69%; Gen Y: 65%; Gen X: 69%), compared to older generations (Boomers: 34%; Older: 13%).
In line with this concern and the drop in household incomes, consumer spending is also down. Over half of Australians (54%) say they’ve cut their spending during COVID-19 by an average of 11% across all respondents.
eCommerce strategies have never been more important
Despite the decline in consumer spending, eCommerce is up. Fifteen percent (15%) of consumer respondents
started shopping online for the first time due to COVID-19.
The impact of COVID-19 on eCommerce in Australia is difficult to overstate. Millions of transactions that would normally have taken place in stores shifted to digital and more than 2 million Australians started shopping online for the first time.
As new consumer habits become embedded, it’s unlikely that eCommerce will ever drop back to the level it was prior to the crisis. Nearly two-in-five Australians (38%) said they will continue a higher level of eCommerce once the pandemic is over. More than a third of respondents (37%) said they’ll make fewer trips to the shops and more than a quarter (26%) say they’ll make more click and collect purchases once the crisis is over.
Australian consumers looking to buy local
Our current situation is, in some ways, more like the economics of a war than a regular economic downturn – and our common enemy is COVID-19. All of us – businesses and consumers – are in the position to help save livelihoods through our actions at this time.
Despite the decline in spending, two-in-five Australians (38%) say they are consciously supporting local businesses to help them recover from the pandemic. This preference to buy local is likely to continue beyond the crisis with nearly half (46%) saying they’ll purchase more from local businesses, and two-in-five (39%) saying they’ll purchase fewer products that need to be shipped from overseas post COVID-19.
It’s great to see Australians backing local businesses in these critical times of need and it will be essential that businesses of all sizes adapt their strategies to meet consumer expectations.
At some point, we will go back to shopping in stores once again; more of us will return to work in offices though probably with a higher level of remote working; and some of us may need to keep a tight budget for a while. While there is still a great level of uncertainty, one thing remains clear – fast, frictionless and secure eCommerce capabilities are more important than ever before.
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