Coronavirus

Why Consumers Are Embracing Digital Life — And Why 23 Pct Will Leave Offline Behind

Why Consumers Are Embracing Digital Life

Wholesale change — the type that leads to seismic shifts, upending daily life across the way we travel, eat, live, work — always comes when a tipping point is reached, when the “old” way of doing things no longer makes sense, or is no longer is feasible.

Sometimes that tipping point comes when technology is available and cheap enough for everyday people to embrace.  Stretch back through the decades and you’ll find any number of examples — Henry Ford’s mass-produced autos, and more recently the internet and mobile phones.

This time around, in the midst of the pandemic, the tipping point to life lived digitally has been reached because of two factors:

We have the technology in hand … and because, as the coronavirus rages on, there really is no other way to get things done, especially when it comes to shopping, to getting the goods and services we need to live.

More than 36.5 million Americans have lost their jobs since the start of the pandemic and countless others have taken huge salary cuts. Goldman Sachs predicts that unemployment could reach 25 percent, and our own research shows that more than 35 percent of those who were working full- or part-time on March 6, no longer are.

As a result, consumer spending is plummeting on anything but the essentials — and even that is slowing.

Stimulus checks are being saved, not spent, as the future economic uncertainty looms. The already paycheck-to-paycheck ranks are being strained even further, as more than half of consumers now have less than a month before they have to dip into their savings accounts to pay bills — and 32 percent have less than two weeks.

More than a third, 36 percent of Americans have less than $1,000 in their savings accounts.

State economies are starting to open up, but consumers — still too fearful about their public health risks — stay put.

Economists warn about the overall risks to the economy if consumers don’t get out and resume their normal activities, but wary consumers are putting their personal health before anything, and have found new digital outlets to live their lives in lockdown.

Getting out and going out are now two different things for most Americans.

Maybe that is not surprising to you since so few options for physical engagement were available to them. What might be surprising is the number of consumers who will continue their new online habits.

Our research shows that 42 percent of consumers are using digital channels to engage in activities more often than they did before the pandemic, while 58 percent are not. But of those who do, more than half — at  22.9 percent — said they do not plan to do any of those activities offline in the future.

Thus the tipping point, as we detail in the study “The Great Re-Opening: Tracking Digital’s Quantum Leap” where behavioral change is firmly entrenched.

Going to the grocery store,  even going out to eat, are all things that many consumers have replaced with digital alternatives, built trust and now recognize that they can get an experience that is as efficient and satisfying experience online as their once offline interactions were.

Even more remarkable is that 5.1 percent of the 12,000 consumers we studied say that they are shifting the retail spend once done in physical stores, to digital channels.

Retail Done In Bits And Bytes

Think about that for a minute.

It took about 15 years for 5 percent of retail sales to shift online, then another 10 to shift another 5 percent. It has taken 10 weeks for another 5 percent of retail sales to shift online by consumers who say that they will never return to doing those activities in a physical world.

Only 13.5 percent of respondents say they have shifted routines online but plan to revert them back to offline activities once we are on the other side of the pandemic.

That shift amounts to roughly $158 billion of sales once done in the physical store. The quantum leap we wrote about last week now has a price tag attached to it — and now is quantified in a way that shows just how quickly firms of all sizes and across all verticals will have to pivot, if they have not done so already.

That pivot is powering a wave of innovation as businesses large and small tap technology, connected devices and payments innovations to meet consumers on this new digital-led path to our connected economy future.

Demographic — And Financial — Details

It may be no surprise that younger, tech savvy consumers have been the most visible adherents to online spending.

The data show that millennials are the consumer cohort most likely to limit their offline activities later on, after we’ve come through the current crisis. As many as 47 percent of millennials have made the leap to bringing routines online, while 41.8 percent of Gen X consumers have done the same.

There’s a bit of schism, drilling down into the data, where relatively higher income consumers are the ones who are likely to have embraced, and stay with, digital channels.

We found that consumers earning more than $50,000 annually have been the fastest to move. With a bit more granularity, those consumers earning more than $100,000 per year have been the ones most likely to view their shift as long-lived.

As many as 38.1 percent of all consumers who plan to continue using digital channels as much as they do now even after the pandemic ends earn more than $100,000 annually. Our analysis reveals that 37.7 percent of consumers who have not moved their daily routines online since the pandemic make less than $50,000 annually.

As to just what is getting done online: The headwinds of the current economic climate are dictating that certain tasks take precedence over others. Job losses and possible pressures on savings and cash flows mean luxury goods are not top of mind for consumers … instead, keeping food on the table is key, especially among less financially secure consumers.

Consumers who go online seem to be triaging their activities, especially when they have some cash constraints.

Those who have switched to doing more grocery shopping online could go an average of almost 120 days without dipping into their savings, while those who have switched to retail shopping online could go nearly 127 days without doing so.

It’s not a huge difference, but it does hint that consumers are eyeing the bare necessities at least for now.

In the meantime, over the weeks and months that follow, it will take more than just the “great reopening” — of brick-and-mortar stores, theaters and restaurants, that is — to lead to a great “reopening” of wallets and purses.

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