Changing consumer habits in the time of Covid-19
The coronavirus pandemic is making people more cautious about going out and changing how and what they buy
By Mike Jewell
“I would say I am relatively more cautious with my options now rather than cutting down on anything. It's important to eat well. I cook at home more often than before and choose ingredients carefully,” my friend told me when I asked if she was doing anything differently since the pandemic started.
Taiwan’s response to the global crisis has been widely praised for the speed with which the authorities reacted and the effectiveness of the measures adopted. As a result, we have not (yet) been subject to an enforced lockdown. The Central Epidemic Command Center (CECC) has issued regular and updated recommendations on how to modify our daily behaviour to minimise the chances of community virus transfer, by avoiding large indoor and outdoor gatherings, social distancing, wearing masks and by not travelling. For the most part, people have heeded this guidance and respected the advice they have been given, but we are – mercifully – relatively free to come and go as we please.
It is still quite early in the pandemic’s life cycle, but some clear consumer trends are beginning to emerge, fuelled by prevailing attitudes to the global spread of the SARS-CoV-2. According to research carried out by Kantar between 24 and 26 March, 94% of Taiwanese said they were worried about the coronavirus outbreak. However, while very concerned about their own health and that of their families, financial concerns were more pressing, in terms of the general downturn in an already fragile economy, the likely increase in unemployment and the long-term impact on their savings and investments. This pessimistic sentiment echoes National Central University’s consumer confidence index, which, in March, dipped over five points to its lowest level for almost three years, with the stock market subindex showing a big decline in the face of chaos in global financial markets and a steep drop in the TAIEX to below 9,000 at one point.
One of the key factors that will shape the future course of consumer thinking and resultant behaviour is how long it will be before we start to see any signs of a return towards normality. The optimists are anticipating a “V-shaped” recovery, kicking in as soon as the third quarter of this year. If that comes about, the Chung-Hua Institution for Economic Research (CIER) now predicts that Taiwan’s GDP will still see growth in 2020, albeit just 1.03%. This is much more upbeat than the forecast released by the International Monetary Fund, which projected Taiwan's growth in 2020 at minus 4%, a six-point drop from its previous estimate in 2019. This is a severe downgrade, but still less steep than the IMF’s projections for most economies. On the other hand, the National Development Council said the IMF was far too downbeat, arguing that the government's stimulus and bailout packages will help the economy continue to grow in 2020 at close to 2%.
Others, particularly medical experts, anticipate that we may have to wait much longer, well into 2021, for the crisis to pass. Epidemiologist and Vice President, Chen Chien-jen (陳建仁), in an interview with Britain’s Daily Telegraph, said social distancing will become a way of life for at least another 18 months, the time it will take to develop a vaccine. Chen suggested that, as long as people live in a "self-limited way" by cutting their social contacts in half, then a "semi-normal" lifestyle can still be achieved. However, many experts expect that nations will be subject to several waves of coronavirus outbreaks before it can be properly brought under control, leading to the reimposition of lockdowns and further stalling of economic activity.
Kantar’s survey suggests that people here are more optimistic about the control and development of the epidemic in Taiwan – hardly surprising, given the slow growth in confirmed cases and low death rate. Although people are very worried about the outbreak, the great majority are satisfied with the government’s handling and believe that the epidemic in Taiwan will end earlier than it will globally, hence there is public confidence that Taiwan’s economic recovery will be faster than that of the world as a whole, although it remains to be seen whether this optimism is misplaced.
A lost season for the tourism industry
Already we are seeing a significant impact on the local economy. The first sign was the virtual ending of inbound and outbound travel, as border restrictions were increasingly tightened to the current point of almost total closure. By 4 April, the number of passengers passing through Taoyuan International Airport, the 11th busiest airport in the world, had shrunk to a mere 961 from normal daily flows of around 130,000. Taiwan Tourism Bureau statistics for February show a total of 357,357 inbound visitors, compared with 812,970 in January and 956,202 in February 2019, drops of 56% and 63% respectively. Popular attractions have seen visitor numbers fall away massively – the National Palace Museum recorded 70% fewer visitors in February than January, Chiang Kai Shek Memorial Hall had 37% fewer visitors and the Taipei 101 Observatory just 28% of the January traffic. No wonder then that Shin Yeh restaurant (欣叶) on the 85th floor of Taipei 101 has closed. The March tourism figures will surely show even greater declines.
Inevitably, the tourism industry, airlines, travel agencies, hotels, B&Bs and restaurants suffered a huge hit from the very onset of the crisis. By the end of February, B&B’s were already reporting drops of 60-70% in occupancy, hotels were partially or totally shuttering to undertake long planned renovations and the restaurant trade was seeing similar fall off in business and many outlets were simply not able to carry on. Travel agencies have been further hit by a ban on outbound tour group travel, currently in force until the end of May, as well as by a ban on all student travel. Some within the industry estimate that up to 90% of all travel agents will go to the wall if the restrictions have to remain in place until the end of the year. By March, occupancy at city hotels around Taiwan had fallen by as much as 90%, leaving them with occupancy levels that are simply not sustainable. As a result, many hotel operators are not holding out much hope for the second half of the year.
The situation has been further exacerbated by the cancellation or postponement of major events such as the Taipei International Book Show, the Taipei International Cycle Show, the Taiwan International Festival of Arts and the closure of the National Theatre and Concert Hall. For now, major events scheduled for later in the year, like COMPUTEX, remain on, but the situation around the pandemic globally is so fluid that there can be no guarantees at this stage that they will be able to proceed.
However, the downturn runs far deeper than the temporary collapse of tourism and the loss of those revenues and despite relatively stable headline economic indicators from January and February. As the survey results quoted previously show, those of us living here are feeling the effect of the pandemic and are reacting accordingly. In another survey, from Kantar Worldpanel, also completed in mid-March, 39% of Taiwanese said their daily lives are being severely affected both because of their desire not to contract Covid-19 and because of their worries about the immediate economic impact of the crisis on their personal situation.
From the corporate side, the outlook remains reasonably optimistic. The American Chamber of Commerce in Taipei recently canvassed their member companies and found that 62% expected the pandemic would “end” in 2020 and 84% anticipated that the local economy would bounce back in 2021. Nevertheless, 77% have already seen their business impacted, with two thirds noting decreased demand for their products or services. Tending to be larger organisations, these companies may have the scale to be able to weather the economic downturn more easily than most and, so far, the majority have not needed to and have no plans to furlough any staff, although 5% have instituted layoffs already and a further 10% will do so if necessary.
Perhaps people are right to worry. The Ministry of Labor is reporting increasing numbers of workers taking unpaid leave or being furloughed. As of 17 April, 636 companies had unpaid leave programs, while a total of 15,634 workers had agreed to go on furlough, nearly double the number reported on 1 April, according to the MoL. As these numbers rise, it is hardly surprising that anxiety about one’s continuing employment status and financial stability will play ever more on people’s minds, especially in a society dominated by small enterprises which are the most susceptible to disruption in the economy, especially those operating in the service sector.
Is the worst yet to come?
The CIER expects to see more profound impact on the economy in the second quarter, after the contagion escalated in the United States and Europe in March, leading to massive lockdowns that have sent demand plunging, hurting Taiwan's export-oriented economy.
Meanwhile, changing consumer behaviour at home will also start to eat more into GDP growth and there are quite noticeable changes taking place in people’s daily activities. The CIER is now predicting that private consumption will rise by just 0.16% in 2020, against an original forecast of almost 2%. Consumers are staying at home much more and limiting their spending in several areas, undermining sectors such as restaurants, bars and entertainment and retail, even though the government’s effective public health measures have meant that most types of outlets can continue to operate. Figures released by the Ministry of Economic Affairs show that spending in restaurants and bars in February was 17% lower than in February 2019. To some extent that is a reflection of the timing of the Chinese New Year, but comments from restaurateurs also illustrate the change and the challenge facing the F&B industry. Bob Chau, who runs two restaurants in Taipei, commented “It was like our business just fell off a cliff. Almost overnight our bookings dropped by half. We’re managing to keep going, but barely and it’s tough, especially for the staff. I’ve had to cut back on our opening hours and reduce the number of shifts I can offer my guys. I’m also getting almost daily calls from people looking for work. That never used to happen, so this is affecting a lot of restaurants.”
In an article published in Commonwealth magazine, Jeff Lee, senior vice president of operations of restaurant company Bayshore Pacific Hospitality, made similar points. He noted that business on Lunar New Year’s Eve was excellent and take-outs of New Year’s Eve feasts set a record high, but revenues began to plummet afterwards and “sales on the weekend were even down 50%” making him realise how serious the situation could get. To date, revenues are down 20-30% and he warned that the worst may still be to come.
The latest reports from Google’s Community Mobility monitoring, covering the period up to 11 April, show just how much more cautious Taiwanese have become about going out. Mobility trends for places like restaurants, cafes, shopping centres, museums, libraries, and movie theatres show an 18% drop compared to pre-Covid-19 times, while passenger traffic through transport hubs is off by 32% and data from Israeli transport app provider Moovit confirm that public transport use has decreased by a whopping 53%, with people switching to private transport.
This switch has been accompanied by a large jump in sales of private vehicles of 36.3% in March compared to February, while electric scooter manufacturer also saw a 300% increase in their Gogoro 2 and Gogoro 3 series in February, over January sales. According to one industry expert, this is attributable to two main factors, firstly the forthcoming end of government subsidies to encourage the replacement of old, air polluting vehicles and the wish among consumers to have independent transport means and thereby reduce their need to depend on public transport.
The CECC has also advised the public to exercise care and observe social distancing when going outside and to avoid large scale public gatherings and there was great concern over the period of the recent Qing Ming holiday when an estimated 1.5 million headed out to 11 of Taiwan’s most popular scenic locations and resorts, with little evidence of efforts at social distancing. Authorities were forced to make use of Taiwan’s Public Warning System (PWS) to send SMS alerts to people at the tourist spots, reading “When visiting crowded places during the long break, remember to keep a distance of at least 1.5 meters when indoors and 1 meter when outdoors, wear a face mask and wash your hands frequently. Consult a doctor right away if you are not feeling well. Call 1922 if you have any questions.”
Happily, two weeks on, there has been no evidence of any cluster outbreaks resulting from the increased movement of people at that time, while the transport minister later revealed that visitor numbers in many of these locations were in fact well down on what would be seen in a normal year. Indeed, the latest Google Mobility analysis also shows a pattern of general decline of around 20% in visiting outdoor locations, like national parks, public beaches, public gardens and so on (although a short stroll through Da’an Park last Sunday afternoon might lead one to question the validity of that finding). It will be interesting to see how the general public react to the next long holiday weekend around May Day, how many choose to travel and whether they adopt a more prudent approach. In the words of Minister of Transportation and Communications Lin Chia-lung (林佳龍) “people can enjoy their holiday outdoors and feel just as relaxed [as long as] they adhere to disease-prevention policies, including observing social distancing, wearing masks, visiting less-crowded areas and avoiding peak travel time.”
In-home buying, in-home consumption the new normal
On the domestic front, one neighbour told me “I still go out to the market and to the supermarket, but much less than I used to before coronavirus, because I just don’t want to take any unnecessary risks of being exposed to it [the virus] in public places. So when I go shopping I buy more to last us longer.” Another friend explained “Now, we’ve almost zero dining out. I’m not having coffee with friends outside, not going to hair salons or having facials. I’m not going to the gym anymore.”
Everyone I spoke to in collecting information for this article said the same thing, with the emphasis very much on avoiding crowded indoor spaces as much as possible.
The trend towards staying at home coupled with the intense focus on the pandemic has, of course, resulted in big changes in people’s lifestyles in terms of their media habits and their purchasing. A report by Nielsen Media highlighted big spikes in TV viewing right after Chinese New Year, when the government had ordered school holidays to be extended by two weeks. “Taiwan’s TV audience grew by 1 million viewers, for a total viewing population of approximately 21 million. News channels and programs were the primary beneficiaries of the increased penetration, followed by children’s programming. Kids in Taiwan, now home from school and forced to stay indoors, quickly gravitated to their TV screens.” [source: The Impact of COVID-19 on Media Consumption Across North Asia; Nielsen Media]
Changing media consumption has gone beyond just watching more TV, though, again as the Nielsen report notes. “In the earlier days of the outbreak, social media usage skyrocketed among consumers who expressed everything from fear to worries about the future to prayer. While social media buzz about COVID19 has remained steady since Chinese New Year, engagement peaked in early February. It then started to taper off as more people began to use social media to stay informed with news than to express their own personal experience.” [source: The Impact of COVID-19 on Media Consumption Across North Asia; Nielsen Media]
And digital engagement is rapidly extending beyond use of social media, as a wide cross section of consumers turn increasingly to online channels for purchasing, for managing their daily affairs and for their sources of entertainment. Both Kantar and Nielsen reported as much in their recently published surveys. “Consumers have also gravitated to apps that meet the needs of their temporary indoor lifestyles, largely in the entertainment and e-commerce categories. While video and gaming apps have topped the entertainment options, consumers have embraced e-commerce for an array of needs: at-home delivery of goods and services, food delivery and online education.” [source: The Impact of COVID-19 on Media Consumption Across North Asia; Nielsen Media]
Kantar Worldpanel discovered that 42% of consumers had reduced their household purchasing in bricks-and-mortar stores in favour of online, e-commerce stores and Kantar Insights’ survey recorded big increases in online shopping, online banking, online food delivery, audio and video streaming and music streaming. The report’s author commented “the pandemic has had a huge impact, especially accelerating the use of digital technology to deal with daily life, consumption, entertainment, learning, work, etc. This change has even embraced older consumers whose digital usage rate of online shopping and online banking has increased significantly due to the epidemic. Many people are now going online to avoid having to make personal visits to banks and shops.” [source: Kantar Insights Covid-19 Special Outbreak Survey]
Not only has media consumption changed, but consumers’ product focus has been reshaped by the pandemic. The Kantar Worldpanel survey, which was conducted from 11-13 March, saw big jumps in demand for:
• Home cleaning products (+55%)
• Personal hygiene products (+54%)
• Laundry and dishwash products (+39% and +31% respectively)
• Health and nutrition lines (+39%)
• Fruit and vegetables (+25%)
…but accompanied by significant declines in the desire to buy:
• Luxury goods (-38%)
• Alcohol and other beverages (-28% and -18% respectively)
• Make-up and beauty products (-16%)
• Meat and seafood (-11%)
Unlike the F&B industry, which has seen a large drop in spending, retail purchases have not registered much change in total spend, at least so far, but the shift in product demand has changed the profile of channel use quite significantly. For sure, e-commerce retailers are benefitting massively. Right after Chinese New Year, PChome 24h saw a doubling of its sales of food ingredients and products, while Buy123 recorded a 30% uplift. On the opposite side of the coin, department stores, the bedrock of Taiwan’s modern consumer shopping spree, bore the brunt of consumers not going out and not spending on luxury items, on clothing or on beauty products. The MOEA’s published figures show department store revenues down by 25% in February 2020 from the year before, while individual stores in Taipei’s high profile Hsin Yi district bemoaned massive declines in customers and sales drops of 40-70%.
Despite the growing trend towards e-commerce, trade through established grocery stores is also holding up, with supermarkets particularly enjoying better sales, notably for food and fresh produce, as well as for the health, hygiene and household cleaning lines referenced in the Kantar Worldpanel survey.
The stay-at-home, eat-in trend has already been highlighted, with its potentially devastating impact on the restaurant trade, but it has been a boon to the main delivery services, Foodpanda and Uber Eats, which have been experiencing double digit growth and to the take-out and quick service chains who work with them. It is too soon to tell whether these seismic shifts in consumer behaviour will become the new normal once the crisis has abated, but history suggests there will be some long-term carryover and Nielsen’s "COVID-19 Where consumers are heading?" study provides an early indication of the possible longer term impact. 54% of Taiwanese consumers expect they will eat at home more often post-crisis, while 39% anticipate ordering take-aways more often and 33% envisage using specialist delivery services more frequently.
Currently, we are less than three full months into life under the global pandemic in Taiwan and the people’s focus remains very much day-to-day, but lives are being impacted substantially in many different ways and it will be fascinating to see which changes become permanently embedded and which ones revert back to previous patterns.
Mike Jewell is a Freelance Consultant and a Euroview Contributing Writer