Extended COVID-19 lockdowns gave consumers a chance to reflect on their lives. That’s led to a “priority reset” of how they intend to behave going forward.
In an April pulse survey, we asked U.S. consumers what they expect to spend their time and money on once the outbreak is contained. Edition 1, Part 1 of The Great Reopening and Priority Reset Series covers the macro themes that the survey revealed. Now, in Part 2, we’ll dive into the specific behaviors and shifts in spending that appear to have staying power in the wake of the crisis. (Note that all forward-looking data reported is a reflection of consumer sentiment or expectations and is not an official L.E.K. Consulting forecast.)
Consumers are rethinking their pre-pandemic choices
Among the respondents in our survey:
- Most (75%) say they will increase the time and money they spend on health and wellness activities as a result of heightened sensitivity to health risks
- A majority (57%) agree that reflection during the pandemic made them realize that at least some of their pre-COVID-19 discretionary spending was unnecessary
- Most parents (80%) believe they will be permanently closer to their children as a result of the pandemic
Post-COVID-19 attitudes reflect consumers’ experiences during the pandemic
Among survey respondents, viewpoints tend to break down into four distinct, strategically significant segments.
Bounce-backs (44%) believe the pandemic has had little more than a temporary impact on their attitudes, behaviors or spending categories. These consumers cover many demographics, with a slight skew toward middle- and lower-income consumers in the outer suburbs.
Health obsessionists (15%) have permanently changed their view of health and sanitation. They’re willing to spend more on personal health, rest and well-being. Health obsessionists skew a bit older, and they are more likely than the other segments to be retired or living on less than $50,000 a year.
Newly frugal consumers (19%) are more critical of their post-COVID-19 discretionary spending. They skew a bit lower in income and are disproportionately single.
Balance seekers (22%) have drawn permanently closer to their families and expect to live more active lifestyles. Most balance seekers are millennial or Generation X parents with children at home, typically married and higher earning.
So how does this translate into consumption? For bounce-backs, the outlook is unchanged — they don’t anticipate a permanent shift in where they spend their time and money.
The other segments expect to make significant permanent shifts, reflecting their various priorities.
For example, health obsessionists intend to spend significantly more on home productivity, presumably to enable them to retain greater control of their environments. Newly frugal consumers plan to spend significantly more on digital streaming services and groceries while spending less on out-of-home entertainment and dining out at restaurants.
As for balance seekers, look for them to spend “more” in general, particularly in categories that can be shared with family such as takeout and home entertainment. Balance seekers are also a segment that, relative to pre-pandemic levels, expects to put more money and time toward leisure travel and fitness.
Shared priorities shake out differently across consumer segments
Let’s take a closer look at some of the spending priorities among health obsessionists, balance seekers and the newly frugal — the three segments that are in a state of “permanent reset.”
The majority of consumers across segments expect to do more grocery shopping online. The largest increases are among the health obsessionists and balance seekers, who claim they will nearly double the proportion of online grocery shopping (across curbside pickup and delivery) relative to what they did pre-crisis.
Health obsessionists likely value the relative safety of having groceries delivered to their cars or front doors. Balance seekers, on the other hand, are probably more attracted to the convenience and time savings of grocery ecommerce.
In the wake of the crisis, leisure travel looks poised to rebound much faster than business travel. Those who travel for business expect that videoconferencing using products like Zoom and Teams will continue to displace one-quarter of their trips. This implies that it might take several years to fully grow out of this impact to the most lucrative portion of the travel market.
However, all three of the permanent reset segments (collectively representing more than half the U.S. population) plan to spend more on leisure travel than they did pre-crisis. Balance seekers expect to increase their spending the most, but even the new frugal segment appears to be relaxing constraints in this category. Combined with bounce-backs reverting to 2019 levels of expenditure, leisure travel looks set for a very welcome rejuvenation in the industry that suffered the most through the pandemic.
Swinging the lens to personal fitness, we see that the three permanent reset segments generally expect to spend more time on exercise post-COVID-19. Balance seekers and health obsessionists say they will spend more money overall on fitness, particularly on digital subscriptions. For the newly frugal, the plan is more time, less money as they seek low-cost alternatives to maintain their pre-pandemic fitness routines.
Reaffirmed priorities drive changes in post-COVID-19 behaviors
Those in each of the reset segments are emerging from the pandemic with a different view of the activities they expect to participate in.
Health obsessionists want activities that improve their health and well-being in more solitary environments. They expect to avoid activities with crowds (e.g., all-inclusive resorts) and increase their use of fitness apps and curbside pickup for takeout.
For balance seekers, the emphasis is on activities that either are restorative, such as going to the gym or a spa, or enable them to spend time with friends and family. More than other segments, they anticipate visiting friends and family more — including through family-friendly activities like traveling to resorts — and spending less working time in the office.
Get ready for long-term change
Executives need to be mindful of these post-COVID-19 shifts in consumer activities and spending. Don’t expect a full reversion to pre-pandemic behaviors across the board. Certain changes in consumer behaviors are expected to transcend the crisis. And while there are separate groups making very different choices, it’s clear that more than half of the U.S. population has permanently recalibrated the priorities underlying discretionary spending.
This means that consumer-facing organizations should be on the lookout for new opportunities arising from these shifts. It also means that organizations will need to evolve their business models to address the new realities and the risks from shifting consumers preferences. With proper planning, executives can use the priority reset to their advantage and strategically position their businesses to outperform as the country reopens.
To continue the discussion, please don’t hesitate to contact us.
Charlie Meade, Manager, contributed to this report.