The Great Reopening and Priority Reset: Consumer Insights — Edition 1, Part 4

Since the beginning of the pandemic, L.E.K. Consulting has been at the forefront of understanding how consumer behaviors are changing. Through a recurring U.S. consumer pulse survey, L.E.K. has reported on evolving consumer dynamics as well as the outlook for a post-pandemic world.

Our latest survey includes responses captured Nov. 2-5, 2021, from ~1,000 U.S. consumers who are demographically representative of the general population. In this iteration, we have focused specifically on the home goods sectors, the upcoming 2021 winter holidays, and return to office behaviors, in addition to our other recurring questions regarding overarching consumer spend and behaviors across categories.

We first wanted to understand how consumers’ perception of the severity of the pandemic has evolved, and to what extent the pandemic continues to factor consciously into consumers’ daily decisions. While most consumers (88%) do not believe the pandemic is fully contained, only 17% say they are very concerned about it and that it influences their day-to-day behaviors significantly (down from 26% in July 2021). 

Important note: All forward-looking data reported is a reflection of consumer sentiment/expectations and is not an official L.E.K. forecast. Additional surveys can be found at the L.E.K. COVID-19 Insights Center. 

Consumer-reported spend levels for dining out, gyms and other categories remain dampened

Our survey revealed findings similar to L.E.K.’s June 2021 consumer pulse survey.

Among the 12% of U.S. consumers who believe the outbreak is fully contained and/or sufficiently managed and thus not impacting their behaviors: For these consumers, spending behavior has largely returned to pre-pandemic levels across categories. Notably though, dining out, gym/fitness services outside the home, movies/ concerts/sporting events and taxi/Uber/Lyft remain below pre-pandemic levels even for these consumers (although much higher than for the remaining 88% of consumers who don’t believe the outbreak is fully contained). 

Among the 88% of U.S. consumers who believe the outbreak is not fully contained: For these consumers, spend levels across categories continue to be impacted. Categories with slightly higher than pre-pandemic spend levels include groceries, takeout/delivery, vitamins/minerals/supplements, medicine/medical supplies, personal electronics, personal care products and pet food/treats. Categories where spend remains below pre-pandemic levels include dining out, digital fitness subscriptions, gym/fitness services outside the home, movies/concerts/sporting events, apparel/footwear/accessories and taxi/Uber/Lyft.

Consumers expect post-pandemic spend levels to regress to pre-pandemic levels for most categories

Consumer expectations for future spend levels, once the outbreak is fully contained and/or sufficiently managed, are largely a regression to pre-pandemic spend levels for most categories. However, spend is expected to remain slightly diminished for use of taxis/Uber/Lyft in the future.

Notably, consumers’ expectations for future spend levels have moderated over time. For example, our earlier consumer surveys suggested grocery would maintain higher levels of spend relative to the depressed spend for dining out. Consumers also anticipated spending more on their pets over time, but this expectation has also moderated over time (although there are net more pets than pre-pandemic).

Anticipated future spend on taxi and ridesharing has been the most volatile and least consistent over time. Most recent consumer expectations indicate spend will be just below pre-pandemic levels, while July 2021 expectations suggested it would experience stronger declines in future spend. These changes could be the result of a number of factors, such as cooler fall weather, anticipated holiday travel plans revealing a greater need for these services than was evident during the summer months and improved (yet still restrained) driver volumes.

While many in-person activities remain dampened, they are recovering and expected to rebound

Across activity types, frequency has certainly improved since the start of the pandemic but still remains dampened relative to pre-pandemic levels in many areas: visiting friends and family, going to the spa, going to live events, going to bars/restaurants, etc. 

Post-pandemic, consumers expect activity levels to rebound strongly. However, going to the gym may remain slightly below pre-pandemic levels, particularly as connected fitness and at-home workouts have proliferated over the past 18 months. Going to the bar/nightclub may also remain slightly below pre-pandemic levels.  

Where and how consumers work is also changing. In April 2020, the high point of statewide lockdowns, consumers spent only ~34% of their time in an office setting. This number is now ~55% (consistent with July 2021 results) and is expected to reach a peak of ~61% post-pandemic. Consumers currently spend ~33% of their time working at home and expect that to dip only slightly to ~27% post-pandemic. Overall, post-pandemic work-setting expectations have remained highly consistent from April 2020 through November 2021, and consumers anticipate spending more time working from home in the future than they did before the pandemic.

For the consumers who expect to work more at home post-pandemic, they feel that working at home helps minimize commuting, gives them flexibility and enables them to save more money. 

About half of office workers report that employers have an in-office full-time policy

Fifty-one percent of U.S. consumers who have traditionally office-based jobs indicate their employer currently has an in-office full-time policy. Seventeen percent are under a hybrid model, while another 17% are fully remote. Nine percent indicate the location is up to the employee, and 6% report no formal policy at this time. 

Overall, among all consumers with office-based jobs, ~77% indicate that they usually go to the office at least once per week. The average number of days spent in the office is ~3-4 days per week (for those going into the office in any capacity).

Employer decisions regarding work policies seem to reflect employee preferences, as consumers who operate within a fully in-office model demonstrate a preference for the office setting, while those who are remote, hybrid, flexible, or do not have a policy prefer to work remotely. 

Policies also seem to reflect perceived productivity levels. For example, those fully in-office report higher levels of productivity in the office versus in a remote setting. Those not in the office full time report relatively similar levels of productivity whether in the office or in a remote location. However, fully remote workers report higher productivity levels in their remote locations than in the office setting.

The pandemic has driven substantially more time spent in and dollars spent on the home, and many consumers expect this to continue over the next ~3 years. We found that:

More time at home is expected to persist: Not surprisingly, consumers reported more time spent in all areas of the home during the pandemic, particularly the living room, followed by the kitchen, home office and backyard/outdoor area(s). Post- pandemic, consumers will continue to spend more time at home — again, primarily in the living room and kitchen, but also outdoors or in the backyard. Time spent in the home office will drop but remain above pre-pandemic levels as consumers return to offices.  

Spend on the home was a mix of planned/unplanned and pandemic-related/-unrelated spend: An analysis of why home goods purchases were made during the past two years (during the pandemic) reveal a few insights. First, there were clearly some categories that saw a disproportionate number of “unplanned” purchases. Many but not all unplanned purchases were for pandemic-related reasons; however, the minority of these purchases were true pull forward of future demand versus  incremental to category. These categories include home office, backyard recreation and outdoor furniture. Other categories were less affected and were purchased primarily for planned reasons (~80%+), for reasons such as replacement, home turnover or aesthetic remodels. 

Long-term, continued investment in the home is expected: A majority (52%) of consumers said they expect to increase spend in at least one of the home goods categories in the future (“over the next 3 years”). This indicates a longer-term investment in the home among consumers. In general, we would expect that more time spent at home in the future would support continued investment in the home even once the pandemic is fully contained.

Most consumers expect their increased investment in the home to continue for the next 3 years

Consumers are investing in the home for several key reasons. We found that core market drivers such as replacement, decor refresh and housing turnover remained the primary purchase motivators. This finding applies to nearly all categories of home goods. 

In addition, the majority of consumers (52%) expect to permanently increase their spending on home goods in the next three years. Twenty-six percent expect to permanently increase spending in three or more areas of the home. 

For the 2021 holidays, consumer sentiment appears pessimistic, but actual spend levels appear stronger

We asked consumers if they expect to spend more, less or the same during the holidays this year relative to prior years. While roughly half (53%) of consumers expect to spend roughly the same amount of money on holiday gifts in 2021 relative to 2019, a substantial portion of consumers report that they anticipate spending slightly less (15%) and significantly less (17%) this year. The anticipated drop in spend is driven by a few reasons: consumers say they have less money to spend, anticipate seeing fewer friends and family, and/or expect to purchase lower-priced gifts. 

However, recent consumer spend data suggests that consumer sentiment may not be the best predictor of holiday sales. The Census Bureau has reported a positive trend in monthly sales with September’s retail sales (excluding motor vehicles/parts) up 14% over September 2020 and up 25% over September 2019. Other secondary sources have also reported a more positive outlook for holiday spend this year. This disconnect between consumer sentiment and actual spend has been observed frequently this year; consumers are pessimistic about the economy, even though it is arguably doing well overall.

Most (86%) consumers are aware of current supply chain disruptions that may impact holiday gift availability. As a result, 70% of consumers say they plan to adjust their purchasing behavior this holiday season. For example, respondents are planning to order gifts earlier than usual, purchase fewer gifts and/or purchase alternatives to gifts they would normally purchase (locally made products, gift cards, etc.).

Online shopping for holiday gifts is expected to increase to 50%-60% of all gift purchases (+10-20 ppt for online purchases relative to 2019). 

In sum

This is our final edition of The Great Reopening and Priority Reset Series for the year 2021. For previous editions in the series and additional COVID-19 insights, please see our COVID-19 Insights Center.

We understand that many of our clients are facing continued uncertainty in their business outlook as the ebb and flow of COVID-19 continues. Some of these changes are likely to endure well beyond when the current pandemic has passed. While many changes will create challenges, new opportunities will also emerge. We will continue to share our ideas and insights through our website and other media over the coming months.

We wish good health to you and your loved ones, happy holidays, and a happy new year. We look forward to continuing to support our clients through these changing times.

To continue the discussion, please don’t hesitate to contact us.

Chris D'Angelo, Manager, contributed to this report.