How many of you are convinced that life is full of uncertainty with 2020 bringing the only
and the worst kind of certainty in our lives- contracting covid-19, suffering a natural
calamity, or for the pessimistic lot- death?
The impact of the virus has varied from country to country, with a fortunate few slowly nearing a complete unlocking of the economy while the rest struggle to battle it and their economies on the verge of collapsing.
Consumer spending is one of the major drivers of global economic growth and in the wake of this horrid year, studying consumer behavior has gained renewed relevance for economists as it is this trend which will decide the fate of B2C businesses.
Even when the global economy witnesses a troubling year, there are two schools of thought debating whether hedonism will prevail where majority of the consumers will splurge on buying goods and services or that they would clutch onto their money as insecurity increases.
Many around us have shunned the concept of materialism and have been seeking happiness from spending time with loved ones while lobbying for environmental populism and the no- waste culture. They believe that unnecessary consumption has been detrimental for the environment and that this pandemic is an eye-opener, pushing us to adopt a more conscious way of life. On the other hand, a growing sense of hedonism has dawned upon the rest of us, where relaxation of the lockdown has been a gateway for pleasure seeking by embarking on a spending streak.
With these drastically opposing views related to consumer expenditure, it will be interesting to see which role the consumer shall assume- a spendthrift, or that of a saver. Hedonism, the feeling that we all associate with pleasure and well-being, is compatible with the materialistic aspect of life. As studies have found, social trauma promotes materialistic decisions as it is related with uncertainty regarding mortality and future survival. Consumers start assigning greater weightage to short-lived happiness. An article by consumer psychologists, ‘an urge to splurge’ presents the terror management theory (TMT) and talks about the consumeristic worldviews which protects people from existential anxieties.
In India, data shows that deposits (savings, current and term) increased during lockdown 1.0, as people grew apprehensive and completely cut down on spending. During lockdown 3.0, deposit growth turned negative as people started nearing a state of normalcy. Lockdown 4.0 again saw a variation in this trend with increasing deposits and lesser incentive to spend. This uneven pattern of deposits and advances during a series of lockdowns is being analysed by experts to determine consumer insights and predict the speed of recovery for businesses and the economy in general.
Countries which are linked to higher levels of optimism, like India, China and Indonesia, have increased spending even for non-essential products. This is particularly true for the elites, who are more or less insulated from the financial impact of the pandemic. As we climb down to the middle class, forced austerity is increasingly becoming evident due to a financial crunch. Cutting down on unnecessary expenditure and optimally using resources has become the preferred way of life. It is possible that the paradox of increase in consumer spending at a time of job losses and salary slashes may well be true only for the rich segment of the society.
Whether we have trodden down the path of optimality whereby the near future will witness a rise in ‘Quaranteens’ who are mindful of spending and have a no-waste mentality, or consumers will assume roles of spendthrifts and embark on a journey of spending prodigiously, is yet to be discovered.