QUICK READ: Americans have built up excess savings worth $2.6 trillion since the start of the coronavirus pandemic that will help power the economy’s recovery from the crisis, according to Moody’s Analytics. The US has amassed the most excess savings of any country, with the cash pile amounting to 12% of gross domestic product. They won’t spend recklessly, and they will demand more from brands at a lower price.
According to Business Insider, “JPMorgan strategist Karen Ward said the large build-up in consumer spending could lead to stronger-than-expected inflation, which could in turn cause volatility in stock markets. The US consumer is generally not known for its reserve and thriftiness at the best of times, she said.
After a devastating year, consumers are eager to get back to concerts, family vacations and happy hours that don’t involve Zoom or their couch. Between rising vaccination rates, easing COVID-19 restrictions and a new round of stimulus payments landing in bank accounts, economists say people who have the means to do so are poised to splurge — as long as they continue seeing signs of recovery.
So the question becomes where will the money go?
If employers require employees to come back to the office there will be a demand for casual office clothes and accessories and they will be purchased at stores rather than through commerce. This doesn’t mean that e-commerce will drop off a cliff. 60% of commerce moved online according to McKinsey & Company’s COVID-19 2020 Consumer Pulse surveys, and this isn’t decreasing.
Even beyond the acceleration of e-commerce, the digitalization of the customer experience is here to stay,” Veis said. “What might have started as one-off behavioral changes to match specific events in response to global shutdowns, has now had a permanent impact on how customers want to engage with brands moving forward,” said Jeff Veis, chief marketing officer at Actian, a hybrid cloud data analytics company.
What about major brands?
According to research, I have read, more than 50% of consumers switched to new brands during the pandemic, and the majority (65%) say they are not switching back. This should be a major concern to brands. They are going to have to win consumers back with new products and promotional discounts. However, other research from Merkle reveals that close to 6 in 10 (57% of) consumers remained loyal to a brand. It really depends on the product category.
If you’re a brand with a new product to sell, TV is still the best, most efficient way to create awareness and demand quickly. Brands that have put new product plans on hold would be wise to get the ball rolling again.
Should we worry about inflation?
Most economists agree that, statistically, the U.S. will experience a notable pickup in the measured inflation rate. This is due to “base effects”— comparison with an abnormally low number in a previous period; in this case, specifically, the readings that followed the Covid-related lockdown a year ago were particularly stunted.
It’s already started. Local newspapers are talking interviewing shoppers about the higher prices they seeing at the grocery store. After the euphoria of spending wears off, you can bet that consumers will cut back some and only spend money on brands they feel align with their values.
Yes, consumers are ready to spend but don’t make the mistake that they will spend like s drunken sailor on shore leave. Careful spending will be en vogue, and consumers will be sharing ways they are saving money while shopping. They will be frugal shoppers and demand more from brands at a lower price. They also want brands to be socially responsible and align with their values.
As a marketer one of the biggest mistakes you can make is take general research or news stories on consumer behavior and apply it to your brand. You should always have your fingers on the pulse on your target audience and have and in-depth understanding of what motivated them to become customers.