How Did Americans Spend Their Money in 2020?
By Space Coast Daily // December 8, 2020
Every crisis causes people to re-evaluate as they mark a new course moving forward. In the US, younger generations learned about money the hard way. Life gave them valuable lessons through the 2008 subprime mortgage debacle, stratospheric student loan debts, and the current global pandemic.
Once the latter got a foothold around the globe, in a matter of weeks, US industry pillars grounded to a halt.
Now, after months of lockdown and with social distancing measures in place, changes in consumer habits are clear, and many are wondering if they will linger post-pandemic.
While we have yet to realize the potential long-term effects caused by the events of 2020, we can analyze how Americans behaved during this trying year and yield wisdom from it.
People Spent Billions on Home Entertainment
According to a report from GroupM, a leading media investment company, the average daily time spent on digital media globally went up by 21% this year. In-home media services, particularly those that provide entertainment, noticed the largest increases in consumption.
Online gaming is one field that noticed a dramatic surge in new users, and due to stay at home recommendations, many people sought fun through video games.
Gambling sites also saw a spike in visits, as poker is experiencing a second boom period, with more card enthusiasts than ever playing on digital sites, such as those featured at PokerListings.
The Digital Entertainment Group posted an August report that said that in the second quarter of 2020, Americans spent more than $1.5 billion on digital entertainment transactions.
As the year went on, Americans spent even more on home entertainment (Q3 – $7.3 billion), with internet rental platforms having a strong showing with a 46% year-to-date increase in demand.
Netflix added 2.2 million subscribers during this quarter. The overall spending across all home-entertainment formats for the first nine months of 2020 in the US came to S$22 billion. Digital avenues, such as VOD, and SVOD platforms, are the main culprits for these increases in transactions.
Health Product Sales Rise, While Cosmetics Sales Drop
Once the pandemic began unfolding, the sale of food, health care products, and spirits went up. In July, sales in each category dropped significantly, with health products still maintaining decent sales levels.
Unsurprisingly, disinfectant and cleaning products sales shot up, as companies such as Lysol and Dettol reported an over 100% surge in cleaning wipes and aerosol disinfectant sales. Soap was also a popular item with a 60% increase in demand.
Vitamin and supplement consumption went up by 50% in the first six months of this year. Since a ton of people had to work from home, coffee consumption also shot up, as Starbucks at-home, Coffee-Mate, and Nescafé products grew at double-digit rates in the first half of 2020.
So, while people feared for their health and took precautions to improve their well-being, they did not seem as concerned with how they looked.
The French personal care company, L’Oréal, one of the largest in the world, claims the beauty market fell by 14% in the first half of the year. Skincare brand L’Occitane is facing a massive financial crisis, something that may apply to all companies in the industry.
People Are Sitting on Record Cash Savings
In 2020, anxiousness became one of the most common emotions, as there was a great deal of uncertainty in the air. Much of this was financial precariousness regarding potential economic hits.
During the onset of the crisis, Americans began socking away large chunks of their monthly household incomes, and they manage to hit a record-high savings rate of 33.5% in April. The staggering percentage dropped to 19% in June, which was still way above the previous average of 7.5%.
The chief economist of RBC Capital Markets, Tom Porcelli, noted that this is uncharted territory and that US residents have never saved money at such rates.
According to Moody’s Analytics, from March to July, US households saved over one trillion dollars. That said, many have already spent some of these reserves, as consumer spending shot up over the summer and many predict the same for 2021.
Analysts say that higher-income houses put away a large chunk of their earnings during the first quarter of the year. Those who benefited the most are upper-middle-income Americans who held onto their jobs and qualified for stimulus checks.
Many financial experts are speculating that most Americans will plow through their savings as things get back to normal.
The main reason as to why is because when people get forced to do something, they do not embrace a new mindset and are likely to get back to their previous patterns once there is no force applied.
Thus, many are predicting that travel spending will be at an all-time high next year and that the same will apply for spending on clothes and accessories.