The COVID-19 pandemic has impacted economies all over the world in many different ways. Consumption and spending patterns have been affected and are directly related to the management of the pandemic in each country.
The impact on consumer behaviour was further examined during an online seminar What Consumers Want during the Pandemic: A Singapore Perspective, by the Asia Competitiveness Institute (ACI), a research centre at the Lee Kuan Yew School of Public Policy (LKYSPP), in collaboration with Mastercard. The findings were presented by Senior Research Fellow, ACI-LKYSPP Xie Taojun and moderated by Professor Paul Cheung, Director of the ACI-LKYSPP.
The data compared 2019 and 2020 and was much more granular than national statistics, notes Leslie Teo, Grab Holdings Inc. Advisor and former Chief Economist of GIC.
Such granular and near-real-time data can help governments and researchers understand the empirical impact of an event. Real-time consumption data and the impacts of policies can be measured, and this means that policymakers can respond as quickly as possible.
"Data study is very important in times like these, for people to understand how they should navigate this uncertainty," said
Ling Hai, Co-President of Mastercard Asia Pacific.
The current data can also be used to project into the future, noted Mr Xie. In the event of a second or third wave, or even another pandemic in the future, policymakers and society can be more prepared with data like this at hand.
Changes in online spending and the future of e-commerce
Prior to COVID-19, online shopping made up 20% of retail transactions in Singapore compared to 80% offline. During the Circuit Breaker (Singapore's temporary lockdown) online spending rose to 30% as offline dropped to 70%.
But is e-commerce here to stay?
Mr Ling believes that while the trend is unlikely to reverse, he would not bet on an even 50/50 split between online/offline. According to the data, offline spending declined during the Circuit Breaker, but eventually increased again when Singapore entered Phase 2. On the other hand, online spending remained roughly constant throughout.
This could be attributed to the recovery of discretionary retail — consumer spending on non-essential goods and services — during Phase 2 of the Circuit Breaker as observed from the data. Humans are social creatures, and we are returning to old, pre-COVID habits due to a craving for social interaction, hypothesised Mr Ling.
With all these changes laid out for us, the question is, will this cause shifts in the economic structure? According to Walter Theseira, Adjunct Senior Research Fellow at ACI-LKYSPP and Associate Professor at the Singapore University of Social Sciences, it depends. Some kinds of online spending have greater structural implications than others, and we need to take care to distinguish them.
How have Singaporeans' behaviour changed?
Although offline spending and discretionary retail are on the rise, Singaporeans' consumption patterns as a whole indicate some degree of risk internalisation among the population. Singaporeans are spending less on activities that involve a higher risk of contagion, such as eating at restaurants.
“Shopping mall in a time of human fretting about disease. Chinatown, Singapore.” Taken on March 22, 2020 (photo: Bingxiong Chen)
This reallocation of consumption during the Circuit Breaker is reflected in the data obtained, where less spending on travel, more online or cashless spending, and more online food purchases were recorded. Furthermore, online spending on essential items remained relatively unchanged even after the lockdown restrictions were lifted. All of this indicates that Singaporeans now prefer safer and easier methods of transaction.
These patterns spell good news for Singapore’s future. Risk internalisation is a key cost-mitigation mechanism that can help prevent a greater number of deaths and larger declines in economic activities in future crises.
“When we internalise these consumption patterns, handling future pandemics will be much easier,” said Prof Cheung.
That being said, risk internalisation is not static, and will change over time. The average Singaporean is now less afraid of the virus than they were in February, which means they are more likely to push the limits with respect to restrictions and safe distancing.
Prof Theseira added that with the current data, there is no way to tell if these consumption patterns are truly due to risk internalisation or due to government policies such as social distancing measures.
The more data, the better
As useful as the Mastercard data was in informing research and policymaking during the pandemic, several panelists pointed out areas of possible improvement.
The limited scope of data could affect its representation. The data was only collected from Singapore-issued cards tracked by Singaporean merchants, and this excluded spending from tourists, non-residents, Singaporeans using non-Singapore-issued cards, and spending on non-Singaporean merchants such as Netflix.
“We need to be clear about this, especially if we’re talking about consumption habits related to the population,” expressed Mr Teo.
Prof Theseira also pointed out the issue with the concept of “revenge spending”. According to Mr Xie, revenge spending was defined as spending not explained by increased mobility due to lifted restrictions. The data displayed short-lived overspending on days leading up to the reopening in Singapore.
However, Prof Theseira expressed that “revenge spending” can be completely consistent with standard consumption smoothing models, or consumer substitution away from categories restricted by COVID-19 measures, such as nightlife and travel.
“It would only matter if it exhibited some kind of irrationality in expenditure or permanent structural shift,” he said. “I think a more useful concept is the substitution of reallocation idea of spending.”
The future of high-frequency, real-time data
Since the onset of COVID-19, many countries have been using high-frequency data to study the impact of the pandemic on consumption, established Mr. Xie. Seeing how crucial high-frequency real-time data has been, many are searching for ways to make such data more available.
First and foremost, responsible use of data and protection of privacy has to be stabilised and sorted out before it is handed out, said Mr. Xie. Thankfully, there are many ways to handle issues surrounding consumer privacy, such as aggregation and anonymisation.
If necessary, the government has the power to step in and obtain important data from businesses, suggested Mr. Teo. “It may be top-down and heavy handed, but there are times when it’s appropriate,” he said, citing an example of Grab providing data for contact tracing, as required by the law.
Another option is to create incentives for companies to share data with one another. A win-win situation has to be created for this to happen, but this is easier said than done. Companies may be reluctant to release data that could benefit their competitors, even though it could be an avenue to obtain data for lower costs or even for free.
Otherwise, Prof Theseira suggested that it would also be beneficial for governments to release their data to companies that participate in a data sharing agreement. It would be a more efficient alternative, since businesses would get crucial data for free or for a much lower cost.
Mr Ling suggested a distributed model of data, where companies are allowed to own the data, and governments can “aggregate and pull things together” to protect consumer privacy whenever the data is needed.
Overall, there has to be movement on both fronts. Both companies and relevant government agencies have to be persuaded to engage in a reciprocal arrangement for important data to be accessible when it is needed most.
The digital divide in Singapore
The COVID-19 pandemic has laid bare various divides in our economy, one of which is the digital divide.
In terms of business enablement, Mr. Ling said small businesses suffer from this digital divide. Unlike big enterprises that utilise big data, small businesses do not have these resources. Nor do they have the capabilities to go digital during the lockdowns.
But it’s not just about limited access to the internet or technology. There are a whole slew of other factors that contribute to this digital divide.
Prof Theseira believes that the digital divide is conflated with education and English proficiency divides. Being unable to read English, having a low level of education and a lack of familiarity with technology means that older workers tend to be the most affected. He highlights the need to design digital tools for these groups, rather than for the “well-educated, digitally-adept native”.
In addition, our inflexible mindsets are beginning to pose a problem as well. The world is developing and changing at a breakneck pace, making it increasingly difficult to understand the world and how it works.
“Our society is struggling to adapt,” said Mr. Teo. “There is no more formula, there is no more standard operating procedures (SOPs).”
To overcome this global digital divide, governments and private enterprises must come together and tackle this inequality in terms of access, which would otherwise be detrimental to economic development.
“We need to make sure that we create equal access, not equal outcome,” stated Mr Ling.
According to him, Mastercard is already advocating for an inclusive growth model. They are doing so by providing solutions to help small businesses, like creating a sales platform for small businesses without needing additional infrastructure.
The profit-seeking motivations of the private sector may actually enable solutions to this problem as well. Greater competition within the market will inspire greater innovation, and this will create solutions for the underprivileged segment of society. In this manner, a more level playing field will be created.
“I don’t think anybody alone can solve the problem,” said Mr. Ling. “When companies, governments and private citizens all come together — that’s the only way to solve these problems.”
Watch What Consumers Want During the Pandemic: A Singapore Perspective here:
(Photo credit: Khwanchai Phanthong)