The pandemic has rippled into a lot of aspects of society including consumer buying habits. It has introduced a paradigm shift that forced the hand of many businesses into cost-cutting measures. As a result, a lot of consumers are changing the way they use and even save their money. It has been a steep adjustment curve for several people.
CNBC even shares that personal savings rate has hit a historic rate at 33% for American households. On one end, this helps people shore up the money they might need to survive the pandemic. A lot of this is fueled by the unknown. No one knows when this health crisis will end which is why a lot of Americans are keeping their purse under lock and key.
For one thing, this high savings rate is a good thing for people because it gives them a sense of financial security. Having money set aside can help you manage your stress and give you the ability to stretch your budget further. One thing it also does is while you lower your financial stress, your mental health also benefits in the process. But the change in consumer buying habits also has some negative side effects.
One thing you need to understand is that the economy is based on consumer consumption. This means that the more people buy, the better the economy can get. That being said, the current situation is not ideal for the economy. The reason people are able to save at this point is because they are pulling back on their spending. The fewer people spend, the bigger the negative effect it has on the economy.
Consumer Buying Habits during the Pandemic
There are a lot of reasons why the buying habits of consumers have changed when the pandemic hit. Take a look at these and understand why people are suddenly holding on their money for a longer period of time.
Value for Money
Consumers nowadays are trying to find the best value for their dollars. In the past, spending was not given a lot of thought. Now, everything is under a microscope with expenses being thoroughly reviewed. For one thing, spending money now is a necessity. You only buy necessities at the moment. This is the reason why value is top of mind.
Much like how you would buy food nowadays. It is an essential expense and you will spend for it every single day. But you might be buying ingredients in bulk and preparing meals ahead of time now. In the past, you might just order food or get takeout on your way home. Now, it is less expensive and a lot more healthier to prepare your meals at home.
Prioritizing Essential Purchases
As mentioned earlier, one of the biggest changes in consumer buying habits is prioritizing essential expenses. A lot of people are buckling down to basics and making sure their needs come first. Their wants can come in later or sometimes, not at all. Household budgets are re-organized in a way that shifts all payments to bare necessities. The rest, if any, are then put in an emergency fund. This helps most people deal with uncertainties brought by the pandemic.
This is because as regulations seem to ease up, the fact is that the virus is still out there. It still poses a real threat not only to your health but the economy as well. The very reason why stay-at-home orders were handed down in several states is to curb the spread of the virus. Once people were forced to stay indoors, a lot of habits needed to change. This included their purchasing routine.
Spending Less due to Lockdown Rules
Stay-at-home orders are starting to ease up and shops are beginning to open their doors once again. But a lot of people are still choosing to only go out for essential needs. This has forced a lot of businesses to re-evaluate their operations to try and reach out to this new consumer buying behavior. As a result, a good number of businesses are forced to pivot online. This is because of the the many changes in consumer buying habits.
This is also one of the main reasons why credit card debt is down according to Forbes. But do not be too complacent because online purchases are also on the rise. This means that the most convenient way of paying for your purchases is with your card. It helps that focusing on the bare necessities also keeps the expenses down on your card.
What it teaches consumers
This part in history has been an eye-opener for a lot of people. Not only did it push people to new learnings, it also emphasized time-tested financial knowledge. Here are some of them to look at.
This has been a staple in any financial tips you have come across in the past. The idea is to always save money for future use. This is applicable in so many targets in life you have. It can be for your retirement, strengthening your emergency fund, or even for your children’s college needs. The idea always goes back to saving what you have now for your needs tomorrow. This is one of the reasons why consumer buying habits have changed.
This took the spotlight during the pandemic especially with the emergency fund becoming the go-to fund for people. There were a lot of Americans who lost their jobs and in these instances, income will be hard to come by. The unemployment insurance at the beginning had a $600 boost and it helped a lot of people with their expenses.
But that has been stopped and a few states adopted an additional $300 unemployment boost. This means consumers now find the importance of having money set aside for emergencies. It is important to have a fund you can use to pay for your most basic expenses while you work on getting a new income source.
Re-evaluate Current Lifestyles Choices
CNN shares that Americans have less debt for the first time in six years. There are a lot of factors that contribute to this. But one of the biggest is the fact that current lifestyle choices for a lot of Americans have changed. Over the course of the pandemic when people were staying at home, it has given a different perspective in their finances.
For some, they now understand that they have a lot of unnecessary expenses in the past. Being forced to stay at home made them look at their expenses in a different way. They can go weeks without signature coffee and brew their own cup at home. They can cook their own healthy and more affordable meals at home rather than ordering every single night.
It is also possible that they are now starting to focus on more important and sustainable financial goals. It can be retirement, or even setting up a business during the pandemic. The time at home has forced people to re-evaluate their finances.
Consumer buying habits have drastically changed over the course of the pandemic as people focus more on what is important. If there is one positive thing that this crisis has done, it’s that Americans are more conscious of their spending.