Household Consumption

Covid Impact Report

Household Consumption

Covid-19 has caused household saving ratios to hit heights not seen since the early 1970s.

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OVERVIEW

Household Consumption Spending:

50% of households expect to have less income available after meeting commitments.

Disposable income expectations in a year from now:

• Increase: 17%

• Decrease: 50%

• Remain the Same: 25%

• Unsure: 8%

Household disposable income outlook…

• Employment is increasing as pandemic restrictions ease

• Population growth has slowed from 1.5% to 0.5% - less people receiving income than previously expected

• Wages growth has slowed from a low 2.2% to 1.8% and may decline further given the weak labour market

• Federal income support will be progressively reduced over the next six months

• Interest payments on savings have declined and so have share market dividends
  

Household Consumption Expenditure Outlook

• Household consumption expenditure growth will improve slowly as more spending options

  become available

• Weak income growth will constrain the rate of growth, although a build up of savings is likely

  to reduce slowly and support spending to some degree

• In annual growth terms, spending will likely still be in decline over the September, December,

  and March 2021 quarters

• Underlying growth will then settle at around 3.5% to 4%, which is similar to the growth rate

  before the pandemic

• Pessimistic estimate of underlying growth in consumer spending is 1.5% to 2% and optimistic

  estimate is 5% to 6%. The optimistic estimate is still below the pre-GFC growth rate of 5% to 9%

*Data Source: Foreseechange, Charlie Nelson

Consumer patterns and implications for brands & retail

Covid Impact Report

Consumer Patterns & Implications for Brand & Retail

Covid-19 has created several new consumer segments as a result of varying attitudes and spending habits are changing.

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OVERVIEW

Consumer concerns are centred around health, the economy (including income and unemployment), and climate change which is still a prominent issue.

80% are not willing to return to life as it was.

Driven by ongoing concerns about health and finances but also as a result of rethinking and resetting priorities.

50% expect to have less disposable income.

Driven by high unemployment and the imminent reduction of government income assistance.

A high priority to build savings.

As a precaution, to buy residential property to live in, or to invest.

Only 9% feel they have discretionary funds and want to spend on discretionary items.

Consumers have adapted their shopping behaviour.

As a result of the pandemic and lockdown restrictions; consumers have adapted to online channels at the speed of lightning.

With more consumers adopting new ways of doing things, the online grocery channel has increased market share.

Convenience customers are going to drive a surge in e-commerce

Retail entrepreneur Ruslan Kogan, says the next wave of e-commerce growth in Australia will be driven by consumers interested in convenience as much as price.

Kogan predicts  e-commerce will surge from 8% to 30%.

If Kogan’s prediction is accurate, that still leaves 70% for physical shops (which may also sell online)for shoppers who prefer local, personal customer service, unique merchandise, instant gratification, or other attributes satisfied best by physical shopping.

Keeping it local…

Independent and specialty stores are benefiting from consumers shopping closer to their location and wanting to support local businesses.

Key reasons consumers are shopping locally:

• I’m supporting local businesses

• I’m shopping more at stores that are closer to my location

• I was looking for better quality products

• I was looking for products that I couldn’t find at larger retailers

• I was looking for better prices

• I always shop at this store

Shopping locally is more important for Insulated spenders.

Constrained or insulated?

As published in Nielsen’s “Reboot or Rebound – The New Normal For Australia” communication, the polarisation of consumer spending habits continues…

Insulated spenders prioritise convenience whilst Constrained spenders prioritise value. Constrained households do not necessarily correlate to lower income.

In this report we unpack how brands and retail can cater for the two types of spenders: constrained and insulated and what trends we can expect to see as the retail landscape continues to evolve and change.

*Data Source: Foreseechange, Charlie Nelson