Coffee, Ketchup, Nike Air Max: It's the COVID Consumer Economy

    07 September 2020

    Instant coffee mix and Nike Air Max footwear are all in. Bottled water and high-end Burberry trench coats are out.

    Welcome to America's consumer economy in the coronavirus health crisis. It is completely different than anything that Americans have ever experienced.

    "Everything we knew about supply and demand, we can...throw out...because consumer behavior has changed completely," said Piotr Dworczak. He is an assistant professor of economics at Northwestern University in Illinois.

    Reuters news agency examined a wide mix of goods and products to show how the COVID-19 crisis has changed consumer behavior for everything from clothing to food. These changes have given some businesses the power to raise prices or, at least, stop lowering prices.

    Business experts say all of this can be linked to one change: working from home.

    Over a very short period, a consumer-driven economy with predictable work and home spending changed completely. Rising demand for some products, as well as supply-chain problems, has pushed prices up.

    American consumers are now spending a lot more than they did a year ago on coffee, eggs, and cheese, the Reuters study found. The study was based on the latest pricing information from the Nielson Company and other data-gathering businesses.

    Demand and prices have increased for more costly items, such as Nike Air Max sneakers or a Louis Vuitton handbag.

    Economists explain this by saying that many people have more money right now because they are unable to buy things at stores or eat in restaurants.

    Many other workers who lost their jobs are receiving money from a federal program.

    "If I were to consider the a strange way, they may have more disposable income, if they kept their job," said Nirupama Rao, an assistant professor of business economics and public policy at the University of Michigan.

    FILE - Nike shoes are seen on display in New York, U.S., March 18, 2019. (REUTERS/Shannon Stapleton/File Photo)
    FILE - Nike shoes are seen on display in New York, U.S., March 18, 2019. (REUTERS/Shannon Stapleton/File Photo)

    Americans paid about 8 percent more for one kind of instant coffee at stores between July and August, the Nielsen Company found. Such inflation might make sense, given the increase in demand for products used in and around the home. But some experts believe stores and big businesses are using their power to increase profits while millions of people are out of work.

    Well-known companies "have been fattening their pockets" while putting pressure on the consumer who has to pay those higher prices," said Burt Flickinger. He is an expert on retail sales at Strategic Resource Group.

    Other industry experts note that many businesses have had to accept costly production changes because of the COVID-19 pandemic.

    For example, before COVID-19, tens of millions of workers bought a cup of coffee to drink on their way to work. Now, they make coffee at home every day and want to buy coffee mix instead. That means the coffee industry has had to increase production of smaller packaging for home use.

    Egg suppliers have had to increase production of egg packaging because people want more fresh eggs.

    Yet consumer companies can be hurt in the future if they are not careful.

    Prices for bottled water and diapers have gone up, while demand for those products has fallen for most of the pandemic. People are unwilling to pay for water when they can drink their own water at home. Parents can also use less costly diapers when they and their baby are staying home all day.

    COVID-19 safety restrictions have meant many Americans do not travel, eat out, or go to movie theaters. They are driving much less, so they buy less fuel for their cars. This means they have the money to buy high-priced items.

    Michael Collins is a professor at the University of Wisconsin's consumer science department. He says that during the pandemic, many Americans feel like they can buy high-end goods because of the money they are saving.

    "Now I don't eat out at all, so I have a couple of hundred dollars," he said. With this "found" money, a person can buy a luxury item.

    This behavior could explain the rise in demand and prices for the Air Max. Nike online sales increased about 50 percent in July, noted a clothing data business.

    Separately, the price of Louis Vuitton's Neverfull MM Monogram handbag has risen 5 percent on its website since the start of May. In July, Louis Vuitton owner LVMH said sales had increased since June, even with three price increases in six months.

    There are some limits, however.

    Demand for a Burberry woman's trench coat has fallen about 11 percent over the past year. It costs $2,245, and women who no longer go into the office, no longer want to spend a lot of money on outdoor wear.

    I'm Jonathan Evans.

    Reuters News Agency reported this story. Susan Shand adapted it for Learning English. George Grow was the editor.


    Words in This Story

    consumern. one that utilizes economic goods

    supply chainn. the companies from which one orders products to make one's own product

    data n. information

    handbagn. the item most women carry to hold personal items

    disposable -adj. something that is discarded after use

    retail – adj. things that are sold to the public in stores or online

    pocketn. a space sewn into clothing for holding small items

    pandemic – n. a contagious disease that moves across national borders

    package - n. a box or large envelope that is sent or delivered usually through the mail or by another delivery service

    diaper - n. a piece of cloth or other material that is placed between a baby's legs and fastened around the waist to hold body waste