With 2021 being well underway, and with the globe having faced a year of firsts, it is inevitable that the face of the retail market will have also experienced its fair share of change. On one hand, online shopping has become a forerunner and customer service and experience needed to be revamped, and on the other hand, the fact remains- consumers continue to buy and spend.
Observed Changes in Consumer Buying Behaviour During an Economic Crisis
When an economy is booming, the upturn in consumption is usually of luxury goods and consumer durables. And vice versa, during periods of recession, disposable income is reduced, and consumer confidence usually falls. A slowdown in economic activity often results in fewer luxury purchases being made.
A few decades ago, the driving force behind consumption was the desire of individuals to improve their social condition and perceived social status through the acquisition of material goods- ensuring their middle-class membership. However, over time, consumerism proved that it was unable to make people happier, with excessive consumption creating a so-called ‘paradox of happiness’.
“Consumerism” refers to a tendency of people (living in a capitalist economy) to engage in a lifestyle of excessive materialism that revolves around impulsive, wasteful, or conspicuous overconsumption- the intentional purchase of goods or services in order to display one’s wealth.
Studies suggest that ‘hyperconsumerism’ has failed to satisfy the consumer, leaving him unhappy and alienated from others and from the natural world. A paradox of modern consumerism is that even as those who have come to own more, they actually felt like they had less.
As such, we see the emergence of new typologies of consumers- ‘the new consumer’. The new consumer rather focuses more on original products and services which prove to be innovative and distinctive. As such, there is a general tendency to reject those goods which are produced and even sold at mass, opting instead for products and services which can stand on the claim of ‘authenticity’. As we have come to learn, no longer does the power lie solely with the manufacturer, but rather has shifted to theconsumer who increasingly dictates not only what they will buy, but also how and where the goods they purchased are made.
It is suggested (Mansoor, 2011) that the main changes in the new consumer behaviour (due to economic turmoil) could be noted as the following:
- The need for simplicity: during recession consumers are accustomed to limited offers and tend to simplify their demands,
- Temperance: this suggests that even ‘wealthy’ people save, although they are not required to do so,
- Smart consumption: consumers today are “agile” and react quickly to price changes, with the ability to change brands looking for the lowest price,
- Green consumerism: this trend slowed during the recession because people are not willing to pay more for certain products that can be substituted with other which are of a cheaper price,
- Ethical consumerism: people are less inclined to charity actions because they are more concerned about the welfare of their families.
Pros and Cons of Consumerism
According to Scott (2017) the following can be considered benefits of consumerism:
- Economic growth: Consumerism drives economic growth. There is increase in both production and employment which further leads to more consumption.
- Boosts innovation and creativity: producers and manufacturers are under constant pressure to innovate since consumers are actively looking for the next best thing.
While the downside of consumerism includes (Scott, 2017):
- Environmental degradation: Increasing demand for goods puts extensive pressure on natural resources such as water and other raw materials.
- Moral degradation: Increasing consumerism tends to shift societies away from important values such as integrity. Instead, there is a strong focus on materialism and competition.
- Higher debt levels: The number of people taking short term loans such as payday loans to buy luxury goods has increased drastically.
- Mental health problems: Consumerism increases debt levels which, in turn, results in mental health problems or strain such as stress, anxiety, and depression.
Constrained Consumers VS Insulated Spenders
Studies suggest that there are two distinct types of consumers which have been identified with key behavioural changes which make sense of today’s fundamentally altered shopping landscape. These being: constrained consumers who are stretched financially due to factors such as job losses and compressed income; and insulated spenders who have managed to retain their job and therefore sustained their income (Maggs, 2020). It is further suggested that as more consumers become unable to maintain their peak Covid-19 spending levels, the consideration set for what is “essential” will shrink. This cautiousness will affect where and how households spend their money.
Strategic Consumer Spending
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.
South Africa’s Spending Patterns During Lockdown
More than 60% of South Africans said they have experienced a loss of income during the Covid-19 crisis and expect to cut back aggressively on spending in all categories except groceries and home entertainment, with 65% refraining from making purchases they would otherwise make, due to uncertainty about the economy. The image below depicts these numbers- the adjustment to routines as well as the impact on household and personal finances.
Prior to the Covid-19 pandemic, much of consumer buying decisions were influenced by desire, uniqueness, and maintaining a perceived social status. Studies suggest that since the Covid-19 pandemic, consumers have adapted their spending and become more strategic in the way that they make purchases as a result of the lockdown which started in 2020.
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