As we embark on a new year, our Industry Group leaders reflect on the changes spurred by 2020 — stories of novel products and services, shifting market trends, and new M&A strategies — and consider the implications for 2021. Access more industry perspectives in our related insights tab.
For me, the biggest surprise of 2020 was what didn't happen: Consumer spending never collapsed. Even with millions of people unemployed, stores and restaurants closed, and strict social distancing policies, consumers kept spending, but in different ways, in different places, and in different proportions. They bought groceries and household goods online and had them delivered. They took up new pastimes and spent money on outdoor hobbies, cooking and grilling, and entertaining. They fixed up the houses they were spending so much time in. They ordered take-out and delivery from their favorite restaurants.
That's not to suggest that there's been no pain; certain industries will take a long time to recover. But clearly, the pain could have been much worse. Most importantly, we still see solid savings rates and manageable debt, even among lower-income consumers. Part of consumers' relative financial health is the inherent strength of the economy through 2019. The stimulus package delivered during the depths of 2020 is another factor. Still another is how many consumers "found" more disposable dollars as they shifted spending away from commuting (i.e., gas), traveling, and enjoying live entertainment. The lesson to me is that most consumers are not going to sit at home and do nothing until COVID-19 passes. We're going to find things to do and, by extension, spend money on.
All of the above has fostered strong performance in home repair services and products, food sold through grocery stores, outdoor equipment, and pet food and supplies. Gyms have been hit, but we’re confident they will come back, as will full-service restaurants. The pandemic has also given an unexpected opportunity to smaller brands and start-ups: As leading brands stocked out, consumers bought what they could find. That opportunity was especially rich for digital-native brands that could fully exploit the mass switchover from bricks to clicks. COVID-19 also forced a host of consumer businesses to quickly figure out low-contact operations, whether curbside pickup or contactless delivery.
That leads us to the biggest question: Which of these developments will stick around? Which new brands will keep the momentum they gained this year? What hobbies are going to be here three years from now? Clearly, new habits were formed that will stay long beyond COVID-19, and consumers have reset their priorities on how they choose to spend their time and money.
One new thing that I think will persist is pandemic readiness. There's broad consensus that this kind of crisis will happen with greater frequency than before, and it's something the most agile consumer brands will be ready for.
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