In 2020, the COVID-19 pandemic left devastating impacts on the nation’s economy, resulting in widespread business closures, record-high unemployment rates and reduced consumer spending.1 However, various recovery efforts throughout 2021 are paving the way for an exit from this recession. The ongoing vaccine rollout and an overall reduction in COVID-19 cases, namely, have motivated government leaders to ease federal, state and local restrictions — permitting businesses across industry lines to open their doors once again, offer in-person services and run their establishments at greater (if not full) capacities.
As the economy reopens across the nation, it’s important for businesses to prepare for a “new normal.” After all, the pandemic contributed to a wide range of commercial trends, consumer habits and workforce adjustments. Some of these changes could have short-term effects on initial recovery plans, while others have the potential to remain for the long haul. Nevertheless, reviewing these changes can make all the difference in helping businesses prosper in this shifting landscape. As such, here are five key considerations that businesses should keep in mind amid the economy reopening.
1. The U.S. personal saving rate has soared
At the onset of the pandemic in March 2020, a slowing economy and rising unemployment concerns prompted many consumers to reduce their spending dramatically. In fact, over half (52%) of Americans confirmed that they cut their spending within the first few weeks of the pandemic due to worries about the economy or stock market.2
As a result, the country’s personal saving rate — which refers to the monthly percentage of consumer income remaining after taxes and spending — reached new highs. While it was just 7.2% in December 2019, a combination of lowered spending and the federal government’s distribution of stimulus checks led to the rate more than quadrupling to 33.7% by April 2020. Since then, the rate has fluctuated alongside the pandemic, falling to 14.2% in December 2020 before jumping to 27.6% in March 2021.3
In any case, the rate has remained significantly above pre-pandemic levels. On the one hand, such an elevated rate suggests that — even as the economy recovers — some consumers may continue to be more mindful of their spending and less likely to make impulse purchases. This practice could be particularly prevalent among consumers from lower-income households, which were more heavily impacted by the recession (e.g., greater job loss) and may be facing continued uncertainty. On the other hand, this higher rate could also encourage some consumers — such as those from middle-and high-income households — to tap into their extra savings and contribute to a boost in post-pandemic spending as the economy reopens.4
2. Consumer demand may increase within certain industries
The recovering economy and reduced COVID-19 restrictions could motivate consumers to act on pent-up demands across various sectors. In particular, consumers have begun displaying greater comfort levels with activities that were previously considered higher-risk at the peak of the pandemic — such as traveling, enjoying live entertainment and dining at restaurants. Further, many consumers have expressed high anticipation toward resuming these activities once the economy fully reopens.
Specifically, 63% of U.S. adults reported that they are excited to go on a vacation, while 50% are looking forward to eating at restaurants and over 40% are eager to enjoy in-person leisure activities (e.g., going to a concert, seeing a movie or attending a sporting event).5 Therefore, businesses within the tourism, hospitality and entertainment industries will likely encounter a surge in consumer demand in the coming months.
3. Many consumer behaviors have changed
The pandemic vastly altered the ways that consumers were able to obtain goods and services. These changes contributed to several shifts in consumer habits and accelerated the adoption of existing trends. Many of these changes are expected to continue impacting businesses as the economy reopens, including:6
- Increased desire for digital services — More than anything, the pandemic pushed businesses of varying sectors to implement remote services in order to remain operational. This shift to online offerings increased consumers’ appetites for a range of digital activities, such as streaming various forms of entertainment, utilizing telemedicine, participating in videoconferencing, engaging in e-commerce and leveraging online delivery options. Looking ahead, consumers will likely continue to seek digital services for their convenience and simplicity. With this in mind, businesses should seriously consider integrating remote capabilities within their product or service offerings (if they haven’t already) to remain competitive and ensure customer satisfaction.
- More stringent purchase practices — Because most purchases made during the pandemic were digital, many consumers only bought goods and services from businesses they deemed trustworthy. Consumers likely made these distinctions based on online reviews, value comparison between different businesses and brand recognition. Such purchase practices emphasize how crucial it is for businesses to make an effort to build a trusted reputation and positive online presence, as doing so can boost customer loyalty.
- Greater commitment to health and sustainability — The pandemic also encouraged consumers to take their well-being into further consideration when making purchases. In response, some consumers are displaying preferences for organic, all-natural goods or services that can offer significant health benefits—which will likely continue even after the pandemic concludes. Also, more and more consumers are calling on businesses to ensure environmentally sustainable practices (e.g., reduced emissions, eco-friendly packaging, green technology and minimal waste). This trend began before the pandemic but has only accelerated as climate change concerns continue. These shifting consumer priorities highlight how crucial it is for businesses to ensure their goods and services promote health and sustainability (and are marketed as such).
4. Businesses across industries are facing labor shortages
The pandemic initially forced many businesses to close their doors altogether, contributing to an unemployment rate of 14.7% in April 2020 — the highest rate recorded since the Great Depression.7 This rate has since fallen to 5.8% as of May 2021 due to the economy reopening but still remains above pre-pandemic levels, which hovered just below 4%.8 Although seemingly contradictory, the nation is now experiencing a combination of elevated unemployment concerns and labor shortages, with over 9 million U.S. jobs currently open.9 While such shortages are the top hurdle facing practically all businesses during this time, certain industries are encountering more struggles than others — namely, the manufacturing, transportation and health care sectors.10
These labor shortages are likely due to unemployed Americans having doubts about returning to the workforce after the pandemic or being more selective in choosing their career opportunities following an unprecedented year. After all, many workers’ priorities have shifted since the onset of the pandemic. For businesses to combat ongoing labor shortages, it’s important for them to establish effective recruitment practices (e.g., expanded talent searches), ensure competitive salary and benefit offerings, implement remote work capabilities or flexible hours, invest in workplace health and safety protocols (e.g., cleanliness), and promote opportunities for career growth among their current employees.
5. Supply chain issues remain
Lastly, supply chain interruptions are still a pressing concern for many businesses, even as the pandemic subsides. This issue is due to the nation’s rapid economic transition and swift reopening of various industries. Specifically, certain sector reopenings have been met with sharp surges in consumer demand for numerous goods and materials, resulting in uneven inventory-to-sales ratios and elevated item pricing. Amid supply chain interruptions, it can be increasingly difficult for businesses to remain operational, provide goods or services and ensure customer satisfaction.
The industries hit hardest by these supply chain issues include the manufacturing, construction and retail trade sectors.11 Fortunately, the vast majority of supply chain interruptions are considered transitory — which means they are expected to dissipate as the economy fully reopens and businesses are able to resume their typical operations throughout the remainder of 2021.
Overall, it’s clear that — despite the economy reopening — many businesses will continue to experience both short-term and long-term impacts from the COVID-19 pandemic. Yet, by understanding these changes, businesses can adjust their operations accordingly and stay successful in this evolving economic climate.