The past six months have been a time of great change for all of us, and in addition to the adjustments to our everyday life, the move to working from home (and eventually nationwide lockdown) has also led to a shift in our shopping habits.
We sat down with James Edwards, head of cards and payments, and Mitesh Patel, our customer insight manager, to find out how people’s spending patterns have been affected by the coronavirus pandemic, and how we’ve been using this insight to support our partners through this unprecedented crisis.
Changing customer behaviour in the face of Covid-19
As the people behind a range of consumer finance solutions for many of the UK's leading brands, we have unique insight into how people have been spending (or not spending) their money as they navigate the coronavirus crisis.
When the nationwide lockdown was initially announced, our team saw an immediate decline in overall spending.
Mitesh says: “As you would expect, the areas that were worst hit were transport and leisure – and all of the restrictions in place meant that spending in these categories stopped almost entirely, with spend in the hotels and leisure sector down to 30% of normal levels at one point.”
But while some industries experienced a big drop in sales when lockdown was first announced, other businesses, such as supermarkets, found the opposite was true.
James explains: “We saw a significant spike in spending on groceries when lockdown began, due to a combination of people eating out less and some level of panic buying.
“This stockpiling behaviour continued for a good few weeks before supermarket sales started to settle back to normal levels.”
Another area that has experienced an upturn in sales over the past few months is DIY, and Mitesh believes this is due in part to people having more free time.
He explains: “One of the biggest by-products of this virus is that people have more time to themselves than ever before, and with those who can working from home, the conventional 9-5 has almost been thrown out the window.
“This not only means people have more time to spend on DIY projects, but also that they’re paying more attention to their home environment, leading to greater levels of spend in that area.”
James adds: “There’s definitely a seasonal aspect to it too, and the fact that lockdown came as the weather started to get warmer meant that people wanted to get out in their gardens, which naturally led to an increase in spend in DIY stores.”
Data shared by our customer insight team on the top 10 products bought using ‘Your Plan’, flexible credit to spread the cost of latest tech from Currys PC World, revealed that vacuum cleaners and gaming consoles were some of the most popular products in the period since 24th March – neither of which featured in the top 10 products in January / February this year. This is again most likely due to people spending more time at home.
As well as having insight into where our customers have been spending their money over the past few months, we’ve also been able to monitor how they’ve been spending it.
James explains: “Since lockdown began, we’ve naturally seen a big shift towards online transactions, with people temporarily unable to visit retailers and spend their money in person.
“With such a dramatic switch to e-commerce from traditional retail, it will be interesting to see whether this trend continues, as more and more people discover the convenience of online shopping.
“We’ve also noticed that debit cards have hardly been affected by the crisis, which is possibly due to people using debit cards instead of cash. In contrast, credit card spend was at one point around half of where it was previously.”
This rich wealth of data around customer spending that we have access to, combined with our expertise and insight, allows us to analyse this information and use it to help the partners that we work with.
When looking at the impact of the coronavirus crisis on customer behaviour, it’s essential that we consider how people’s financial health has been affected, and this is something our customer insight team has been monitoring very closely.
Mitesh says: “While the government’s furlough scheme has helped in terms of reducing the number of people losing their jobs as a result of this crisis, many of our customers have still taken a hit to their income, and are therefore being more cautious with their spending.
“However, it is also worth noting that the pandemic hasn’t had a negative financial impact on everybody, and we’ve actually seen an improvement in some of our customers' financial health, with some people having saved money from going out less and not having to commute to work etc.”
James explains: “Everyone’s circumstances are different, and it’s really important that we treat all of our customers as individuals, instead of assuming that they’ve all been affected by this crisis in the same way.
“The FCA has been really agile in the way that it responded so quickly with its regulatory agenda, and as a result we’ve seen customers who potentially may have had issues taking those payment holidays to help them at this time.”
This data has also given us insight into the way in which our customers manage their finances.
Mitesh explains: “Another thing we’ve been looking at is the type of profile that has gone and requested a payment holiday.
“One would assume that it’s those who need the financial support who are taking advantage of this scheme, but the data we have available shows that it’s not actually as clear cut as that, and we’re increasingly seeing customers doing so simply because it seems like a financially savvy decision.”
By analysing this data around how customers have been impacted by the coronavirus crisis and what profile has fallen into the category of requesting a payment holiday, Mitesh and the team have started to build models to help them predict the percentage of customers who are at risk of doing this in the future.
By sharing this information with our partners we’ve been able to help them plan ahead, as well as advising them on how they might be impacted from a sales perspective.
James says: “Our expertise allows us to act almost as an extension of our partners’ marketing teams, and during the coronavirus pandemic we’ve been able to help them understand how their customers are feeling by analysing the way they’ve behaved in response to this crisis.
“This gives our partners a real insight into what’s going on in their customers’ minds, and therefore gives them the opportunity to adjust the way they communicate with their customers based on this.”
So, what happens next?
Mitesh predicts: “With the many changes, big and small, that have impacted our everyday lives, it’s inevitable that this crisis is going to change things forever – and this includes people’s spending habits.
“Over the last six months people have adapted to a new ‘normal’, and by either investing in or spending less in a particular category, many have discovered a happier and more efficient way of living.
“While some of these changes to customer behaviour will only be temporary, we also predict that there will be more permanent changes that will continue for a long time into the future.
“But whatever happens in terms of customer behaviour, we’ll be there to support our partners through it all and share our insight and expertise with them along the way.”
To find out more about how we can help your customers make every day and larger purchases with our consumer finance solutions, contact us today.