April 12, 2021
Happy Days Are Coming For Marketers
“Happy Days are Here Again” was a popular 1929 song that’s since been recorded by numerous artists. It was even the theme song for Franklin Delano Roosevelt’s successful 1932 presidential campaign and has been featured in more than 80 movies and 76 record albums. 2021 marketers may be reviving the song once again as some indications point to increases in consumer spending this year.
One reason for this optimism was the $1.9 trillion economic aid package President Biden signed into law in March. Another is the $3 trillion in bundles of federal proposals that could be invested into the U.S. economy. If approved, funds would go to infrastructure, workforce development, education, and even to fight climate change. The third reason is a consumer study conducted this February by McKinsey. The research firm has been conducting studies since the pandemic and built a case for optimism.
The McKinsey Study
In its latest report, McKinsey revealed that 40% of Americans have been consistently optimistic about an economic recovery since last October. Less than 15% felt otherwise and said they were still pessimistic. McKinsey also found that many people are no less cautious about going out in public. The numbers had decreased between late spring of last year to early fall, but plateaued in September. 66% of respondents said they’re still hesitant in venturing out on a regular basis.
What’s given rise to this cautious economic optimism is that McKinsey noted smaller credit card losses while seeing growth spurts in monthly charges. In fact, the firm noted that credit card spending over the past six months matched 6 months from the previous year. They credited both stimulus payments as well as holiday spending for that.
Other Reasons for Optimism
It was also discovered that discretionary spending has picked up since last summer. Increases were particularly evident in pandemic essential industries like home furnishings. Also noticeable were department, apparel and cosmetics stores that were initially hit hard by the pandemic and which now showed signs of recovering. More than 50% of consumers told McKinsey they intend to splurge and spend more on themselves. Higher-income millennials topped the list.
Fatigue from the pandemic is driving many consumers to this point. 50% of those polled told McKinsey they expect to start spending soon. What’s different from earlier spending patterns is that they said they would now be treating themselves to discretionary items like apparel, electronics and beauty products. The remaining 50% said they would wait for the pandemic to be declared over and then binge on travel and dining. McKinsey expected that the March stimulus checks would help motivate both groups.
How Vaccines Play a Role
The accelerated rate of vaccinations was identified as another reason why McKinsey expected economic recovery to gain speed. The firm compared habits of both vaccinated and yet-to-be vaccinated people and found that 33% of those already vaccinated expected to be out more. This compares to 22% of those who intend to get their vaccines. As younger people receive their vaccines, the numbers venturing out will only increase since they’ve already demonstrated a penchant for spending more than boomers.
As reported in an earlier article, this increase in online use and shopping is expected to continue. McKinsey reported that usage declined in the second half of 2020 but remains higher than before the pandemic. Value and convenience will be primary drivers of online sales in the future based on the firm’s findings. What the firm also found is that smaller companies replaced larger ones in driving growth in late 2020 and early 2021.