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Consumers cut spending, but open to digital offerings during COVID-19 – survey

Three-quarters of high-income U.S. consumers plan to draw down their overall spending over the next few months, but many also say that they are turning more often to a host of at-home products and services as the novel coronavirus spreads, according to a new survey.

Just 7% of respondents said that they are planning to spend more overall during the next 90 days than during the same period in 2019, 451 Research's Voice of the Customer Macroeconomic Outlook, Consumer Spending found. 451 Research is an offering of S&P Global Market Intelligence.

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That represents a rapid shift from just two months earlier, when 30% of consumers planned more spending over the next 90 days and 18% planned to pull back. In March, 33% of consumers said that they planned to pull back spending over the next 90 days, while 20% expected to increase it.

At the same time, many consumers indicated that they have already been relying more on products and services to entertain, feed and care for themselves at home as they avoid public places. Nearly 53% said that they are using more cleaning supplies, such as bleach and disinfecting wipes, as a result of the pandemic, while 41.4% said they were buying more groceries and 31.2% referenced higher usage of video streaming services such as Netflix Inc.

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While the larger pullback in spending bodes poorly for brick-and-mortar retailers, consumers' increasing reliance on digital services presents an opportunity for companies that offer online versions of formerly in-person activities, from workouts to grocery shopping, said Sheryl Kingstone, research vice president at 451 Research.

"You can still engage virtually" with communities and services that used to be in-person, she said.

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The survey, which asked consumers about multiple aspects of their spending plans, collected 1,151 complete responses from consumers in the U.S. and Canada between April 1 and 13. Fifty-four percent of respondents made less than $125,000 per year, while 46% were above that threshold.

A majority of respondents — 51.1% — said that they have replaced some of their in-person shopping with online transactions since the pandemic started, while another 25% said most of their in-store spending has migrated online. Retailers have pointed to sharp increases in online sales in recent weeks, with Target Corp. reporting April 23 that comparable digital sales grew more than 275% month-to-date in April.

How much of that increase will stick even after the pandemic eases is a key question for investors and analysts. Keith Daniels, a partner at Carl Marks Advisors who works with clients in the grocery space, said that pickup and delivery orders are likely to take a higher percentage of grocery spending in the long run.

"You're seeing a broader group of people who are willing to adapt to use this technology now who wouldn't have under normal circumstances," he said in an interview.

Higher digital sales have also prompted manufacturers of food and other fast-moving consumer goods to rethink their offerings. The Procter & Gamble Co. Vice Chairman, COO and CFO Jon Moeller told analysts April 17 that the company is looking at new, e-commerce friendly packaging options for its cleaning supplies and paper goods as its sales have jumped.

Broadly, the 451 survey found that consumer spending on eating out and leisure travel were the most at-risk, with roughly three-quarters of respondents saying that their restaurant expenditures would decline and a similarly sized portion citing less spending on vacations. About a third said that their spending on consumer electronics would take a hit.

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