While it’s early to begin celebrating the end of the worst pandemic in 100 years, especially with the Delta variant and a fourth wave here, Canadian consumers are seeing an end in sight. The lifting of restrictions on travel, entertainment, and gatherings, along with a strong vaccination rate have many in the mood to spend on what they’ve been missing out on, says Avni Shah, Assistant Professor of Marketing in the Department of Management at the University of Toronto Scarborough.
“It’s like the Roaring Twenties. It’s a time of excess, of potential innovation, and enjoyment, because it’s been a rough bit,” she says, comparing the situation to the era that followed the First World War and the Spanish Flu pandemic.
Shah, whose research focuses on consumers’ spending habits, spoke with Perspectives about how and where people will spend some of the money they’ve accumulated, whether those who saved during the lockdowns will continue to do so, and how the Delta variant might change their plans.
Q: Post pandemic, will consumers return to their spendthrift ways, or will they continue to save?
A: In general, people are looking to spend. There is excess savings and many are saying, “I was held back from vacations, from nice dinners, shopping, and spending time with the people I love.” People felt depressed and are looking forward to and are spending far more than their pandemic selves.
Q: Is that short-term, pent-up-demand spending?
A: People have been keeping their purse strings tight for a variety of reasons, including that lots of things were closed. Now, we’re seeing a surge as gyms open, restaurants are serving people indoors again and the malls don’t have lineups to get in. People are shopping, especially for clothes because they’re seeing people again. Spending is to be expected and it’s OK. What will dip, at least for a bit, is putting away money. We save for something and this could be it right now.
Q: What will people be spending on and will it differ between generations?
A: We’ll see more pronounced spending among younger individuals, particularly those making good money. They will want to go meet people, go on a date; newlyweds, who don’t have children yet, will want to spend time with friends. It’s about connecting with their social circles, taking a weekend away with friends, eating out more frequently, spending on self presentation — manicures, pedicures, hair cut and colour, and going back to the gym. We’re also going to see spending rise on children for back-to-school clothing and supplies, summer camps and sports.
For older individuals, it will be more about having once-in-a-lifetime experiences, such as an exotic cruise. My parents, who are retirees, aren’t looking to go to a dance club, but they are ready to travel again. How people travel, though, has changed. People are predominantly booking outdoor experiences — laying on a beach, but also hiking, climbing mountains, and skiing. Would going to Paris be high on my list. No, because a lot of experiences would be indoors. I read about how the cost of renting a car has gone up — it’s $500 a day in some places — because people are reluctant to do ride sharing or take the bus.
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Photo: Avni Shah, Assistant Professor of Marketing in the Department of Management at the University of Toronto Scarborough.
Q: Prices are rising to compensate for pandemic losses, will that influence spending?
A: When prices go up, naturally fewer people can afford to do certain things. If I’m used to going out four nights a week, maybe I can only go out two or three. Still, with so much pent-up demand people may decide to go out the same amount. Also, there’s a clear logic behind the increases and people can account for the fact that businesses might need extra money.
Down the road, however, there will have to be more price competition to get people through the door. It’s not like I’m going to go to a fancy restaurant 10 times over the next month. Also, there will be more restaurants opening to fill the void left by those that were forced to close.
Q: What will most affect people’s spending choices in the coming months?
A: How we manage the Delta variant and what happens within our health system will dictate what we’re able to do. It also will shift our attitudes toward travel, eating out, clothes purchases, gifts, even wedding celebrations. Something that became popular last month was Christmas in July, because people missed out on family gatherings for the holidays last year and worry it may happen again. There’s uncertainty around travel again, despite more people having been vaccinated and many people are trying to get in a trip before case numbers surge, because there’s an inherent fear it could put things on hold. That’s not wrong, based on the trends from last year.
Q: Are there sectors that will see a drop off in spending?
A: We’re already seeing a decline, at least in the US, on masks, cleaning products and things such as Lysol wipes, which were at massive levels during the height of the pandemic. Also, as more people return to the workplace, there’s going to be less hoarding of paper products such as toilet paper and paper towels. As well, do-it-yourself hair colour was a big thing, but now salons are open more people likely will leave that to their stylists.
A good thing to come out of this pandemic is that it connected people in ways they hadn’t connected before. The boom for Microsoft Teams and Zoom should continue, though not at the pandemic levels. Online concerts, on the other hand, should cease to exist.
Q: During the pandemic, there were stories about young people losing their jobs and moving back home. As they rejoin the workforce, will the condo and rental market pick up?
A: Being back with their parents has helped them save. At the same time, they’ve been in proximity for so long they’re ready to have their own space again. Rents have not fully recovered, so it’s a good time to get into places that people wouldn’t have been able to earlier.
Q. We also heard about people moving out of urban centres for more space and proximity to nature, will this trend continue?
A: It will be interesting to see what if any demands there will be from those who moved out of a major urban centre and may now have to return to a downtown office. Will people look to trade in for a city home again, or will they get a small space in town? That’s a big question mark.
One positive, which may be the answer to a lot of different problems with housing, is the build up of secondary cities — Markham, Hamilton, Burlington — at least in Ontario. I grew up in New Jersey, a satellite city of New York City that got built up because housing in New York was unaffordable. Cities like that are super cool, fun, and have their own charm. That’s where things are going with the greater Toronto area.
Q: How do we balance spending and saving going forward?
A: There are people who will say you need to save, but people have been pent up for a long time and they need to enjoy life a bit. Just making sure you replenish emergency savings or allocate a little money each paycheque for a rainy day, is enough for now.