In today’s newsletter, we will examine how a global pandemic could change certain aspects of consumer behaviour forever.
The Story
A global pandemic is terrible for our economy- that much is obvious by now. But there’s more to this story than what meets the eye. The uncertainty, forced isolation, and fear of contagion could change consumer behaviour forever. As clinical psychologist, Ilene Green noted, “It’s akin to a PTSD (Post Traumatic Stress Disorder). All of this will be on people’s minds in really quiet ways indefinitely. …I would not call it a mental illness, but this kind of thing does get folded into the psyche.”
What that means is, this pandemic will likely force consumers to reevaluate everything they have been taking for granted. Touching foreign objects, coming into contact with strangers and being in enclosed spaces could all be considered as a potential health hazard.
And sure, this hyper-awareness might fade once the pandemic has run its course, but some part of it will always be ingrained within us. Who knows, refusing to shake hands after a meeting might become acceptable. People walking around with masks could become the new normal.
And most importantly, even after we emerge into the sunshine, there will likely be a year of uncertainty before a vaccine hits the market and we are officially declared safe from harm. And until then, consumers will evaluate the risks and rewards of every transaction they make- such as a meal at a restaurant, a vacation to an exotic destination, or attending a concert. And because of this, certain aspects of the economy will never be the same.
Something similar happened when the SARS epidemic hit in 2003–2004. People in China (a region that was most affected by the virus) who were anxious about travelling and human contact, started doing most of their shopping online. This led to the meteoric rise of a small e-commerce company called Ali Baba, making it the face of retail in China.
Or maybe consider what happened after the financial crisis of 2008. People with meagre savings and dwindling discretionary income started sharing spare rooms and car rides This gave wings to a model where people borrow or rent goods and services owned by other people- the sharing economy. And if you go to work in an Uber, rent out your spare bedroom on Airbnb, you’re a part of this.
Unfortunately, this time around, the future of sharing economy looks highly uncertain, at least over the short term.
In February, a Londoner who used Uber to visit the hospital later tested positive for Coronavirus. When Uber found out, they temporarily suspended the driver. But unfortunately, the spread of the virus continued unabated and people started becoming sceptical of the popular ride-sharing service. In fact, last week Uber told its investors that their ride-sharing business has dropped by as much as 60–70% in hard-hit cities this year (compared to last year).
Room-rental giant Airbnb is also feeling the heat. According to data from vacation rental site AirDNA, Airbnb’s listings on offer have remained relatively stable, however, demand has dropped drastically. This is most pronounced in virus hotspots. From January to March 2020, Beijing went from 40,500 bookings to just 1,600 — a 96% drop.
And so if an Airbnb or an Uber or any other company facilitating the shared economy wants to make a strong comeback they’ll have to change their strategy.
Perhaps hygiene and sanitation will become as instrumental to your business as seamless operations. Cleanliness ratings for holiday homes might become as important to vacationers as the location of the house. Ride-hailing companies might have to install dividers between the driver and passengers. And co-working spaces may need to ask for medical records from people who want to rent seats there.
Either way, once we get through this, we will be walking into a brave new world and we hope the sharing economy can adapt as it has done for the past decade or so.
Until then…
