The Covid-19 pandemic has changed the way consumers shop. Different types of consumers have emerged from the crises, each with their own unique needs. Revenge spenders, for example, don’t need a motive to spend but delighting them with an optimal brand experience will help retailers gain long term loyalty. Resetter spenders on the other hand will require retailers to be aligned with their values in exchange for loyalty. The recovering spenders will be the most difficult group to encourage to shop but focusing on necessities and competitive pricing could certainly help.
It is important for retailers to understand these 3 types of spenders in order to satisfy their needs.
Revenge spender refers to consumers who are looking make up for lost time. With stores being closed, as well as travel and socialising being restricted, consumers have been starved of shopping experiences. Thus, according to the EY Future Consumer Index, the revenge spenders will be back with a bang and a strong focus on self-comfort and ‘social consumption’.
45% more consumers plan to increase their spending compared to pre-pandemic levels: 43% plan to spend more on holidays; 29% on personal care; and 37% on recreation. The demand will differ for different categories but a 9% increase in every category is predicted. For instance, The Office for National Statisticsfound 53% of working adults are already leaving home for work which has naturally increase demand for coffee and fast-food chains such as Pret a Manger, Paul, Wasabi etc.
As for non-essential shopping, 73% Britons are optimistic about their financial future; and they have aggregated savings of £180bn to spend. In China for instance, revenge spending begun as early as April 2020. Tiffany & Co.’s China sales surged 90% in May 2020 compared to 2019; and Guangzhou’s Hermesstore reached $2.7 million in sales on the day of reopening in April 2020, a record for boutiques in China.
Pent up desire to shop, forced savings and an increased optimism amongst Britons will certainly help recover the British economy, making revenge spenders a highly valuable group of consumers. Among the revenge spenders are also the rewarders who may not have a lot of money but are looking for experiences.
Despite the British governments efforts to minimise the damage caused by the pandemic, many Britons have been hit hard by the pandemic – these are the recovering group of spenders. Unemployment reached 5.1% in Q4 of 2020; the estimated redundancy rate in three months to January 2021 stands at 11.0 people per thousand employees; and since the beginning of the pandemic, 85% of English councils saw an increase in homelessness.
Whether poor before the pandemic, newly poor, or one pay check away from poverty, the recovering spenders have one thing in common; that is, they are only able to buy necessities. In fact, many have been reliant on help for basic necessities. In Braford, three times more food was distributed by food banks compared to pre-pandemic levels and one in five schools in the UK have also set up food distribution.
13% of Britons will have to keep cutting costs until they reach financial stability before they are able to spend on non-necessities. Thus, retailers can attract these consumers with competitive pricing and rewards.
The resetters are not a new group of consumers but the pandemic encouraged their growth. They are concerned with big issues such as climate and sustainability, willing to pay on average of up to 3% more‘green premium’ prices for sustainable goods, and 33% more for cleaner food and drinks.
More than half of consumers of all ages in London said they are seeking more sustainable products. This trend is particularly noticeable among millennials who are willing and able to pay the higher prices attached to sustainable products. 57% of all European consumers have already made significant changes to their lifestyle, such as recycling and busying sustainable products and services.
The resetter consumer is open to changing vendors if their values are aligned. McKinsey’s report found 36% of consumers have tried new brands during the pandemic and 73% of them plan to experiment further with companies they haven’t previously purchased from. The report also found that the majority of consumers who are trying new brands are from the younger generations, Gen Z and millennials. However, most consumers are actively trying to adopt good habits such as reducing alcohol and tobacco consumption and increasing organic fresh food consumption.
Resetters are much like revenge spenders, willing to spend their money, but the brand value must be aligned to their own in order to encourage them to spend.
In summary, understanding the 3 types of spenders is the starting point for retailers to satisfy their customers’ needs. With 42% of the UK population financially unaffected by the pandemic, (19% of consumers even saved money during this period) retailers have a real shot at quick recovery.