From 1961 – 2018 consumer spending represented 56% of Canada’s GDP. That means that people buying things – primarily goods and services – is what keeps Canada’s economy and our society going. And consumer spending was – at least from a macro-economic perspective – churning along reasonably well until February of this year when COVID-19 changed everything rapidly and dramatically.
As a society, we’ve experienced economic shocks before. Most recently the Global Financial Crisis, but before then there was 9/11, the Asian Financial Crisis, the Dotcom bust, Black Monday, WW1 and WW2, the 1920 Crash, among others.
One of the big differences with COVID-19 is the economic shock has less to do with untenable underlying economics and is more the result of a natural disaster occurring on a global scale.
The impact on people has been fundamentally different. And so the response we’re seeing from state governments around the world, has been equally so.
COVID-19’s impact on consumer spending is global
Instead of being limited to a country or region, the virus is having an impact around the world – resulting in obvious and critical disruptions to supply chain networks and customer interactions.
More importantly though, rightly requiring people to self-isolate in order to “plank the curve” comes with significant consequences. If people can’t work, they can’t earn a living. If they can’t earn a living, is stands to reason that, without intervention, they’ll have limited discretionary spending power.
To make matters worse, Canadian households have been adding debt for more than 30 years, and high debt levels can make individuals and the economy vulnerable to negative events.
Turning the taps on
National governments – especially in the Western World – know this. And they also know how critical maintaining levels of consumer spending is for the health of the overall economy. That’s why in the last few weeks we’ve seen countries like Denmark, the UK and Canada introduce all kinds of emergency benefits designed specifically to help consumers.
Canada’s Federal Government has, among other things, expanded Employment Insurance, increased the Child and GST benefits, created an Emergency Response benefit, and rolled out an ever expanding wage subsidy primarily designed to help employers keep employees on payroll.
While these new benefits are being introduced almost daily, banks and other creditors are voluntarily (or at the strong urging of government) making programs available that allow for some significant debt servicing relief. Mortgages and other lines and loans can be pushed out for months as can car payments. Utility companies are waiving or reducing fees. Even food delivery services are cancelling delivery charges.
Implications for brands that choose to adapt
Interestingly, the net result of all these actions is that some are now musing that – at least in the near term – many Canadian households could well wind up having the same, or in some cases, more discretionary cash than they may have had before the crisis began.
For brands there are significant implications to this. Those most nimble and tuned-in to their customer’s beliefs and attitudes have been proactive, finding ways to reach out to provide much needed assurance and support calls for social distancing, promote new and well-timed services for affected individuals, and even the creation of goods – some of which they’ve pivoted to produce and deliver themselves.
Data release by Corus this week would appear to suggest that these brands are on the right track. It found that while only 16% of Canadians wanted brands to advertise as though it’s “business as usual” during the crisis, only 18% want brand to stop advertising altogether.
Instead 56% of respondents want to learn more about how brands are helping out during the crisis while 50% are looking for information about how they can continue to access the company’s products and services they use.
What’s next?
In the weeks ahead, as the initial shock subsides and people continue to adjust at least temporarily to a new way of living, brands will be seeking to engage with a mostly stationary, perhaps more contemplative – and hopefully, economically secure audience.
While few Canadians are planning any large purchases in the immediate term, close to 30% expect to make a major purchase as soon as conditions normalize.
Current data from the same Corus study indicates that while few Canadians are planning any large purchases in the immediate term, close to 30% expect to make a major purchase as soon as conditions normalize.
It’s not business as usual. But it’s clear that levers have been pulled to ensure consumers continue to have the ability (and liquidity) necessary to make purchase decisions both in the immediate and over the longer term. Brands that meaningfully engage with their customers during a time of crisis stand to earn a brand affinity benefit that will pay dividends both now – and in the future – when rates of consumer spending return to more traditional levels.
