2022 has been painful for investors in the stock market globally but the last couple of weeks have been especially painful as several retailers like Wal-Mart, Target, GAP, and Dick’s Sporting Goods have all warned of a significant slowdown in consumer spending for their products. The explanation of the consumer slowdown is easy: the last stimulus checks have run out, and, with high oil and food prices, inflation is eating into the disposable income of the broad consumer who is forced to make choices on spending – either to postpone it or to downsize it.
The consumer slowdown in goods was inevitable – with COVID everyone was stuck at home and so people are up to their eyeballs in high-ticket hard goods, from the latest kitchen gadgets to outdoors and garden equipment to indoor furniture. However, as we sift through the wreckage, there is a clear silver lining emerging from all of this. As the world opens and as more and more restrictions are lifted there is a clear shift in consumption from goods to services as people are willing to spend more on travel, eating out and socializing. This is very positive for the tourism industry globally which has been the principal Covid loser over the last 2-3 years.
In Covid, there was this perception that we are in a “New New World” and that people will jettison past habits to stay indoors and change their lifestyles substantially. A couple of years hence and this has been proven to be total hogwash – there is a significant pent-up demand for returning to behaviours and habits suspended during the heart of the pandemic. People want to travel, meet each other again and lead a normal life, while sales growths of Peloton, Streaming Media and Zoom have slowed down tremendously. The “COVID winners” are back to earth and there is significant life left in “COVID losers”.
The move of spending from goods to services is not just a recent phenomenon, it has been happening for a while before COVID. Numerous studies have shown that more and more consumers and especially Millennials prefer experiences over material things. Experiences include things that make them laugh and have fun or learn something new or take away stress and anxiety. Fortunately, tourism ticks all these boxes – travelling to a nice holiday destination, visiting and immersing in new cultures, eating fantastic food and bonding with family are all well-established ways of achieving these outcomes.
What may be a difficult period for big-box retailers, can become an amazing opportunity for travel and tourism. We are bored of staying at home and staring at screens, and we are craving to explore, see new things and become normal humans again. Even as things are more expensive than before, the consumer is more willing to spend money on travelling today than in the last 3 years and is willing to forgo the next cool T-shirt, latest pair of sneakers or the next handbag for the joy of filling their memory baskets. As global tourism rebounds, the tourism sector in India needs to grab this opportunity with both hands and destinations need to make sure they put the traveller’s passion points front and centre, and welcome guests with unique and memorable experiences.
Entertain this returning customer and they will never leave again!
By Aradhana Khowala , CEO & Founder – Aptamind Partners, U K
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