Niche Advertising/Audience Targeting


Consumer Spending Habits Shift In Response To New Norms

April 22, 2020 Melissa Ledesma

Shutterstock_1690524220 Happy girl waving hi to laptop, video chatting with family or friends, sitting in modern room with pillows and plants. Young casual woman using laptop for communication in quarantine. Home office

With many Americans following shelter-in-place and stay-at-home orders, day-to-day life has experienced radical changes. As a result, consumer spending habits, which drive one-third of economic activity in the U.S., have also shifted. 

External Shock Caused A Major Shift In Consumer Spending

For the past decade, the U.S. economy was on a positive trajectory. Quarterly consumer spending in the U.S. saw steady growth, exceeding $13 billion in Q4 2019. In December 2019, the Fed forecasted GDP in the U.S. would grow approximately 2%, maintaining the upward trend it had been exhibiting since the Great Recession ended a decade ago. Unemployment was predicted to remain below 4%, and interest rates were also expected to stay favorable. 2020 was off to a strong start until external shock was introduced to the market at the end of Q1 as a result of a spreading global health crisis. From grocery shopping to home buying, as consumers consider the essentialness of each purchase, the external shock of COVID-19 continues to alter spending trends in many industries.

In-Home Dining Drives Growth In Grocery Sales

Stay-at-home dining has replaced physical visits to restaurants and food establishments. Even though panic buying has started to taper off, a majority of meals are being enjoyed at home, which continues fueling growth in grocery spending, especially online grocery orders. For the seven-day period ending March 18, grocery sales were already up 79% year over year. Instacart, FreshDirect and retailers such as Walmart, Amazon and Target, all of which offer online grocery purchase and delivery options, have seen spikes in consumer activity. Although brick-and-mortar supermarkets experienced some growth, many consumers are opting for alternative ways, which include contactless at-home delivery or minimal contact pick-up options, to shop for their essential food and supplies. The popularity of meal kits also surged as a result of consumer reactions to COVID-19. Outpourings of consumer demand helped drive increased revenue for brands like HelloFresh and Blue Apron.

Staying Inside Spurs Impressive Growth In Gaming

Prior to COVID-19, the gaming industry was booming with consumer spending exceeding $43.4 billion in the U.S. in 2019. While most entertainment-based businesses, such as movies theatres, attractions and performance venues, were negatively affected by social distancing and stay-at-home orders, online and virtual entertainment is growing as consumers seek at-home content and diversions. Online gaming, specifically, has seen significant gains. According to a recent Nielsen report, 39% of U.S. gamers have increased their video game spending since the start of social distancing. In part due to the allure of multiplayer games that create opportunities to experience social interaction without physical contact, major gaming-related brands, such as Twitch and Nintendo, have seen spikes in memberships and sales. Anticipating continued demand, Niantic, owner of the once-viral sensation Pokémon Go, plans to expand and accelerate augmented reality mapping. Niantic CEO Megan Quinn told VentureBeat, “I believe that augmented reality combined with a sense of place is the next transformative platform for consumer discovery and exploration. And, I believe the opportunity for Niantic is much bigger now.”

Home Buying Season Peaks Are Delayed

Historically, spring has represented the hottest season for real estate transactions. Although inventory shortages were still an obstacle in some markets, U.S. economists were confident the real estate market was healthy heading into 2020. And Q1 showed positive indicators in the real estate and mortgage markets until the end of March. Since then, many lenders and banks have reported tightening borrower eligibility requirements, including raising minimum credit score and down payment thresholds.

Home purchase application volume declined to its lowest level since 2015, according to an April 8 report from the Mortgage Bankers Association (MBA). As a result of COVID-19, by mid-April, 60% of buyers and sellers working with Realtors confirmed they were planning to delay purchasing new homes or selling their current properties. Although real estate buying has not completely come to a halt, existing-home sales were down 8.5% from February to March, and the April drop is expected to be more significant.

Spending Habit Shifts Vary By Generation

Each generational segment is exhibiting slightly different responses to the economic and societal shifts resulting from COVID-19. According to retail technology First Insight, Inc., 75% of survey respondents from all generational groups reported COVID-19 impact their shopping behavior.

Shutterstock_1050674681 Love lives forever! Senior couple at home. Handsome old man and attractive old woman are spending time together. Sitting on a sofa with laptop and credit card in hands. Online shopping

For Gen X, COVID-19 represents the third major economic downturn in their professional lifetimes, preceded by the dot com bust and Great Recession. Similarly, external shock of COVID-19 is the second major financial crisis Millennials have endured. COVID-19 is affecting both how much consumers spend and where and how they complete transactions. Even though COVID-19 has not altered the saving behaviors of Baby Boomers, it has transformed some of their spending habits. 71% of Baby Boomers surveyed by First Sight, Inc. claim COVID-19 impacted how and where they shop. Because interacting with crowds poses a major health risk to older Americans during COVID-19, Baby Boomers immediately gravitated toward shopping online. Baby Boomers using technology in new ways will likely continue to shape the buying behaviors of the segment.

How Will COVID-19 Affect Future Consumer Spending?

The ultimate effects on both society and the economy post-coronavirus are still to be seen. Prior to the pandemic, consumers were already seeking frictionless and seamless shopping experiences from brands that authentically connected with their personal values. The new norms that consumers face as a result of COVID-19 have not removed those wants, but they have added the importance of transaction optionality, including online shopping, alternative payment options and a variety of pick-up and delivery choices. The brands that have remained successful during this time have also exhibited the ability to stay nimble and respond quickly to changing consumer needs. 

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About the Author

Melissa Ledesma

An innovative problem solver by nature, Melissa Ledesma is both experienced and passionate about the digital marketing industry. She has held a number of high-level positions within the real estate, mortgage, entertainment and digital advertising industries, including Director of PR and Business Development at NJ Lenders Corp. and Director of Communications & Government Affairs at Eastern Bergen County Board of Realtors. As Director of Content & Communications at Digital Media Solutions (DMS), Melissa demonstrates a strategic, creative and tactical approach when handling the thought leadership programs and marketing and communications efforts for DMS and its family of brands. She manages all conferences, sponsorships and event execution and plays a pivotal role in the creation of written, digital and video content for all campaigns. Melissa has consistently positioned the team at DMS as experts in performance marketing across multiple industries.

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