The lockdowns and restrictions on social activities may have led to the impression that little time has passed, but for most of the world, it has been a year since the first Covid-19 social-distancing measures were introduced.
A year is the typical length of a merchandising cycle for a consumer-facing business, and more than enough time for changes in consumer tastes and preferences. A year under Covid-19 restrictions is likely to be a more profound experience – consumption has been severely restrained, and after a year of living without certain goods and services, consumers will inevitably start asking themselves if they ever needed those goods and services in the first place.
In Europe, a cross-country study across 5 major economies has already provided indications of such a shift. When asked why they were going to spend less on certain goods and services in the future, a recurring reason was that they were “not missing it” – in other words, they no longer see the value of these categories of goods and services they have consumed pre-pandemic, and hence there is likely to be a permanent shift in their consumption patterns.
This paper focuses on Southeast Asian consumers, in which the findings from our survey and the domestic consumer environment indicate that the effect of changing consumption is likely to be more pronounced in Southeast Asia than the European experience.
The key reasons are:
- Households, and by extension consumers, have largely received less direct government transfers than their counterparts in more developed countries in order to weather the economic effects of the pandemic.
- Most have pulled through by drawing down household savings, which were at a sufficient level due to the relatively high savings rate of Southeast Asian households.
- However, the same conservative attitude is likely to weigh on the consumption recovery – households will prioritize rebuilding savings than returning to old consumption habits.
- Combined with the isolative effects of the pandemic on consumption, this will likely lead to a larger reassessment of the value of goods and services, in particular those which they have consumed less.
As a result, pre-2020 reference points, whether in business or in policy action, are decreasing in relevance. Our paper suggests the possible implications to businesses and policymakers:
- For businesses in consumer-facing, discretionary categories, “staying relevant” will be a key strategic theme to prevent this reorientation of consumption behaviour. In reassessing their value propositions, businesses should be prepared for drastic changes in customer perceptions and preferences.
- For businesses in the higher-end consumer market, there are both opportunities and threats in a new class of consumers - the “middle income social elites”.
- For policymakers, there will be a need to anticipate that consumption patterns will be different compared to before the pandemic, and consequently a possible different economic landscape when evaluating the efficacy of blanket government support for each sector.
The Covid-19 pandemic will undoubtedly be the defining crisis of our generation. To expect a static and unchanging picture of consumption behaviour and an eventual return to pre-pandemic ‘business as usual’ will be a risky strategy for both businesses and policymakers.