According to last year’s estimates, global retail spending was forecast to drop by $549 billion in 2020. However, with shoppers going back to some level of normality, the consumer spending economy is getting a much-needed boost this year.
Many consumers are now eager to go back to their old spending ways, findings by digital experience software firm Sitecore suggests.
81% of young respondents (aged 25-34) said they are ready to embrace pre-pandemic shopping, travel, and holiday experiences. The majority (76%) also said they are currently planning “the trip of a lifetime,” while 68% are now more spontaneous, more social, and enjoying life more.
82% of UAE consumers said they plan to make bigger but mindful purchases during the holidays this year. The majority (72%) also have more savings set aside for special occasions this year compared to 2020.
When it comes to shopping, consumers are more likely to prioritize goods produced in the UAE as 69% said they’d be willing to pay more for locally made gifts.
However, 92% of consumers agreed the pandemic has made them think more carefully about how they spend their money.
Restaurants, apparel, and home furnishing businesses
Mastercard recently released Recovery Insights: Small Business Reset, a report showing that in the UAE, the restaurant, home furnishings, and apparel sectors are thriving in 2021 with home furnishing small businesses doing exceptionally well when compared to large businesses.
Looking at 19 markets around the world, the report reveals that sales performed by SMBs lagged when compared to larger companies by up to 20% at the peak of the crisis. However the sales of SMBs rose 4.5% through August 2021 year-to-date compared to the same period in 2020, while e-commerce sales went up 31.4%.
Small Business Reset identifies several key trends:
- Closures: Globally, small businesses that closed early in the pandemic were about three times as likely as larger businesses to remain closed long term. One-third of small businesses that closed in April 2020 remained closed after six months, and about one-fifth were still closed after 12 months.
- Location: Spending at SMB retailers in central business districts is down 33% vs. 2019, while sales within more residential neighborhoods grew 8%. As tourists and workers stay closer to home, small businesses in commercial districts around the globe are seeing sales suffer.
- E-Commerce: Following shutdowns, the number of businesses going online each month tripled from pre-pandemic levels, peaking in July 2020.
- Entrepreneurship: One-third more small retailers launched in 2020 than in 2019, nearly 8x the number of larger firms created.
- Sectors: In the UAE, home furnishing small businesses have been seeing improved performance over large businesses while large businesses have done much better in the eating place and apparel sectors.
Supporting small business owners is a continued priority for Mastercard, which pledged to bring 50 million small businesses and 25 million women entrepreneurs into the digital economy by 2025.
You can view the full Recovery Insights: Small Business Reset here.
Visa recently announced the results of a study that tracks the impact of the pandemic on consumer attitudes and spending across Central and Eastern Europe, the Middle East and Africa (CEMEA). The Visa CEMEA COVID-19 Impact Tracker revealed significant changes in attitudes to e-commerce following the impact of COVID-19, with 64% of those surveyed in the UAE reporting an increase in their online spending, and 87% saying they will continue to shop online once the crisis ends.
Consumers in the UAE remain cautious when controlling savings and budgeting, but the rest of those surveyed have largely resumed shopping, dining, entertainment, and travel, albeit with hygiene precautions in place.
Evolving Consumer Behaviors
There is a significant improvement in consumer shopping habits for essentials, such as groceries, and a visible shift in attitudes towards wanting an ‘optimized’ experience, as well as being conscious about hygiene and avoiding contact.
Customers have increasingly turned to online shopping channels for both essential and non-essential purchases – with a noticeable shift towards e-commerce and away from traditional face-to-face transactions. In the UAE, 64% of consumers now say they shop for groceries online. These attitudes also prevail for luxury retail and fashion, with 84% of consumers choosing digital shopping channels and home delivery.
87% of consumers surveyed in the UAE revealed that they will continue to shop online for both essentials and non-essentials.
While COVID-19 severely impacted consumers’ overall travel expenditure, the sector is beginning to rebound, with a likely boost for local destinations over the coming months. In the UAE, 22% of consumers said they prefer short-haul trips over long-distance destinations, while 33% said that local tourism and ‘staycations’ take preference over international travel.
Managing Consumer Finances
The pandemic has seen consumers in CEMEA change the way they manage their finances, with increased usage of credit terms and installments. In the UAE, only 28% of those surveyed said they would still continue to borrow from friends or family or use bank loans, while 62% indicated that they would instead use deferred payments through credit card installments.
Changing Payment Preferences
Throughout the COVID-19 pandemic, UAE consumers have continued to prefer digital payments to cash transactions, including contactless cards, mobile payments, digital wallets, and P2P (peer-to-peer) transactions. By the fourth wave of Visa’s survey in August 2021, 57% of consumers in the UAE said they increased their credit card usage, 53% for debit cards, and 47% for prepaid cards. There has also been a spike among UAE consumers in the use of mobile payments and digital wallets, with two-thirds (66.5%) of consumers reporting increasing their usage of these payment methods by August 2021.
77% of UAE consumers are increasingly aware of ‘Buy Now, Pay Later’ payment services, with a relatively high proportion (82%) of those surveyed indicating their willingness to use these services, revealing an opportunity that can be harnessed by brands.
Visa’s research also indicated a noticeable increase in consumer knowledge of cryptocurrencies, with 84% of consumers in UAE reporting awareness. Moreover, close to half of respondents see cryptocurrencies as a viable alternative to cash.