Council Post: How Crisis Is Impacting Consumer Behavior And Sentiment

Managing Partner at Volition Capital, focusing on investment opportunities in internet applications, e-commerce, and consumer products.

In the 1960s, Dr. Maxwell Maltz, a plastic surgeon and psychologist, observed the process his patients took to accept their new appearance and theorized that it takes 21 days for humans to form new habits. But the actual amount of time is likely closer to an average of 66 days, which maps quite closely the amount of time many Americans spent at home to social distance themselves (some probably more so).

As the state-by-state reopening process begins, people are asking themselves when things will finally return to normal. However, a “new normal” might be emerging as the impacts of the coronavirus reshape consumer habits. How have we been impacted by the crisis, and has our behavior been permanently changed?

To answer these and other questions, I started digging into research. As well, my growth equity firm also conducted a study that surveyed over 1,000 consumers on April 17, 2020. Some of the results were expected and others less so, and some were entirely surprising.

Regardless, though consumers have experienced the crisis in very different ways, a vast majority have felt acute impacts personally, financially and behaviorally that will reverberate well into the future.

Americans Have Been Broadly Impacted

Americans are feeling the direct impacts of Covid-19 close to home: According to our study, 41% of respondents said they personally knew at least one person who had contracted Covid-19. Meanwhile, just under 4% said they had been tested for Covid-19.

Pew Research Center’s findings further underscore the impact of the coronavirus. According to Pew Research, 28% of Americans know someone with Covid-19, and 14% reported that they were “pretty sure” they had had the virus, despite not getting tested. This reflects the concern of unknown exposure.

Even more Americans have been impacted financially. At the time of my firm’s study, almost 5% of respondents had lost their jobs, while 10.5% had been furloughed, and 18.5% still had their jobs but with decreased compensation. Pew Research reported in April that less than one-fourth of lower-income Americans had the savings to cover their expenses for three months following a job loss or economic downturn. This means people are unable to pay their bills.

Going Back To Normal Is A Long Way Off

Perhaps impacted by concerns related to unknown exposure, our research found that a massive 80% of respondents believe that a second wave of the virus is coming, which is in line with the 79% reported by Politico in April.

This belief might also be impacting people’s willingness to attend large group events: Almost 32% of respondents said they were unlikely to go to a large group event until 2021 or beyond. This makes sense; it’s been reported that health experts don’t expect large gatherings to resume until 2021, according to CNBC. This has dramatic implications for the live events, sports, catering and convention industries. 

Meanwhile, spending levels have dropped, according to the World Economic Forum, which suggests a quick economic bounce back is optimistic. My firm’s study further reflects this trend: We found that nearly 36% of respondents expect their discretionary spend to decrease after the crisis, almost 40% plan to travel less, and just over 60% believe U.S. home values will decrease over the next year. 

The ‘New Normal’

With nonessential businesses closed, the pandemic is pushing consumers to adopt new services and technologies that will carry into the future, most notably videoconferencing and grocery delivery. According to our research, just under 40% of respondents tried videoconferencing for the first time during the quarantine, and around 22% tried grocery delivery services for the first time.

To see this trend in action, just consider that Zoom’s number of daily video participants grew to 300 million, and Instacart’s customer order volume went up more than 500% year over year, according to CNBC.

But do consumers plan to continue using these services? I believe that over the past few months, many have likely grown accustomed to the benefits of these services and have formed new habits. Our study found that about 18% of respondents plan to continue using a grocery delivery service, while 30% will stick with videoconferencing, and about 9% expect to keep using a prescription drug delivery service.

That said, there are a few habits consumers have missed. For example, online fitness generated a lot of interest while gyms were closed, and a number of companies offering at-home workout solutions saw increases in engagement during stay-at-home orders. “Those who managed to make the transition to at-home workouts successfully are likely to continue working out at home, at least some of the time,” according to Fortune. But some experts are still expecting many Americans to eventually return to their gym.

The activity missed by most respondents in my firm’s survey has been going to sit-down restaurants, with just under 31% of respondents saying that this restricted activity had the biggest impact on their lives. Another recent study reported that number is even higher at 41%.

This has benefited delivery services and restaurant technology service providers that have been working with more independent restaurants that were previously not built for takeout and delivery. In the long term, I believe restaurants are likely to see a noticeable bump as consumers begin returning. 

Where We See Value

With stay-at-home orders having lasted long enough to achieve habit formation, new consumer habits are crystalizing. Although I predict discretionary spending will decrease, there are opportunities to make money in a bear market if you are positioned to meet new consumer behaviors.

Broadly, companies in the internet and digital services industry are benefiting from accelerated customer adoption. From Zoom to Teladoc to Peloton, we are seeing rising market caps of companies providing digital, internet-enabled services to consumers.

Some old habits, such as sit-down dining, are beginning to return now that some states are slowly reopening, but I predict that many of the new habits in the digital ecosystem are here to stay.


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