Monday, February 6, 2023
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Why consumers will swing between saving and splurge during Covid-19

Research shows that in the middle of great social trauma, buying behaviour is tied to how people feel about their own mortality.

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Consumers tend to respond to mass crises in two contradictory ways, research has shown: We retract into our shells and hold onto our money, then we spend as if there’s no tomorrow. One reaction naturally follows the other: First comes penny-pinching to help us regain a lost sense of control, then an exuberant play to live this brief and fragile life to the fullest while we still can.

Buying behaviour, in other words, is tied to how people are feeling about their own mortality — subconsciously or not — especially in times of great social trauma.

Are these the reactions we should expect in the wake of Covid-19? If so, how will they play out? Doug Stephens, the founder and president of Retail Prophet and the author of two books on retail consumer behavior, has been looking at past widespread traumatic events for the answers. I asked him some questions about what the future might hold. Here is a lightly edited transcript of our exchange.

Mary Duenwald: It seems a bit heavy to look at consumer behavior through a lens of mortality. Is our fear of death always hovering over us when we shop, or does it come into play only after grave crises?

Doug Stephens: They say that the only certainty in life is death. And for many years psychologists, sociologists and anthropologists have postulated that much of human behavior is predicated on that very simple notion — that we’re all going to die.

Human beings are unique in the sense that we, unlike any other animals, are conscious of our own mortality — something that strikes terror into the hearts of most of us. Terror Management Theory, developed by social psychologists Jeff Greenberg, Sheldon Solomon and Tom Pyszczynski, suggests that our only means of coping with persistent death anxiety is to create a worldview, a reality if you will, that works to distract us from death’s inevitability. We busy ourselves with work, family, friends, religion, community, plans, etc. — mostly in an effort to stave off thoughts of death. This worldview that we create brings meaning and order to what might otherwise be viewed as a chaotic and uncaring universe.

Within that worldview we also work to ascribe value to our rightful place and existence within it. We tell ourselves that “my boss depends on me,” “my church values me,” “my family needs me” or “my team can’t win without me” — all to establish a sense that our lives have inherent value. For many, material goods help to bolster this sense of self-esteem and worth.

But every now and then something comes along that shatters the security of this worldview and our value in it. Things like wars, depressions, recessions and terrorist attacks can shatter the illusion of meaning, order and self-worth that we’ve created. This is what Terror Management Theory refers to as “mortality salience” — a reminder that life is finite and we aren’t really any more important or valuable than a blade of grass or a bird.

Thus, in the face of such events, we attempt to do two things: defend and shore up our world view and re-establish our self-worth and esteem.

Also read: India’s shopping boss Damani only tycoon to get richer under lockdown

MD: How does spending — on things or experiences or services — help people tolerate their own mortality?

DS: Spending on material goods can do two things: Give consumers a renewed sense of control over their lives, their security and safety. This tendency explains much of the panic buying we witnessed at the outset of the pandemic. Leaving Costco, for example, with an overflowing cart of essentials instills a sense of control in the midst of chaos. Spending can give us security and control in other ways too. Buying a new pair of pants can give us a better sense of control in preparing for a job interview. So, control and order is the first priority.

Second, spending on material possessions can enhance our sense of self-esteem. As a society, we use possessions as a proxy for individual value or worth.

This need or desire to acquire material goods after a crisis is explained by another theory called Secular Immortality, developed by Elizabeth C. Hirschman, a professor of marketing at University of Virginia. Secular Immortality suggests that this need to reaffirm our worth and value in the world can drive us to create a sense of lasting legacy or symbolic immortality through material possessions. Amassing, owning, displaying possessions can imbue us with a sense of immortality.

MD: What other mass crises in the past could be instructive about how consumers will behave after Covid-19?

DS: It’s not easy to find other world events that can compare completely with Covid-19, but the 1918-19 pandemic offers some solid clues. The pandemic, which came on the heels of the First World War, resulted in a long and severe depression. But by mid-1921, we saw the dawn of the Roaring Twenties, a period of unprecedented growth, prosperity and yes, consumption. In fact, the U.S. economy grew by 42% inside of the decade. The extreme brush with mortality people felt from 1914-1919 spurred a rush to reconstruct our cultural worldview and reestablish our value within it.

Also read:‘Bhaiyya de do please’ — Covid-19 crisis is making urban India go back to kirana stores

MD: What do you see happening this time around? Will we have to wait until the coronavirus has been eradicated for consumer spending to bounce back, or for exuberant spending to happen?

DS: First, I don’t think we’ll return to life as we knew it anytime soon. I expect a slow relaxing of social distancing measures as we wrestle the curve, but some curbs on our behavior may persist for years. Consider how 9/11 changed every aspect of air travel. But eventually, there will be a careful reopening of our global economy. By that time it’s nearly certain that much of the world will be in, or on the precipice of, a recession. In the short term, deep uncertainty about their economic future and job security will be met by most with a natural inclination to reduce spending, focus on essentials and avoid risk. Eventually, as the economy picks back up, we are likely to see these ideas of Mortality Salience and Secular Immortality manifest themselves, and a period of significant consumption beginning in 2022.

MD: Will some kinds of spending return before others do?

DS: We typically see spending on durable goods — cars and homes, for example — recover before non-durables like electronics and apparel. I expect that to be the case as well post-Covid-19. Luxury will also come roaring back, but it will take a secure employment market and a return to growth in the stock market to revive the average shopper as well as high-net-worth consumers.

MD: Will we change the kinds of things we buy? Vacations instead of shoes, gifts instead of personal things — that sort of change?

DS: There are volumes of research suggesting that experiences make us fundamentally happier than material possessions. I believe this is especially true today because experiences have become our primary social currency. Experiences play well on social media and provide us with the sense of self-esteem we seek.

What is more difficult to calibrate will be the scars consumers are left with. Will we be as willing to spend time on planes or in crowded airports? Will we try to limit our public exposure, at least until memories of Covid-19 recede? It’s difficult to estimate the depth of this trauma.

Will we become more practical in terms of only buying what we need, or less so?

DS: I think we’ve learned to be resourceful and do more with less. We’ve seen more people cooking, crafting, taking up hobbies and finding pleasure in simple things. Much of this may be part of short-term coping strategies aimed at making it through isolation, but the events of 2020 could also give us pause to reflect on what we truly need and want out of life versus what is superfluous. So, yes, we could become more practical in our choices.

It’s worth noting, however, that mortality salience can also trigger risky and self-destructive behaviors such as drug and alcohol use and over-spending. If an individual believes that a particular activity, despite its risk, results in higher self-esteem, they are likely to pursue it regardless of the outcome.

Could the Covid-19 experience teach consumers things that change their behavior for good?

DS: Yes. We only have to look at the way the Great Depression indelibly imprinted the psyches of those who lived through it, to understand how trauma can shape future behaviors. The propensity to save money, use coupons, re-use items, conserve and mend things, rather than buying new — all of these behaviors were borne out of the economic brutality of the Depression and the scarcity that accompanied it.

Likewise, after this pandemic, I don’t think anyone will ever look at a touchscreen in a store the same way again. Some of us may avoid air travel, movie theaters and any similar crowded public spaces.

I do believe we’ll have a greater sense of appreciation for the people who work in stores, wait on tables and deliver things to our homes. And I fully expect to see people creating small stock-piles of key products in the event of any other similar crisis.

My personal hope is that Covid-19 can impart to us a greater appreciation for the fragility of life and the world we share, making sustainability an even higher consumer priority. – Bloomberg

Also read: New MHA order allows shops to open, but malls, liquor outlets will have to wait


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