What: The Economist reviews how Covid has changed customers’ behaviour across the world.

Why it is important: How can department stores, places of socialization, can cater for the needs of consumers increasingly tempted by hermit lives?

The COVID-19 pandemic has resulted in a long-lasting shift in consumer behaviour in the affluent parts of the world, signaling the onset of the "hermit economy." While the unemployment spike of 2020 quickly reverted and GDPs recovered, the allocation of consumer spending did not bounce back in the same way. Before the pandemic, the trend was an increasing share of spending on services. However, the lockdowns led to a collapse in this sector and a surge in demand for goods as people stayed home more.

Three years later, spending on services like hospitality and recreation remains persistently below pre-pandemic levels. Consumers are now redirecting their expenditures towards goods, such as home appliances and food. The trend is more pronounced in countries with longer lockdown durations, and this "hermit" behaviour is evident in reduced outdoor leisure activities and lower interest in industries like hospitality.

Anomalies exist, such as the difficulty in booking restaurant tables, which seems contradictory to this trend. However, this is attributed more to a reduced supply due to a shortage of workers in the service sector and a halt in the opening of new venues, rather than an increased demand.

Businesses have taken note of this USD 600 billion shift in consumer spending. For instance, traffic at Darden Restaurants is around 80% of pre-COVID levels, while home improvement stores like Home Depot have seen a significant increase in revenue. The stock market also reflects a preference for companies that cater to homebodies over those that benefit from outdoor activities.

The persistence of hermit behaviour could be due to ongoing concerns about infection, changes in work patterns with more remote work reducing the need for services related to office life, and a possible shift in values, with people now favoring more solitary activities and home-centered lifestyles. Overall, COVID-19 has left a substantial impact on societal preferences, seemingly pulling people apart and changing the landscape of consumer spending.

Are you prepared for the hermit consumer?