Four ways consumer spending will change once people are vaccinated

As more people get the Covid-19 vaccine, business leaders and investors are asking themselves a new question: What will consumer spending look like now?

About one-third of the US population has received at least one dose of the Covid-19 vaccine. Airport and shopping traffic is picking up. And some economists are predicting a massive boom that could last for years.

Still, the global health crisis will continue to affect the way consumers think and make purchases.

Here are four predictions of post-pandemic trends, based on studies and expert reports:

Even after they get a shot, Americans’ concerns about health and safety will likely linger. The US has the highest level of consumers who are “most concerned” about their health and finances and China has the lowest, according to a January survey and analysis of more than 7,000 consumers in nine countries by consulting firm AlixPartners.

In the US, nearly one in three consumers said they were extremely or very concerned about physical health, and about one in four said they were extremely or very concerned about mental health, according to the report published in early April.

For retailers, these concerns can increase the importance of adhering to safety protocols, such as more thorough cleaning.

Target said it will include safety in its future store design. Chief Operating Officer John Mulligan said on an investor day in March that the retailer will include more contactless functions in restrooms and other places and add more space for people to create space between the merchandise and the checkouts.

Home offices, curbside pickup, and lots of cooking drills – all will play a role in people’s eating habits in the future.

Restaurants and travel will be the slowest to jump back, according to AlixPartner’s research. Of US consumers who reported permanently changing habits, 30% said they plan to spend more on groceries and 44% said they would spend less on eating out after the vaccination compared to what they spent in that before the pandemic. areas.

Jeff Harmening, CEO of General Mills, said many Americans ate at restaurants or in the work cafeteria on business trips. That dynamic of frequent jet setting, insane commuting and lunches at colleagues’ tables has faded.

“People want flexible schedules,” he told investors during an earnings call last week. “While consumers may be making more vacation plans now than they have, business people won’t travel as much because technology has caught up and we realize we can do many things remotely.”

The way people store their pantry also looks different. Before the health crisis, about 7% of groceries were done online, according to a report by Mastercard Economics Institute. That share is expected to increase to about 9% of supermarket sales in the future. If that occurs, the grocery industry will have retained 70% to 80% of the digital profits it saw during the pandemic’s peak.

According to a report by Mastercard Economics Institute, grocers and discount stores, such as wholesale clubs and dollar stores, are expected to show the most dramatic and permanent e-commerce profits from the pandemic.

Customers are starting to warm up to the approach, even though there may be a confidence barrier, Mastercard chief economist Bricklin Dwyer said in an interview on CNBC’s “Worldwide Exchange” Tuesday.

“You have to trust someone else to pick your peaches,” he said. “You have to be able to trust that someone else can deliver you goods and still have them right when they arrive. So those are really some of those barriers we are going through.”

Young consumers want to get out again – and they are starting to spend and dress accordingly.

Just like after the Great Recession, teenage girls are at the forefront of opening their wallets after the most recent pandemic-related recession, according to a survey of teens and twenties by Piper Sandler’s 41st Semi-Annual “Take Stock With Teens.” Nearly 30% of the purses of higher-income female teenagers go to clothing – a record that hasn’t been seen since 2013, according to the report. Handbag spending rose to $ 93 per teen, a 4% year-over-year increase.

Levi Strauss & Co. CEO Chip Bergh told CNBC on Thursday that the pandemic has inspired fashion that young shoppers are also embracing. Instead of squeezing into skinny jeans, he said they wanted baggy and baggy jeans.

“This isn’t the first time we’ve seen this resonate with consumers,” said Bergh. “Cycles come and go. And I think the pandemic has certainly contributed to consumers looking for a more comfortable, more relaxing denim.”

Nearly half of the young shoppers surveyed by Piper Sandler said they plan to fly on a plane for the next six months, up from 33% in the fall.

Of the generations, Gen Z is also the most excited about spending time with people outside of their household once they are vaccinated, according to a survey of more than 15,000 people in nine countries by the IBM Institute for Business Value. Nearly 30% of Gen Z respondents said they plan to interact with other people more than before the pandemic, compared to Gen X and those over 55 who plan to return to pre-pandemic levels of Interaction.

Shoppers may have opted for drive-thrus and sidewalk pickup for last year’s safety. Still, they’ve discovered the ease of the approach and that will keep them coming back as they juggle fuller calendars, commute and carpool kids again.

Retailers have increased their investments to adapt their business to ecommerce. Best Buy is testing stores where it spends more square footage fulfilling online orders than flaunting flat screen TVs and smartphones. Walmart and Kroger have both announced plans to invest in automation to track the volume of online grocery orders. Walmart is adding high-tech automated systems to dozens of its stores, and Kroger plans to open at least 11 massive facilities with Ocado. Kroger’s first two warehouses will open in the coming weeks.

“Society has entered a new digital era, and so has Kroger,” CEO Rodney McMullen said at an investor day last week. He said the company will double its digital sales by the end of 2023

Chain restaurants have also taken the cue. McDonald’s is closing hundreds of restaurants in Walmart stores, and chains such as Sweetgreen and Shake Shack have announced plans to add drive-through lanes as diners choose to order from their cars. Chipotle Mexican Grill said it is speeding up its plans to add more “Chipotlanes” to its footprint as well.

Even as the dining halls reopen, Jack Hartung, Chipotle’s Chief Financial Officer, said online sales have remained strong.

“Of course the pandemic really turbocharged our digital business, but as we start to see Covid coming after us – and we have a way to go – we keep most of that digital business, about 80%,” Hartung said Friday in an interview on CNBC’s “Closing Bell”.