Revenge spending post-lockdown: Which sectors will SEA consumers turn to?

The retail scene has undoubtedly been impacted by the COVID-19 pandemic and with consumers being made to stay home due to lockdown measures worldwide. According to Retail Group Malaysia's preliminary report on the country's retail scene during the pandemic, the industry is expected to suffer a 9.3% dip in sales during the second quarter of 2020. The projection takes into consideration the four weeks of the Movement Control Order in April, as well as the expected slow sales during Hari Raya. Sales for Malaysia's retail scene dipped 18.8% during the first quarter. That said, the report predicts retail sales for the third and fourth quarters to rise 2.5% and 3.3% respectively in Malaysia. 

Meanwhile, figures released by the Department of Statistics Singapore this month said that total year-on-year sales for retail in February 2020 fell 8.6% and the total sales value for the month was SG$3.1 billion, 7.4% of which came from online sales. One factor that is expected to boost sales after the lockdown is revenge spending, which means shoppers binge buying once they come out from a lockdown. While it has yet to be proven whether revenge spending will indeed save a country's economy, one brand that has witnessed this trend is Hermes. The luxury brand's flagship store in Guangzhou recently recorded US$2.7 million in sales after the central government in China lifted its COVID-19 lockdown.

Sectors most likely to benefit from revenge spending

In general, health, safety and cleanliness will be at the forefront of consumers' behavioural change, Deloitte Southeast Asia's consumer industry leader, Pua Wee Meng, said. Crowded places such as malls, cinemas, markets and sporting events will be frequented less.  Consumers will be more used to 'virtual routines' and opt for online services, such as online shopping and streaming movies, events and sports, as much as possible.

Pua added that moving forward, when dining out, consumers will adopt healthy eating habits and pay more attention to the cleanliness of restaurants. Online education service providers will also see a surge in demand for their services as more consumers are learning and discovering that e-learning can be just as effective as physical training, he explained.

Sectors expected to benefit from increased consumer spending post lockdown are likely healthcare, pharmaceutical, consumer electronics, logistics, sports/body wellness and education.

Pua explained that households will increase spending on health supplements, herbal products and re-stocking of first-aid and medical kits such as (infrared) thermometers to prepare for future potential lockdowns.

Consumers who have issues with home electronics during the lockdown will seize the opportunity to upgrade. Also, households and businesses are likely to spend more to set up reliable telecommunication infrastructures and services, Pua added. When it comes to logistics, he said that with anticipated revenge spending on imported products post-lockdown, the global logistics sector will see increased shipping demands. The increased demand of eCommerce home-shopping will also see further uptick of spending on last-mile logistics delivery services.

Having been cooped up at home for weeks, consumers are expected to flock to gyms and fitness centres to get back in shape in anticipation of more face-to-face meetings, and there will be increase spending on sports equipment as health-conscious consumers resume physical activities. On the education front, Pua said parents who want to make up for lost time in their child's education will invest in better quality private tuition, and the shifting demand of HR requirements in sectors such as tourism and eCommerce, will encourage professionals to pursue new skillsets. He added that companies intending to be more cost-effective will also invest more to train and upgrade the existing workforce's skillsets instead of hiring externally.

On the other hand, top sectors to remain stagnant post lockdown are hospitality and tourism and entertainment.

Pua said overseas travels will remain largely restricted in most countries, delaying the comeback of commercial airlines, hotels, and other tourism-related businesses. Consumers will also refrain from travelling immediately after lockdown as many countries are in different stages of the pandemic. 

"In the short-term, consumers will also avoid going to crowded entertainment events and centres such as music clubs and KTV. Other public entertainment places such as cinemas and theaters will remain empty as consumers prefer online digital entertainment channels," he explained.

Like Pua, Craig Houliston, Nielsen's global client delivery leader, Southeast Asia said brands in the health and hygiene category will also see a long-term benefit as the pandemic would have made consumers realise the importance of having high hygiene levels and leading a healthy lifestyle. Impulse categories such as ready-to-drink beverages are also expected to see a bounce back once the situation returns to normal.

"Should a recession come about, we often see categories such as alcohol and chocolate become 'recession proof' due to the fact that people will look for categories that can comfort them during challenging times, at an affordable price," Houliston explained. For example, consumers will patronise bars less often and prefer to drink at home instead. 

According to him, the beauty and cosmetics industry has been hit by the fact that consumers are not heading out to shop nor working from the office. This sector has also been further exacerbated by the dip in travel retail due to travel restrictions. However, Houliston predicts that this sector would bounce back but this is dependent on travel restrictions being lifted because Chinese shoppers have strong purchasing power in Southeast Asia for this sector.

(Related article: China post-lockdown: Key strategies SEA brands need to put in place now)

Cutting through the clutter with post-lockdown sales

Recent statistics by the International Monetary Fund (IMF) showed that Singapore's economic output for the year will dip by 3.5%, compared to a growth of 0.7% last year. Meanwhile, ASEAN-5 which comprises Malaysia, Indonesia, the Philippines, Vietnam and Thailand, will see a collective dip in output of 0.6%. For Malaysia, the dip in output for 2020 is 1.7%, while Indonesia's is a dip of 0.5%, the IMF said.

There will be pressure to close the gap on 2020 sales and the worry of a recession, Houliston said. Thus, brands will seek to engage with their consumers to boost sales and consumption. To successfully do so, Houliston said it is important to have an O2O strategy and innovation in terms of communication and product offers will be the key to standing out.

Meanwhile, Deloitte's Pua said brands need to increase their marketing efforts post-lockdown and digital marketing is a more cost-effective way to do so. "Given that the pandemic is still going on around the world and many will continue to work from home post-lockdown, brands can take this opportunity of increased consumers’ screen time to reach out to both existing and new buyers effectively through digital advertisements," he explained.

Brands need to activate creative campaigns to promote enthusiasm and optimism for the second half of 2020.

Considering the changes in consumers' social lifestyle, brands need to re-encourage social or physical activeness where appropriate. According to Pua, this can be done by drawing the link to new value propositions such as health and safety, which were developed during the lockdown. Additionally, this will be a good time for companies to use employee and community advocacy to remind consumers that the brands fought through the crisis with them.

Agreeing with Houlison and Pua was Forrester's senior analyst, Xiaofeng Wang, who said marketing campaigns will gradually return and it is more important than before to engage with the brand's most loyal customers. Also, she said that consumers will return to their daily routines first, including visiting restaurants, cafes, and gyms. Like Houlison, Wang also said it would take longer for industries such as travel and luxury to bounce back.

How can non-essential services change their marketing strategy? 

Public movement in Singapore and Malaysia is currently restricted and the governments have each listed essential services that will continue operating during this period. These include healthcare, food, energy, transport, defence, information and communications, manufacturing, banking and finance and eCommerce. For Singapore, in particular, the government also listed these plumbers and electricians, hairdressing, laundry services, vehicle recovery and repair, and unions, among others, as essential services.

According to Wang, the services not listed were defined as non-essential not because of the perceived importance by consumers, but the nature of the business. "[Non-essential] brands can build brand affinity and long-term relationship with customers by engaging through ethical and cause marketing, and shouldn’t focus too much on short-term sales," she added.

Meanwhile, just like how brands in general should promote enthusiasm and optimism for the second half of this year, Pua said non-essential services can also raise their importance in consumers' eyes through positive and uplifting communication, while adopting a comforting and light-hearted approach. He explained:

This form of compassion marketing, where brands use empathy to create meaningful stories, will help brands to connect with their customers who are going through challenging times.

However, brands should exercise caution to avoid coming across as too light-hearted, as it could be seen as a mismatch between the current mood and the message intended. Non-essential services can also adapt their physical marketing activities to digital delivery formats to remain relevant in the changing market. This includes launching virtual events through streaming technologies or partnering with essential service providers.

Citing Burmese celebrity, Sai Sai Kham Leng as an example, Pua said the singer recently collaborated with Burmese bank uab bank to live stream his annual concert "Sai Sai birthday show" on the bank's newly launched app. According to Pua, this move raked in approximately 250,000 app downloads within a week of the announcement.

Also weighing in on the issue was R3's co-founder and principal, Shufen Goh, who said COVID-19 is the ultimate catalyst for brands that have been dawdling on eCommerce. As a result, lower funnel marketing will gain the attention and resources it deserves.

"To stay relevant throughout this crisis, businesses that can move their offering online will have an edge, gain consumer goodwill and brand preference. Shutting down all marketing is clearly not an option. It’s finding a relevant angle that is key," she added.

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