The consumer landscape has shifted since the start of COVID-19. Americans are going out less frequently, which means less money is being spent on eating out and travel. As a result, consumers are splurging more on luxury foods, clothes, and other items. The logic is: When you don’t need to fill up the gas tank to commute to work or bring your children to school, that money can be used on other things that you might not have had the disposable income to buy before. But there is more to this new COVID-era economy than a simple reshuffling of what we spend our money on.
There are indistinct, whole-sector trends regarding what Americans are now buying or not buying. For example, there was a massive e-commerce push in the fashion industry when brick-and-mortar stores began to shut down, but since people aren’t going out as much, there is less incentive to buy new clothes and keep up with fashion trends. There has been, however, an increase in luxury athleisurewear sales, such as Lululemon yoga pants ($105) – the demand for which has increased, driving the price up. If you’re going to be spending most of your time at home, might as well do so in luxury comfort.
The money that one would have typically spent on going out to eat a few times a week, or for purchasing a daily coffee on the way to work, is now increasingly being spent on at-home alternatives. Americans are now spending more on coffee, eggs, and ketchup – to name a few.
These changes in consumer culture are also affecting how manufacturers are packaging items. For example, Cal-Maine Foods Inc.– the egg market leader – has reported a shortage of cartons. Pre-COVID, Cal-Maine was mostly providing powdered eggs to restaurants whereas now their focus has shifted to egg cartons for grocery stores, as COVID-19 has elicited higher rates for household egg consumption.
This trend can also be observed in the condiment industry, where there has been an increase in demand for domestic, fridge-sized bottles, and a decrease in the gallon-jug sized products intended for supplying restaurants. In the case of market giant Kraft Heinz, consumers are spending 10% more ketchup, mayonnaise, and vinegar this year – a price mark-up that many see as opportunistic and profit-seeking during a pandemic, but which the company claims is due to increased difficulties in manufacturing during this time.
Amidst mass layoffs, many Americans are actually doing quite well financially, all things considered. Along with decreased overall spending, the majority of Americans are either working from home or collecting unemployment. With the added cushion of the first stimulus check – which was distributed in the spring – some Americans are even more well-off monetarily than they were last year, which typically drives the economy.
However, the first round of COVID-related benefits expired on July 31st, which left around 30 million unemployed Americans without the additional weekly $600. As of now, there is no solid federal plan to continue the COVID-19 benefits. With many Americans adjusting to life without the disposable income they had in the spring and early summer, analysts predict recessionary spending behavior in the fall and winter.
Because so much is unknown about government assistance, the economy, and the coronavirus itself at this time, it’s difficult for economists to predict future market trends. While it’s not good for business, almost all remains uncertain.