Canadians are changing the way they spend and shop during this pandemic. They are holding off on purchases, cutting spending, and putting some life decisions on hold while they wait out the COVID storm.
Will this holding back potentially trigger a downward spiral? The outlook for retailers, salespeople and manufacturers in Canada is far from rosy. 1.8 million more Canadians are unemployed now versus February 2020, and while employment in the service sector is rebounding during reopening, the long-term effects have yet to be realized.
CIBC Capital Markets senior economist Royce Mendes expects to see a second wave of layoffs as the longer-term economic effects are felt. “The second [wave] is really the underlying economic drag on employment. That’s going to be more persistent than the first wave of layoffs, and it is going to take a lot longer to heal,” according to the Globe and Mail.
A Bank of Canada survey indicates that 56% of businesses report their sales are expected to decline. And “a full recovery to pre-COVID-19 levels of employment and output is likely a long way off,” according to Bank of Canada Deputy Governor Lawrence Schembri. Their estimate is that it won’t be until well into 2022 that we reach a full recovery.
To understand the future, we need to know how Canadians are feeling today. So, we asked them about their expectations around general spending, big ticket purchases, and buying local.
Big ticket items deferred
Buying a house or a car is not an everyday occurrence. But COVID-19 is putting a chill on those activities and more. Roughly one in ten Canadians have thought about buying large items like appliances, furniture, cars, houses, computers, and TVs and then decided to wait and see what happens.
More importantly, in each case the number of people who considered and then paused are higher than or equal to the number of people who have made such purchases since the COVID-19 pandemic started. The gap is largest amongst those under 35. They are more likely to have considered a purchase and then held off.
This deferred purchasing has very real implications. Car sales for the last quarter, for example, are down 45% over the same time last year and housing sales in April were down 60% from the prior year. The fear is that a lack of spending could trigger a prolonged recession.
Fully 40% of Canadians say they are spending less money than usual. And this is unlikely to change anytime soon. Just 18% believe that, in the Fall, they will be spending more money that they are now.
Reduced spending is a big fear of small business owners. A recent survey of members of the Canadian Federation of Independent Businesses (CFIB) found that 64% said that what they feared most about the COVID-19 crisis was that “Consumer spending will be reduced, even following the COVID-19 crisis.”
Life on hold
In addition to holding off on spending, COVID-19 is also delaying some life events. One in ten (11%) had been thinking of changing careers but decided to wait. A similar number (9%) have held off on moving. And while just 2% have divorced or separated since the COVID crisis began, another 3% have thought about a break-up but have decided to endure a bit longer.
With so many people working from home, some are spending much more time in their local community than they normally would. But because so much of that time is spent in private, rather than in public spaces, it is not translating to a greater sense of community. Fully, a third (33%) reported they felt less connected to their local community than they did pre-pandemic. But that does not stop some from wanting to boost their local businesses.
As store fronts fall vacant on main streets across the country, Canadians are wanting to support local businesses even if it means missing out on some of the savings that could come from shopping at big chains. Two thirds (63%) said that “Given the COVID-19 pandemic, it is more important for me to support local businesses instead of big national or multinational chains.” This lean to the local is consistent across the nation.
Many people currently shop at local stores, but for some, COVID-19 is a reason to shop as local business even more than they have in the past. This is true across a wide array of types of businesses.
This will be welcome news to small business owners. A recent survey found that 38% of these small businesses were surviving on less than half of the income they had before the pandemic struck Canada.
These are difficult times. As English historian Thomas Fuller wrote in 1650, “It is always darkest just before the day dawneth.” We’ll keep monitoring the horizon, scanning for the flickers of first light.
Maru/Matchbox’s connected System 1 and System 2 approach enables us to holistically understand consumers by covering all aspects of how people feel, behave and think.
With our unique intersection opportunity analysis, we’re able to place results directly at the intersection of behavior and emotion.
To see how Maru/Matchbox is keeping a finger on the pulse of how businesses and consumers are managing in the pandemic, visit our COVID-19 research hub.