Coronavirus uncertainty has notably shaken today’s consumer who is focused on essential spending and worried about a potential recession. Though online apparel sales are bouncing back, consumers continue to show signs of being wary to spend.
Early reports found fear and uncertainty to be the leading cause of changing consumer sentiment as behaviors shifted quickly during the coronavirus pandemic. One report by Astound Commerce’s Astound Insights found 75 percent of global consumers had fears about the coronavirus outbreak in early March, while another report from NPD showed steep sales declines in previously thriving categories.
“There is certainly lots of fear and anxiety at this time which is something that causes people to slow down and spend less,” said Dan Ariely, TED speaker and chief behavioral economist at Qapital. “In this crisis, unlike other crises, we are also not allowed to leave home so there is more opportunity for reduced spending.
“At the same time, a lot of what is going on here is a lack of understanding about what exactly is happening, causing a lot of fear and worry,” Ariely told WWD. “One of the ways that we feel we can increase our control over the world and cope is through shopping or shopping therapy. So, we have some forces towards spending more to feel that control and some towards spending less and saving.”
Though Ariely questions which sentiment will win. A fear that drives consumers to save money or a desire to cope through retail therapy?
This is a time where consumers have the time to consider not only what opportunities are wise financially but also to look at past spending. Ariely says consumers will be asking themselves which purchases made them happy and which did not. The experience may prompt many consumers to examine and learn what drives happiness and how they should spend money accordingly. “If we do those things,” said Ariely, “then maybe we will come out of this with better spending habits.”
Data from Qapital shows that those who have the ability to open a “rainy day fund” will, and are, doing so. These funds are something that Qapital also promotes to its users. “Tons of people are taking on this ability and starting a new approach towards saving for an emergency,” said Ariely. “You can tell, for some it is too late, but at some point, we all need to start saving. It’s not just about the act of putting money in the bank, it’s about building confidence.”
Though Ariely says there has been a very large shift by consumers to save more and spend less, he also notes that “life is a combination of now vs. later.”
At the same time, and a crisis result unique to the coronavirus, consumer psyche is being affected by the mass amounts of online sales, deals and promotions occurring during quarantine. According to Ariely these deals create a sense of urgency which trigger consumers to act and often creates a self-created license which gives consumers permission to spend.
“We basically have some income and expected life cycle of spending,” said Ariely. “Life is not about being miserable, that’s not the goal. The goal is to spend wisely, which means to get the most amount of happiness you can from spending the smallest amount of money.”
Meaning, the right advice to consumers is not to stop spending money. “If enjoying life is through fashion and beauty then I don’t think we should say don’t enjoy the things you enjoy,” said Ariely. “The right thing is to figure out how to create [boundaries] so you are spending an amount that is reasonable. You have to figure out the balance between joy and misery.”
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