Mar 20 2020
The recent global outbreak of COVID-19 (coronavirus) has altered the way domestic consumers spend on a daily basis. The Centers of Disease Control and Prevention (CDC) has encouraged all US residents to engage in social distancing by staying indoors in an attempt to prevent the virus from spreading as rapidly. As a result, restaurants, stores, hotels, gyms and other type of businesses are temporarily closed in some states. For this reason, consumers have increasingly looked for other mediums of in-home entertainment, such as online shopping, streaming and delivery services, either for a quick workout or to binge watch their favorite shows. However, the Consumer Confidence Index, which measures consumers’ confidence in their economic position, is anticipated to drop 25.1% in 2020 due to widespread economic uncertainty. Yet, consumer spending is anticipated to increase 1.8% in 2020 as people continue to shop online for necessities.
As the virus continues to spread, food and grocery delivery services have experienced a surge in demand, driven primarily by large companies such as GrubHub, Postmates and UberEats. In fact, Postmates and Instacart have introduced a “contactless delivery” program to reduce risks. As a result, IBISWorld expects that the Single Location Full-Service Restaurants industry (IBISWorld report 72211b) will be particularly adversely affected by the coronavirus. Meanwhile, the quick-service restaurants that comprise the Fast Food Restaurant industry (72221b) will likely be able to keep demand steady by continuing to offer takeout and pickup options. According to OpenTable, a restaurant reservation app, the restaurant industry has experienced an almost 50.0% drop in reservations during the outbreak period.
Currently, IBISWorld estimates the Supermarkets and Grocery Stores industry (44511) will rise 1.8% in 2020; however, the recent outbreak will likely cause the industry to experience a further spike in sales as consumers continue to panic shop and stock up on food for self-quarantine. However, Amazon.com, the largest player in the Online Grocery Stores industry (OD5085) through its Amazon Fresh grocery delivery service, plans to hire 100,000 more workers for its delivery operations, in addition to giving raises to current employees due to the strong surge from the coronavirus. Similarly, Walmart’s delivery services also experienced a surge, causing delays in delivery time and lack of inventory.
Beyond necessities, the “homebody economy,” which describes services that revolve around in-home entertainment and communications, is expected to perform well during this crisis period. Zoom, a video conferencing service, Peloton, a gym equipment company and streaming services such as Netflix and Amazon Prime have experienced a rise in usage. Netflix has always been a popular form of home entertainment, but it has benefited from the limited options consumers have while social distancing since most movie theaters (including all locations of major chain Regal Cinema and many AMC Theaters locations) have closed in response to the pandemic. Overall, consumers are trying to cope with the anxiety and uncertainty brought about by the pandemic, and will likely significantly affect the e-commerce economy by turning to the internet to try to continue their daily routines while homebound.
Edits by Sean Egan
Infographic design by Alex Valenti