Markets

How COVID-19 Consumer Spending is Impacting Industries

Published

2 months ago

April 22, 2020

Katie Jones

Consumer spending impact on industry

How COVID-19 Consumer Spending is Impacting Industries

Consumer spending is one of the most important driving forces for global economic growth.

Beyond impacting some of the factors that determine consumer spend—such as consumer confidence, unemployment levels, or the cost of living—the COVID-19 pandemic has also drastically altered how and where consumers choose to spend their hard-earned cash.

Today’s graphic pulls data from a global survey by McKinsey & Company that analyzes how consumers are reining in their spending, causing upheaval across every industry imaginable.

While some industries are in a better position to weather the impact of this storm, others could struggle to survive.

The Link Between Sentiment and Intent to Spend

As consumers grapple with uncertainty, their buying behavior becomes more erratic. What is clear however, is that they have reduced spending on all non-essential products and services.

But as each country moves along the COVID-19 curve, we can see a glimmer of increasing optimism levels, which in turn is linked to higher spending.

consumer spending optimism

India’s consumers, for example, are displaying higher levels of optimism, with more households planning to increase spend—a trend that is also evident in China, Indonesia, and Nigeria.

Meanwhile, American consumers are still more optimistic about the future than Europeans. 37% of Americans believe the country will recover in 2 or 3 months—albeit with optimism levels at the highest for people who earn over $100K.

Strategic Consumer Spending

Globally, consumers continue to spend—and in some cases, spend more compared to pre-pandemic levels—on some necessities such as groceries and household supplies.

Due to changes in media consumption habits, consumers in almost all countries surveyed say they will increase their spend on at-home entertainment. This is especially true for Korea, a country that already boasts a massive gaming culture.

As restrictions in China lift, many categories such as gasoline, wellness, and pet-care services appear to be bouncing back, which could be a positive sign for other countries following a similar trajectory. But while consumers amp up their spending on the things they need, they also anticipate spending less in other categories.

The Industries in the Red

Categories showing an alarming decline include restaurants and out-of-home entertainment.

However, there are two particularly hard-hit industries worth noting that are showing declines across every category and country:

Travel and Transport

The inevitable decline in the travel and transportation industry is a reflection of mass social isolation levels and tightening travel restrictions.

In fact, the U.S. travel industry can expect to see an average decline in revenue of 81% for April and May. Throughout 2020, losses will equate to roughly $519 billion—translating to a broader $1.2 trillion contraction in total economic impact.

consumer spending travel industry

According to the World Travel and Tourism Council, a staggering 50 million jobs are at risk in the industry, with 30 million of those jobs belonging to employees in Asia.

Considering the travel and tourism industry accounts for 10.4% of global GDP, a slow recovery could have serious ramifications.

Apparel

Apparel is experiencing a similarly worrying slowdown, with consumption 40-50% lower in China compared to pre-pandemic levels. Both online and offline sales for businesses the world over are also taking a major hit.

As consumers hold back on their spending, clothing brands of all shapes and sizes are forced to scale back production, and reimagine how they position themselves.

“It’s an unprecedented interruption of an industry that has relied on speeding from one season’s sales to the next. And it is bringing with it a new sense of connectedness, responsibility and empathy.”

—Tamsin Blanchard, The Guardian

Towards an Uncertain Future

Clearly the force majeure that is COVID-19 has not impacted every industry equally.

For some, rebuilding their customer experience by appealing to changing values could result in a profitable, and perhaps much-needed revival. For other companies, there is no other choice but to play the waiting game.

Regardless, every industry faces one universal truth: life after the pandemic will look significantly different.

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Markets

What’s At Risk: An 18-Month View of a Post-COVID World

The WEF surveyed 347 risk analysts to uncover the most likely post-pandemic threats—and no area from the economy to the environment is untouched.

Published

1 week ago

June 24, 2020

Iman Ghosh

What’s At Risk: An 18-Month View of a Post-COVID World

As the world continues to grapple with the effects of COVID-19, no part of society seems to be left unscathed. Fears are surmounting around the economy’s health, and dramatic changes in life as we know it are also underway.

In today’s graphic, we use data from a World Economic Forum survey of 347 risk analysts on how they rank the likelihood of major risks we face in the aftermath of the pandemic.

What are the most likely risks for the world over the next year and a half?

The Most Likely Risks

In the report, a “risk” is defined as an uncertain event or condition with the potential for significant negative impacts on various countries and industries. The 31 risks have been grouped into five major categories:

Economic: 10 risks
Societal: 9 risks
Geopolitical: 6 risks
Technological: 4 risks
Environmental: 2 risks

Among these, risk analysts rank economic factors high on their list, but the far-reaching impacts of the remaining factors are not to be overlooked either. Let’s dive deeper into each category.

Economic Shifts

The survey reveals that economic fallout poses the most likely threat in the near future, dominating four of the top five risks overall. With job losses felt the world over, a prolonged recession has 68.6% of experts feeling worried.

Rank	Economic Risk	%
#1	Prolonged recession of the global economy	68.6%
#2	Surge in bankruptcies (big firms and SMEs) and a wave of industry consolidation	56.8%
#3	Failure of industries or sectors in certain countries to properly recover	55.9%
#4	High levels of structural unemployment (especially youth)	49.3%
#6	Weakening of fiscal positions in major economies	45.8%
#7	Protracted disruption of global supply chains	42.1%
#8	Economic collapse of an emerging market or developing economy	38.0%
#16	Sharp increase in inflation globally	20.2%
#20	Massive capital outflows and slowdown in foreign direct investment	17.9%
#21	Sharp underfunding of retirement due to pension fund devaluation	17.6%

The pandemic has accelerated structural change in the global economic system, but this does not come without consequences. As central banks offer trillions of dollars worth in response packages and policies, this may inadvertently burden countries with even more debt.

Another concern is that COVID-19 is now hitting developing economies hard, critically stalling the progress they’ve been making on the world stage. For this reason, 38% of the survey respondents anticipate this may cause these markets to collapse.

Social Anxieties

High on everyone’s mind is also the possibility of another COVID-19 outbreak, despite global efforts to flatten the curve of infections.

Rank	Societal Risk	%
#10	Another global outbreak of COVID-19 or different infectious disease	30.8%
#13	Governmental retention of emergency powers and/or erosion of civil liberties	23.3%
#14	Exacerbation of mental health issues	21.9%
#15	Fresh surge in inequality and social divisions	21.3%
#18	Anger with political leaders and distrust of government	18.4%
#23	Weakened capacity or collapse of national social security systems	16.4%
#24	Healthcare becomes prohibitively expensive or ineffective	14.7%
#26	Failure of education and training systems to adapt to a protracted crisis	12.1%
#30	Spike in anti-business sentiment	3.2%

With many countries moving to reopen, a few more intertwined risks come into play. 21.3% of analysts believe social inequality will be worsened, while 16.4% predict that national social safety nets could be under pressure.

Geopolitical Troubles

Further restrictions on trade and travel movements are an alarm bell for 48.7% of risk analysts—these relationships were already fraught to begin with.

Rank	Geopolitical Risk	%
#5	Tighter restrictions on the cross-border movement of people and goods	48.7%
#12	Exploitation of COVID-19 crisis for geopolitical advantage	24.2%
#17	Humanitarian crises exacerbated by reduction in foreign aid	19.6%
#22	Nationalization of strategic industries in certain countries	17.0%
#27	Failure to support and invest in multilateral organizations for global crisis response	7.8%
#31	Exacerbation of long-standing military conflicts	2.3%

In fact, global trade could drop sharply by 13-32% while foreign direct investment (FDI) is projected to decline by an additional 30-40% in 2020.

The drop in foreign aid could also put even more stress on existing humanitarian issues, such as food insecurity in conflict-ridden parts of the world.

Technology Overload

Technology has enabled a significant number of people to cope with the impact and spread of COVID-19. An increased dependence on digital tools has enabled wide-scale remote working for business—but for many more without this option, this accelerated adoption has hindered rather than helped.

Rank	Technological Risk	%
#9	Cyberattacks and data fraud due to sustained shift in working patterns	37.8%
#11	Additional unemployment from accelerated workforce automation	24.8%
#25	Abrupt adoption and regulation of technologies (e.g. e-voting, telemedicine, surveillance)	13.8%
#28	Breakdown of IT infrastructure and networks	6.9%

Over a third of the surveyed risk analysts see the emergence of cyberattacks due to remote working as a rising concern. Another near 25% see the threat of rapid automation as a drawback, especially for those in occupations that do not allow for remote work.

Environmental Setbacks

Last but certainly not least, COVID-19 is also potentially halting progress on climate action. While there were initial drops in pollution and emissions due to lockdown, some estimate there could be a severe bounce-back effect on the environment as economies reboot.

Rank	Environmental Risk	%
#19	Higher risk of failing to invest enough in climate resilience and adaptation	18.2%
#29	Sharp erosion of global decarbonization efforts	4.6%

As a result of the more immediate concerns, sustainability may take a back seat. But with environmental issues considered the biggest global risk this year, these delayed investments and missed climate targets could put the Earth further behind on action.

Which Risks Are of the Greatest Concern?

The risk analysts were also asked which of these risks they considered to be of the greatest concern for the world. The responses to this metric varied, with societal and geopolitical factors taking on more importance.

VC_What's-at-Risk-v5-supp

In particular, concerns around another disease outbreak weighed highly at 40.1%, and tighter cross-border movement came in at 34%.

On the bright side, many experts are also looking to this recovery trajectory as an opportunity for a “great reset” of our global systems.

This is a virus that doesn’t respect borders: it crosses borders. And as long as it is in full strength in any part of the world, it’s affecting everybody else. So it requires global cooperation to deal with it.

——Gita Gopinath, IMF Chief Economist

Green

Vegetarianism: Tapping Into the Meatless Revolution

This graphic unearths the origins of the meatless revolution, while exploring how the $1.8 trillion meat market is responding to the threat of disruption.

Published

1 week ago

June 22, 2020

Katie Jones

Vegetarianism: Tapping into the Meatless Revolution

The way people choose and consume their food is changing, and it’s encouraging a sweeping shift from animal-based to plant-based food products.

Whether it’s from the perspective of environmental impact, cruelty to animals, or health benefits, meatless diets are quickly becoming a new normal for people around the world—but where did it all begin?

Today’s infographic unearths the origins of vegetarianism and explores how the industry erupted into a lucrative web of sub-categories that are whetting the appetite of investors the world over.

The Origins of the Meat-Free Diet

Taking a holistic view of vegetarianism, there are several different diets that people typically adhere to. A vegetarian for example, doesn’t eat meat but still consumes animal products such as dairy and eggs. On the other hand, a vegan eats a strictly plant-based diet.

With 70% of the global population now reducing their meat intake, veganism has become a lifestyle choice for many. By 2026, the global market is projected to be worth over $24 billion.

While this seems like a relatively new phenomenon, the meatless revolution has been quietly building for almost two centuries.

1847: The first vegetarian society is formed in England
1898: The world’s first vegetarian restaurant opens in Switzerland
1944: The term “vegan” is coined
1994: The first World Vegan Day is introduced
2014: Influential breakout documentary Cowspiracy is released
2017: 6% of the entire U.S. population claim to be vegan
2018: Roughly 8% of the global population claim to eat plant-based
2020: Acceptance of plant-based diets by both the medical community and general public is at an all-time high

Although vegetarian and vegan diets were once heavily stigmatized, global support is now growing.

Towards a Plant-Based Future

Today, people in dozens of countries are making big strides towards plant-based lifestyles.

China, for example, introduced guidelines to help its population of 1.3 billion people reduce their meat consumption by 50%. These ambitious goals will be driven by consumer’s growing understanding of the positive impacts of eating less meat, such as:

Health benefits
According to the American Heart Association, reducing meat intake could reduce the risk of stroke, high blood pressure, type 2 diabetes, and even certain cancers.
Environmental impact
Animal agriculture creates more greenhouse gases than the world’s entire transportation systems combined, but shifting to a plant-based diet could significantly reduce this problem.
Animal welfare
Roughly two thirds of the 70 billion animals farmed annually are cramped in close quarters and given heavy medication. Plant-based diets eliminate animal suffering while lowering demand for other animal food products.

In fact, if more people commit to embracing a plant-based lifestyle, it could result in up to $31 trillion—or 13% of global GDP—in savings for the economy.

Big Players Fight For a Piece of the Pie

Given the newfound consumer demand for meat alternatives, it’s no surprise that global companies are clamouring to enter the market.

Many established food companies such as Nestlé and Danone are either advancing their own formula for plant-based proteins, or acquiring companies with existing experience.

Meanwhile, fast food chain McDonald’s features vegan products as permanent staple on their menu, and report an 80% uplift in customers buying these products in certain countries.

Big Meat Shifts Gears

As new players in the space attempt to cut into the $1.8 trillion global meat market, big meat companies are responding in kind.

Tycoons such as Tyson Foods and Cargill are placing bets on plant-based startups and filling shelves with their own plant-based products.

But while plant-based products created by traditional meat companies may appeal to less rigid flexitarians, vegans and vegetarians may not accept them so readily due to their strong ethics.

Food For Thought

Along with the uncertainty of how these products will be received, there are other challenges that the market must overcome in order to be considered truly accessible. For instance, plant-based alternatives boast higher price points than their predecessor’s products, which may deter consumers from entering en masse.

Regardless, it is clear that the shift to plant-based diets is a disruptive force that could change the food industry over the long term. Early movers are dangling a golden carrot in front of investors—but will they take a bite?