Why Consumers Aren’t In A Rush To Restart The Economy | PYMNTS.com
Economists, policymakers and epidemiologists have been modeling the cost/benefit of reopening the U.S. economy since governors began asking their citizens to #stayathome in mid-March, and even well before that.
A decision to reopen, even partially, must weigh the economic impact of keeping the economy locked down against the availability and effectiveness of treatments that will mitigate or eliminate the risk of another serious outbreak, as well as illness and deaths, within months of reopening — and the potential for another shutdown.
At the same time, consumers are doing their own cost/benefit calculations about when it’s safe to re-enter and resume their daily activities.
Most aren’t in much of a rush. That’s because they see more cost than benefit in resuming many of their old activities.
The fifth PYMNTS study of consumer behavior before and during the course of the pandemic, now encompassing a national sample of more than 12,000 consumers as of April 27, shows that nearly two times as many Americans have little or no interest in leaving their homes to reengage in the physical world as those who do.
Just 28 percent of the U.S. consumers we studied report being very or extremely interested in doing so, with 51 percent being slightly or not at all interested. This sentiment is consistent across all demographics and income groups.
It’s also one that seems to correlate with who consumers turn to and trust to tell them it’s safe to reengage.
Consumers are basing their decisions on their understanding of the medical risks based on information from credible scientific sources. Nearly twice as many consumers are putting more stock into what medical science is telling them will lower their risk of contagion than what governments say is safe to do. Those consumer cost/benefit analyses heavily weigh what scientists and medical professionals say about when it will be safe for themselves and their families to leave their nests.
That, in turn, has shaped how long most of the American consumers we studied now think it will take for them to do that.
Over the last two weeks, consumers have added 47 days to how long they think it will take for them to return to normal, and when they think the economy will truly reopen. In my reading, that’s pretty consistent with how long the scientists say it will take, too.
More than half (53 percent) of the consumers we studied now say it will take 7.2 months (225 days), up from roughly six months (178 days) just two weeks ago. That belief is largely consistent across income groups and generations. Millennials are the outliers, but not really by that much, with only 44 percent sharing that view.
That seven-month timeline is on top of the two months most have already spent in lockdown.
For those keeping score at home, seven months from now would be December of 2020.
Healthy Or Hermits?
Now, it isn’t as if the very same Americans who were out and about in droves in January and February have suddenly turned into hermits and recluses over the last eight weeks. Or that Americans have collectively decided that social distancing from the comforts of their homes is now their preferred way of life for the remainder of the year.
But for a consumer who is still seven times more afraid of dying from the coronavirus as losing their jobs or their wealth as a result of its economic impact, they must be convinced that the benefits of re-entering the physical world are far greater than perceived risks to their health if they re-enter now or sometime over the next seven months.
Calculating those risks and trade-offs also has much to do with the availability of convenient and reliable substitutes for the activities consumers once only did in the physical world — and now do mostly via digital channels, because they must.
Those decisions will be further influenced by how essential those physical world services are to consumers, and whether there are suitable digital substitutes for the activities they miss and don’t think they can get any other way.
Their decisions to reengage in the physical world will also be influenced by what restrictions are in place when the physical world slowly reopens — and whether those restrictions will create an experience that a majority of consumers are comfortable with and are willing to accept.
In other words, whether the benefits of the experience will outweigh the costs of the remaining health risk.
And more importantly, whether consumers believe that those digital surrogates create a better experience now and in the foreseeable future.
As consumers mull those tradeoffs and their personal health risks and weigh the cost and benefits of re-entering, the question for every business — and every provider of services to those businesses — is this:
Do the digital-mostly experiences of the last eight weeks offer enough of an improved experience that when the economy fully reopens, those substitutes will become permanent replacements for most or all of what consumers used to do in the physical world?
Based on what we are hearing from the 12,000 consumers we’ve studied so far, businesses might not want to wait seven months to find out.
Life In A Digital-Mostly World
Consumers seem to have settled comfortably into their digital-first — and sometimes digital-only — groove.
In just eight short weeks, we have observed six times more consumers working from home, four times more consumers buying groceries online instead of going into the grocery store, four times more consumers ordering takeout from aggregators or their favorite restaurants, and three times more consumers shopping online for things other than groceries.
Now, 39.2 percent of consumers shop for retail goods online more often than they did on March 6, the first day of our study, and that continues to climb — up 10.5 percent from 35.5 percent in just the last two weeks.
Of course, some, if not all, of those behaviors were changed out of necessity. Even if they wanted to, consumers couldn’t go to a restaurant to eat and couldn’t shop at a physical store.
And for the activities they are able to do, consumers remain uneasy.
Two-thirds (66 percent) of consumers say that going to the grocery store puts them at risk of getting the virus — even though grocery stores have implemented rigorous social distancing and sanitizing procedures.
Consumers feel the same way about going to the store — with nearly as many (64 percent) citing it as a reason not to shop in physical stores once they reopen.
Those concerns, and the availability of digital substitutes that offer a great consumer experience, suggest that these digital habits will stick — even when consumers can resume their once-normal day-to-day activities.
Only slightly more than a third (36 percent) of the consumers we studied who went out to eat at restaurants before the pandemic say they’ll go back to their pre-pandemic restaurant routine — two-thirds say they will not.
Seventy (70) percent of consumers who are now working from home say they will continue to do so for some or all of their jobs, if they can.
Almost two-thirds (65 percent) of the consumers who have used order-ahead or ordered food from aggregators more often since restaurants closed in mid-March will continue to use them just as much even after restaurants reopen.
Almost three-quarters (71.7) percent of the consumers who now order groceries online and pick them up curbside say they will stick with that routine even when shopping in the grocery store starts to return to its pre-pandemic state.
Almost two-thirds of consumers (64.8 percent) say the same thing about shopping online.
Among those who are now shopping more online, only one-third say they will go back to physical stores to shop when they reopen. More telling, perhaps, is that only 40 percent of those who used to shop in a physical store say they will resume their normal shopping activities when those stores reopen.
Physical retailers, which had already been threatened by stores with a strong digital presence, now have even more of a reason to question their business models.
What Consumers Miss, And What They Don’t
Restaurants, which depend on foot traffic to make their numbers, face a much harsher reality.
It’s not as if consumers don’t miss their physical world activities. They do.
Of those consumers who are eager to leave their homes and restart the physical world economy, there are a few activities they say they really miss a lot.
Three quarters (75 percent) of those consumers say they miss going to restaurants. And who doesn’t?
For most, eating out at a restaurant is a social experience with family and friends, which comes with a side of good food. For millennials, who tend to live in small spaces and often with roommates, going out to bars and restaurants with friends is a key part of their daily and weekly activities. Being under lockdown has made that doing that impossible — and an activity sorely missed.
Not surprisingly, 59 percent of consumers who’d like to resume their daily activities said they miss going to sporting events and participating in other leisure activities. And even going to the store (57 percent) to buy things.
More than half (53 percent) of those consumers say they are just plain bored — bet you can’t guess who said that the most — and want to leave the house to go somewhere, anywhere and do something, anything.
Then there are the things those same consumers said they don’t miss as much.
Less than half (44 percent) of consumers who want to resume their daily activities as before want to travel domestically.
And hopping on a plane and traveling abroad?
That’s near the bottom. Only 18 percent of consumers find travel abroad appealing.
More interesting, though, is what those consumers said when we asked them to rank in order the activities that will motivate them to return to their normal day-to-day activities.
Seeing their family and friends tops the charts.
Eight in 10 (80 percent) of consumers with an interest in resuming their day-to-day routines say that being able to visit Grandma or get together with friends is why they want the lockdown to lift. Forty-three (43) percent of the consumers we studied say it’s the №1 reason for wanting to do so — four times more than the number of consumers who say they miss going out to eat.
Second on the list is getting back to work.
Although it ranked seventh on the list of reasons for leaving the house, going back to work was cited as the most important reason by 43 percent of those who said going back to work was an important reason to reengage with the physical world.
In addition to offering a job and a paycheck to get back to, the workplace is also a hub of social activity. Although using Zoom, Teams or Slack makes working at home more efficient, it doesn’t necessarily make it social.
Consumers may also miss going to the store, but only 4 percent of those who said they really missed it see it as the primary reason they’d like to restart their activities in the physical world; only slightly more said the same thing about attending sporting events or reengaging in the leisure activities of the past.
It’s not that surprising. Consumers have found suitable digital substitutes to fill those gaps.
Consumers can get a restaurant meal brought to their doorstep, and can even work largely from home right now thanks to software platforms and connected devices that make it easy and efficient. They can order stuff online, they can stream movies, — even first run movies — at home. They can go outside for a run or a bike ride, fire up an app and do a workout, even Facetime with their hair stylist about how to get unruly hair to behave. They can pile the kids in the car and drive to a park and walk around, respecting social distancing.
But what they can’t do is give moms and dads and grandmas and granddads a hug. They can’t see family and friends at birthday or engagement parties, celebrate weddings or bar mitzvahs, or go to graduation parties or ceremonies. Zoom and Face Time only take those experiences so far.
What’s clear is that consumers really, really, really, really miss the one thing for which there is no efficient and available digital substitute: seeing their friends and family more often than they can right now.
Is The Benefit Worth The Cost?
The consumers we have studied over these last eight weeks remain steadfast in their belief that it will take a vaccine to get them comfortable resuming what used to be their normal routines in the physical world:
Hopping on an airplane for business or leisure travel.
Sitting in packed stadiums or movie theaters.
Standing shoulder to shoulder in a line to do anything.
Sitting at a table a foot away from other diners in a restaurant.
Going shopping at a physical store — even the grocery store.
It’s why reentering the physical world — restarting the physical economy — and coming into contact with people they don’t know in environments isn’t that appealing right now. Particularly when they consider the risks to their health if they do, against the benefit of the experience they might find when they reenter.
Let’s suppose a consumer has her favorite restaurant, one that is her normal go-to. The food is great, the atmosphere is buzzy. It’s always crowded.
In addition to dining tables, there’s a bar. Maybe she and her friends visit so often that the owner and waitstaff all know them, and serve their favorite drinks and apps without them even having to order.
Part of the allure of going to that restaurant is the experience of seeing, being seen and eating there.
That same restaurant is forced to close as a result of the pandemic, offering only takeout or delivery from a limited menu. She and her friends continue to support that restaurant since they all want to do their part. But they see the struggle each and every week, and notice that the food isn’t what it once was. They suspect that’s because the kitchen staff has been slimmed down, and it’s harder to get the food supplies they need to make more than what’s on that limited menu right now. They also suspect that the volume isn’t nearly enough to pay the bills — and without alcohol, the tab for each of those orders is a fraction of what it once was.
Then the lockdown lifts — but the regulations require that the restaurant operates at reduced capacity, something like 25 percent of what it once was. The waitstaff and other diners wear masks and gloves and take their temperature at the door. There is a limit to the number of people who can be seated at any one table and at any one time in the restaurant. Reservations are no longer taken — it’s first come first served — which requires more planning and introduces more uncertainty. Plastic utensils replace stainless steel cutlery. Diners are asked to sign a certificate, with their email addresses, saying they do not have symptoms at the door, too. The bar scene doesn’t exist.
The experience feels weird, even awkward, for everyone.
If that’s the restaurant experience for the next several months, will consumers go at all — or as much as they used to?
If a large part of the restaurant experience is the social experience with a side order of great food, it seems doubtful.
Instead, consumers will likely gather at home with their family and friends, in small groups they know and trust. They’ll cook together, barbecue together, picnic together. Maybe that will include getting takeout delivered, heating up prepared foods bought at the grocery store, cooking a meal from scratch with stuff they ordered from the grocery store and picked up curbside, even having their favorite restaurant deliver a fully prepared meal. The array of digital substitutes allows those consumers to create a great experience, doing the one thing they really miss — getting together with family and friends — where the benefits far outweigh the risks.
That seems to be what we are hearing, now from nearly 12,000 American consumers. That makes the question for restaurants, retail and every physical establishment with whom the consumer once engaged quite clear: Is what they are doing right now — or plan to do for the foreseeable future — enough to end up on the right side of the consumer’s cost/benefit analysis?
Of course, eventually, everything really will get back to normal.
But it’s starting to seem that a true normal — as it was before the pandemic — is still a long way off.
Meanwhile, the consumer’s cost/benefit calculation will determine how quickly the economy revs back up and which businesses can generate enough consumer demand to survive in the meantime.
It will also determine how many consumers will stick with the online substitutes they’ve found for physical activities, which seem to get stickier and stickier every time we ask them.
Originally published at https://www.pymnts.com on May 4, 2020.