From March 21, all non-essential businesses in the UK were forced to close, from hospitality, restaurants and fashion retail to car dealerships and holiday travel companies.
At the same time, many businesses have had to furlough staff and a substantial number of people have sadly lost their jobs altogether.
Inevitably the reduction in income through furlough and loss of jobs and restrictions on going out due to most of us being confined at home are having a huge impact on consumer spending.
It is no surprise, therefore that in March, demand for new cars from private buyers fell by 40.4%, while fleet registrations dropped by 47.4%.
According to Essential Retail the food retailers have clearly benefited both in-store and online to the point where they have had to limit supplies of some products and sign-ups of new online shoppers, however the picture for non-essential retail spending is significantly different, even for those retailers with considerable online and delivery capabilities. Purchases have plummeted.
It says: “People are scared to spend money that’s not essential,”
But as the situation continues, it argues, there is likely to be a greater need for certain non-essential items. Examples include exercise and hobby equipment, gardening products and home improvement materials.
The question is whether all this will lead to a more permanent change in consumer spending once the crisis is over.
According to Paul Martin, UK head of retail at KPMG, Covid-19 will precipitate a rapid increase in e-commerce activity that may persist long after the event, not that this has happened yet.
No-one knows yet how many of the currently closed SMEs will survive the current limitations and much will depend on whether such consumer and business activity will return to normal once the restrictions are lifted. But those of you that do survive will be well-advised to develop an e-commerce proposition if you don’t already have one. The rapid growth in our use of online conference facilities for video meetings that in the past were physical meetings could be an indicator of one change to our normal behaviour where the number of daily meeting participants using Zoom has risen from 10 million to 200 million in a month.
A major factor is the possibility that unemployment rates may rise substantially which will be down to two factors: staff reduction by surviving businesses; and job losses due to insolvency, both of which are likely if there is a delayed or slow return to normal activity.
Another unknown quantity is whether consumers will be more selective about what they purchase having discovered how much they can do without while they have been forced to stay home.
Once the pandemic is over, it is also likely that environmental concerns will rise up the agenda again, making people more wary of re-joining the previous “throw-away” culture.
It will be a while yet before the situation becomes clearer but it is likely that the current crisis will have a significant impact on both the mechanisms and the volume of consumer spending.