We are all familiar with the fundamental law of economics that says, “Wants are unlimited, Means are limited”. But today, what people want and how they are prepared to stretch those limited means has undergone a fundamental change.
The COVID pandemic has influenced consumers’ spend and shopping behaviour to an extent where some of these changes are expected to become permanent. People are spending more on food & groceries and home improvement with massive increase in online shopping. Most discretionary spend is on the decline as consumers have re-prioritized their spend. But as the economy begins to open once again, what is interesting to note is that consumer spending habits are not going back to Pre-COVID levels. So, what are consumers doing with the money that they are not spending?
– The first response to cutting down on spending has been to hoard money. The need for emergency funds has become more significant than ever, so people would rather hang on to their funds than spend or invest it. Liquidity is the need of the hour.
– The second area of the shift in thinking is the enhanced need for protective measures. Life insurance has seen a surge in the number of applications as people want to take advantage of current regulations before new rules and restrictions are introduced on account of COVID exposure.
– Additionally, the concept of investments has also changed. Consumers are looking for innovative means to save and invest in instruments that are safer, not directly exposed to the stock market, yet yield high returns. Because nobody wants their lifetime savings linked to the performance of the stock market, that in turn is connected to the performance of a virus!
Originally, this forms a ripple effect. Industries that serve discretionary spend are struggling to recover; Retail stores have shut down across the globe, restaurants have closed down, but as they now begin to open and struggle to operate at 40% capacity and make ends meet, they are now faced with the new, thrifty consumer that doesn’t want to spend! They say old habits die hard, but that saying has gone out the window because of COVID. It will be worthwhile to watch how the industry adapts to the new, thrifty consumer and introduces innovations that have now become a necessity to encourage consumers to spend once again.
is Vice President, DBS and is responsible for strategizing, driving and delivering Digital outcomes to customers across key verticals including Retail, CPG and TTL. She has 20+ years of experience spanning multiple domains and works closely with Global Sales teams, Practice Heads, and Account Managers to lay the foundation for growth and build capabilities to broaden our footprint across the digital arena. During her career, Veena has worked across diverse functions including Consulting, Business Development, program management of large- scale engagements, digital transformation projects as well as architecting cutting edge business solutions across industries and service lines.
