The effects of COVID-19 on the economy and the business world are going to be felt for some time, we know this. But what these effects will be, will determine how existing (and new) businesses fare over the next 12-months-to-three years. We cannot extrapolate how every market will be effected by COVID-19 but we can get you started.
Economies in recession-like states display characteristics that have been commonly repeated throughout history. These characteristics include:
- A shrinking appetite for risk. This becomes significant for mainstream brands as consumer behaviour reverts back to the comfort of “known” quantities. Rather than experimenting on cheaper, but potentially less worthy substitutes, major brands typically see greater loyalty during recession-like periods (regardless of the flawed logic in the process).
- A thirst for simplicity. With a reduction in household income, or the fear of reduced income, consumers typically look to simplify their lifestyles by reducing, reusing or re-purposing their existing belongings. Additionally, the motivation to acquire new “things” makes way for savings and experiences.
- Refined consumption. Changing habits is hard. Modifying habits is less hard. During recession-like periods, consumers may not completely change behaviour but will tend to modify. For example, the new car may still be bought, but the sports car may be shelved for a few years and replaced by a sporty-ish more versatile option.
- Extreme-experiences over conspicuous consumption. Parts of modern society rely on possessions in order to demonstrate success, wealth, prestige, and personality. During recession-like periods, possession-hunting is replaced with extreme-experiences in order to differentiate oneself from the rest of society.
- A pause on ethical buying. As household income declines (or as the fear grows), non-essential expenditure also declines. This typically impacts buying decisions around environmentally friendly but more costly items such as free-range, organic, or ethically sourced products.
As we navigate the COVID-19 legacy, many things are unpredictable. But one thing we do have control over is how we choose to respond. We can implement rationale based on previous trends and our own experience and logic to be active and engaged and give ourselves an incredible opportunity to thrive during a really complex period.