Key Takeaways:

• Online market share has increased by 18% since January 2020;
• A new “homebody economy” has emerged — and millions have bought in;
• Many consumers are ready and able to splurge on certain categories, now that COVID-19 is subsiding numerous states.

By Robert Isler

Businesses would be wise to examine changes in consumer behavior that occurred during the pandemic and in its wake, then adjust accordingly — because the changes are apparently here to stay.

This was a major takeaway from McKinsey & Co.’s recent e-book, “Impacts of COVID-19 on Consumer Behavior.” The book delves into such topics as the digital surge and the recovery splurge, and focuses on changing buying habits — including how and what consumers buy. Some of the findings correlate directly with what’s been gleaned from the microcosm of kitchen and bath, while others offer fresh lessons that can potentially be applied to doing business within the design and remodeling industry.

Some consumer behaviors — like self-checkout, curbside pickup and restaurant drive-throughs — were changing anyway, before COVID-19 struck. These have all increased in popularity and are expected to remain popular, post-pandemic. But the ramifications of the exponential growth in digital should be the major focus.

Since January 2020, online penetration has increased by a significant 18% based on credit and debit card spending data. Companies need to enhance digital experiences offered to consumers, using simplicity, convenience and personalization.

For K&B, e-design is here to stay and has received a boost during the pandemic, as its ability to offer flexibility, time-savings and social distancing has helped designers as well as their clients. And, as noted in NKBA’s Q2 Kitchen & Bath Market Index (KBMI) report, with the current backlog issues, e-design software has often been used to service “design-only” clients, freeing up time for those interested in a full-scale remodel.

The McKinsey report addressed the new “homebody economy” as well.  Over one in four homeowners invested in new uses for their home living spaces. Key changes listed were adjustments to accommodate working from home, home gyms and various room renovations. Clearly, this isn’t anything new. The explosion of K&B remodels is directly correlated with the new homebody economy. The takeaway, though, is that a significant 28% of respondents are making such changes, which bodes well for the K&B industry. Additionally, those who aren’t immediately jumping on the bandwagon, and instead are waiting for supply-chain delays and product price inflation to settle, represent a significant customer base down the road.

For instance, the most recent KBMI showed 60% of designers said they have backlogs extending out three or more months. Additionally, of those who indicated that clients are postponing or cancelling projects, 36% said that customers were postponing only, compared to just 5% who said they were canceling. The future for retailers looks bright as well, with several noting that the combination of accumulated savings and long supply-chain delays have led to clients opting for higher-priced remodels. In fact, of those retailers who said they noticed a shift in price-points demanded by customers, an overwhelming 89% said the shift was to higher-end materials and products

Other major changes revealed in the McKinsey report were the one in three respondents who changed jobs, work more from home, or have returned to school. Also, more than 25% have adjusted their investments, purchased automobiles or bought/sold property. The last of the three has been well-documented by housing industry professionals and one of the reasons remodels and upgrades have been so strong. Both a migration from crowded central cities and an uptick in the purchase of second or vacation homes by those with the means, make these individuals ripe for renovations.

Since the onset of the pandemic, 75% of consumers have changed their shopping methods or visited new retailers or websites.

As for day-to-day shopping behaviors, 39% have tried new brands during the COVID lockdown while 75% have changed their shopping methods or visited new retailers or websites. Perhaps more important, more than 75% of respondents plan to continue with changes in how and what they consume.

It is not just the purchasing patterns that are changing, but the willingness to splurge that caught the attention of researchers. As vaccine usage has become more widespread and consumers are sitting on extra savings from a combination of government stimulus programs and pandemic restrictions that curtailed discretionary spending, they are now itching to treat themselves across a variety of categories. Just over half of those surveyed indicated they plan to splurge.

Patterns by age and income of respondents are telling. Millennials (ages 25-40) lead all for such spending plans. Sixty-six percent of this demographic with household incomes in the $50,000 to $100,000 range indicated they are ready. That compares with 60% for Gen Z (age 24 and under) and 51% for Gen X (ages 41-56). Baby Boomers (ages 57-75) were last, at 34%. Not surprisingly, those earnings over $100,000 are even more likely to treat themselves. Fully 82% of all Millennials said they would splurge, followed by 66% for Gen Z and 65% for Gen X. Boomers again trail. The leading categories for this pent-up spending are also no surprise. Overall, nearly half (46%) spoke of returning to dining out and visiting restaurants, while 44% have plans to travel. These two areas were among the most restricted during the pandemic. Items for the home were further down the list, but still a significant 30%.

The final part of the report spoke of the ability to differentiate between short-term splurges and long-term trends. It suggested that as businesses plan for 2022 and beyond, three things should be kept in mind:

• In what situations are consumers going to value the convenience of digital over the uniqueness of the in-store experience?
• In what ways can brick and mortar and digital complement each other?
• Finally, is the brand the vendor is selling authentic in its purpose? A paraphrase of one survey participant summed up much of the thinking. “For the first time since COVID-19, I’m taking a step back to think about what I’m buying, why I’m buying one brand over another, and whether I really need to buy it.”