Revenge Spending? More Like “Cautious Consumerism”

Earlier this year, when vaccines started turning the tide of Covid’s spread, and as society began to take steps to “return to normal” the phrase “revenge spending” was coined. It was meant to describe unbridled – if not angry – spending on frivolous consumer goods. Take that, Covid!

But a funny thing happened on the way to the market. Rather than wanton capitalism, Americans adopted a practical, thoughtful, compassionate, and risk-averse approach to spending in the coming months, according to a survey we conducted.

“Cautious” consumerism

We asked 500 adults a range of questions about what they were spending money on, if it would be different after Covid, and what impacts the pandemic had on their near-term spending habits. We asked the questions in mid-June, prior to the acceleration of the Delta variant that is now impacting the entire country.

We learned that, contrary to the speculation about revenge spending, American consumers are cautiously returning to discretionary spending. At a high level, they are using cash or savings to pay their debt, purchase clothing, and, perhaps most interesting, buy gifts for others. The data suggests that consumers have not been able to overcome the financial challenges that have come with the pandemic, and are wary about spending money on frivolous items.

The survey showed about 40% of respondents plan to spend the same as they did in the previous six months, whereas 34% say they would reduce spending. Nearly 27% responded they would increase spending in the near future.

What they’re buying, and how

Gifts for loved ones topped the list, followed by paying down debt and purchasing apparel. Additionally, these survey takers plan to spend money on experiences, entertainment, and technology in the same order.

Another interesting insight: Cash is still king. Only 13% of respondents use their credit cards to shop, with 54% using cash and 33% using their savings.

The pandemic has also had a significant psychological impact on consumer spending behavior and how people plan to spend in the future. About 36% of respondents plan to increase their savings, 38% plan to save and spend at the current rate. Only 16% will be compelled to spend income as soon as they earn it, owing to the fact that they “don’t make enough money to save”. Only 10% said that they are spending it as they earn because “you only live once and can’t fear the future”.

What does this mean for marketers?

If there’s anything that Covid has taught us, prognosticating is a fool’s errand. The psychological impact of this pandemic is so profound that the old rules don’t apply. It will take years of surveys combined with actual data to make sense of how consumers responded in the face of the pandemic.

In the meantime, marketers would be wise to understand the dynamics at play here (especially in light of the Delta variant). American consumers are still being practical, conservative, and, in fact, compassionate. We feel gratitude for having come through this period of time and want to give back to others and recapture some of the status quo.

We definitely are not ready to party like it’s 1999.

Image: QuestionPro

Lead image by Alexander Schimmeck, Unsplash