Last year I discovered the intricate, nuanced, complex beauty of my apartment ceiling. In just a few months, what was previously just a flat white surface and a few lights morphed into a discolored, patchy blanket that hovered over me irritatingly while I stared up from my sofa, day in and day out.
Maybe it needed a paint job. Could it be leveled? How does one even do that? YouTube will tell me. For sure these fixtures needed an upgrade. Let me browse Pinterest for inspiration, and scour Wayfair for deals that can’t ship soon enough to solve this fresh, urgent home decor problem.
Remember that cool restaurant that had amazing pendant lights hanging by the dozen above the bar? When will we get to go back? Is that place still open? Let me try to find a list of all the recent restaurant closures. Ooh, maybe if we can get a deal on flights, we can finally get back to Mexico City and try those tacos again. And on, and on, and on. And then back on, and on, and on.
It’s a privilege to be able to casually daydream about consumption during a pandemic, of course, and I’m thankful to have made it through financially unscathed. Even so, my job-secure quarantine transformed the nature of my daydreaming and warped my sense of time. Memories of fun times became gilded; fantasies of future adventures were suddenly much more vivid.
We can read endlessly about how the pandemic redefined grocery shopping, ecommerce, and sent the service sector into a tailspin (on the aggregate), showcasing how severely logistics have reshaped much of the economy. However, considering that the typical shopping cart is largely devoted to non-essential goods, we cannot ignore the movement in desire, imagination, and prediction in the minds of consumers if we expect to correctly address consumer intent and spending changes at a granular level.
Prediction, desire, and imagination
For over a century, advertisers have exploited our imaginative and daydreaming capacities to sell goods. Research in the past few decades supports the idea that consumption and consumer goods are central to future-oriented imaginative activity. Desire-based imagination inserts itself into our most casual, most random mental jaunts—and before we know it, we have a clear picture of what the next thing we want to buy is. And then we really want it.
Research indicates that our minds wander more when we’re housebound. In the face of uncertainty about the futures, those fortunate enough to have maintained financial security get to enjoy the dopamine release from imagined purchases, creating the perfect storm for an ever-growing wish list of goods and experiences.
Basic behavioral economics would suggest that spending months simulating a myriad of pleasurable consumer experiences while in the confines of our same old living room (slash office, slash gyms) will make even the most rational Homo Economicus perfectly primed for memory-driven, irrational consumption. Sure enough, as the economy reopens, we can see a new emergent vaccine side-effect for those of us who survived financially: a pressing urge to spend money on who-knows-what.
Our irrational ways
“Revenge spending” is at the cusp of breaking into the mainstream lexicon for a good reason: emotions are fundamental to consumption. With a majority of consumers intending to splurge post-pandemic, it’s no surprise that we are witnessing a significant rise in irrational spending.
The definition of what constitutes a “rational” act is a centuries-old debate, and there is an element of circularity when justifying an emotional, irrational purchase (i.e. even revenge could be defended as rational because revenge brings one pleasure). For the purposes of this discussion, we can say that a rational purchase is one that aims to meet clearly defined, realistic, well-considered expectations. Irrational purchases, on the other hand, are poorly considered or perhaps spontaneous, motivated by visions of enjoying a product that may contradict or deprive other needs, and have an unrealistic (or unconsidered) set of expectations rooted in fantasy and imagination.
So how will sitting waiting at home in our consumption-deprivation tanks shape the way we buy? In short, we can expect to see a bifurcated consumer market where larger groups of customers are being fractured along the lines of rationality. What was once a single group with similar tendencies is now divided in two.
Our former loves
We’ve all talked about it for a year. We’ve learned that Zoom calls with friends after a virtual workday is the worst. We want to hang out with friends in person. Clouded by the selective memories of good times in great restaurants, we’re charging back to patios regardless of their distance from traffic.
Studies have shown that primed content (content our brains are exposed to) is more likely to enter consciousness. So that pent-up excitement we feel from picturing fun dinners (both remembered and imagined) is drawing some of us back to dining out, with some restaurants seeing huge spikes in revenues in Q2 of 2021.
Yet in 2020, Instagram feeds consistently swapped birthday cocktails pics with friends for photos of sourdough bread and meals made from #scratch. With more people trying their hand a complex cooking and making gourmet coffee at home, the business case for dining out is becoming tougher to make—and many consumers expect to eat more at home.
Similarly, our fond memories of travel are also catapulting some of us to almost any destination that will accept us. The bias created by more than a year of reminiscing about the joys of vacationing builds a longing and exuberance in some prospective travelers that can overcome any barriers faced, financial or other. So while the industry is slowly recovering from a decimating 2020, there are pockets where the rebound is strong and travelers are finding ways to make spending happen.
The alternative crowd, having rhythmically vacationed for years, are now facing the sticker shock and logistical challenges associated with reinstituting their annual trip. We are seeing a reallocation of spending towards domestic travel and simply visiting loved ones, but the unquestioned patterns of traditional vacations may be scrutinized by some in 2021.
Commitment and hope
Of course, we did more during the pandemic than just long for our old lives back. We tried new activities, spruced up our homes, moved houses, bought cottages, invested in home gyms, recreational vehicles, and more.
This category of purchased goods holds significant implicit predictions surrounding remote work, hopeful active lifestyles, and hosted events at a minimum. We’re optimistically (and perhaps unrealistically) imagining working by the lake, getting super ripped at home, buying new houses, or finally cycling everywhere in the face of a very uncertain future. The drive to achieve our goals might, in some cases, force some irrational savings, but this hope can also lock consumers into a sunk cost fallacy that keeps spending up despite the value their purchases actually produce.
Some of these newly acquired behaviors and products may have shone a light on the vacuous, habitual spending we’ve engaged in over the years without scrutiny. We can expect to see a new, rational consumer emerge from the ashes of a year of abstinence with a vigilant watch on mindless, passive spending made in the name of “living”.
Not only macro, but micro
COVID-19 has produced a wide range of symptoms across individuals. They include significant psychological effects, which has profound implications on consumer spending. Focusing on macro trends in the data may help us predict aggregate outcomes, but we can lose sight of the diversity in our data when analyzing at a wide resolution. After all, the aggregate is made up of a bunch of extraordinarily diverse individuals.
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