Enable Light Mode!

To navigate the current economic climate, consumers are pushing ahead, making deliberate shifts in what, where and how they spend. Balancing household budgets while fulfilling long-postponed desires for in-person living means facing meaningful questions on how to spend. Dine out or cook? Buy online or in-person? Book a trip now or later? Shop on the weekend or during the week? Understanding these tradeoffs and where the patterns are emerging reveals how consumers are shifting their longer-term spending habits.

In "Shifting wallets: New consumer spending habits," the Mastercard Economics Institute explores unique and high-frequency economic measurements to better understand the evolution of consumer choices in three areas - what to buy, where to buy and when to buy. Drawing from aggregated and anonymized sales activity in the Mastercard network and third-party sources, we look at how consumers are shifting their spending in the face of higher prices and a reinvigorated appreciation for experiences.

  • Consumers are ordering from restaurants - either in-person or online - over making their own meals at home. Spending on restaurants was up 25% between January and August of this year compared to the same period in 2021, while grocery spending was up 14%. 3

  • Online grocery spend is 70% above pre-pandemic levels, while in-person grocery spend is 25% above. 4

  • Globally, consumer flight bookings have remained around 16% above 2019 levels through the end of August 2022.

One of the most basic and essential decisions people make is where and what to eat. What they have less control over is how much they spend on food. By the end of August 2022, global food prices were a staggering 48% above pre-pandemic levels. 5 Labor shortages and high fuel prices further increased food prices in grocery stores and restaurants.

At the same time, mobility restrictions due to the global pandemic and a sweeping shift to digital in retail completely reshaped how and where people eat. While food prices have increased grocery and restaurant prices, growth in restaurant spend is gaining momentum faster than grocery spend, a trend we're seeing in the more recent data. Consumers have spent 25% more on restaurants and 14% more on groceries between January and August of this year compared to the same span in 2021. 6

This reflects a preference for restaurants, as well as a shift from name-brands to off- and store-brands in products at grocery stores.

While consumer spending on essentials can often be fairly steady, spending on discretionary categories typically shows more fluctuation. In the latter, consumers continue to prioritize travel as mobility restrictions have been largely reduced or eliminated in most of the world. Despite higher prices and crowded airports as travel surged this summer, 7 global flight bookings are still 16% higher than in 2019. 8 It appears that travel has become a necessity.

In-store grocery vs. online grocery delivery

Overall grocery spend has remained roughly 29% above its pre-pandemic level through the end of August 2022. 9 This is largely driven by impressive growth in online grocery, a staggering 70% above the pre-pandemic trend - a clear sign that this new spending behavior is here to stay two years later. Meanwhile, in-person grocery spend remains above trend as well, but to a lesser extent - about 25%. Of course, the share of grocery spending that is online is about 10% relative to in-store despite its impressive growth. Before the pandemic, it was 6%. 10


Unsurprisingly, the convenience of grocery delivery - a behavior widely adopted by even the most novice online shoppers - continues to be in high demand even as many logistical hurdles continue to improve. Convenience factors, such as re-ordering past orders and the ability for businesses to update prices more quickly, help fuel the demand.

However, not all consumers buy into the convenience of someone else picking their peaches. The ease of buying groceries online has widened the gap between how much high-income and lower-income households spend on groceries. Our insights show a striking divergence in the shift to digital for people who have standard cards on the left and people who have premium cards, which require a higher minimum creditworthiness-on the right. Online grocery spending by people with standard cards has returned closer to the pre-pandemic level relative to people using premium cards, which remain above the pre-pandemic trend. 12 This suggests that certain consumers are less willing or is unable to choose the convenience of shopping online in today's high inflation environment.

The difference in who buys food online is more pronounced in certain countries. 13 In Brazil, for example, the share of online restaurant spending on premium cards is 5 percentage points above pre-pandemic levels versus spending on standard cards, which are back to the pre-pandemic trend. Similarly, in the Netherlands, the share of online grocery spend on premium cards remains 5 percentage points above pre-pandemic levels, whereas spending on standard cards is back on trend. 14

Travel near and far

Globally, consumer flight bookings have remained around 16% above 2019 levels through August 2022, signaling continued robust demand after a strong first half of the year despite rising economic challenges. 15 The summer months, when travel picks up around the globe, also saw higher flight bookings between May and August of this year than the same time period in 2019. Domestic and short-haul flight bookings were 15% and 18% higher respectively between May and August than the same period in 2019. It trailed off a bit with medium-haul at 13% higher and long-haul bookings were -4% below 2019 levels. 16 Moreover, with the recovery in Asia Pacific still underway and outbound tourism from China not yet unlocked, there is reason to be optimistic about more travel recovery heading into 2023.

Consumers are also choosing how far they are willing to go: long-haul vs. short-haul flights. While there's been an impressive recovery in spend on long-haul flights, growth in short-haul flying remains 20% above the long-haul segment globally. 17 We explore these differences at a global and country level in the graphic below.

There are notable exceptions to this rule. For example, medium- and long-haul flights have tended to outperform the short-haul segment across most European countries. Perhaps travelers are choosing other modes of transportation as overall interest in travel remains strong. Across Europe, public transportation, trains and buses recovered much quicker during the pandemic versus the rest of the world, and growth in this segment remains roughly 1 percentage point higher relative to the rest of the world.

  • The digital success story remains strong among both small and large businesses. For services specifically, small businesses are gaining market share relative to large businesses online. We estimate that online services at small businesses are growing 1.5-2x faster than at large businesses. 18

  • Growth in online spend at small services businesses is outperforming large services businesses, up 59% and 34% vs. the same month in 2019, respectively. 19

  • In the retail sector, large retailers outperformed small ones in the shift to digital, with e-commerce growing 66% versus 27% when comparing August 2022 and August 2019. 20

Consumers choose where to buy based on several factors, including convenience, price, availability and brand or store loyalty. There is also a choice between large and small businesses - effectively shopping local. Unfortunately, this choice for consumers has widened a gap between large and small businesses for in-store and online spending since the pandemic's start.

The small businesses that were able to launch and grow an online business successfully could better compete with large businesses. Online spending at small services businesses grew 59% between August 2019 and August 2022, above large services at 34% over the same period. In the retail sector, large retailers outperformed small ones in the shift to digital, with e-commerce growing 66% versus 27% when comparing August 2022 and August 2019. 21


The number of existing small businesses that started accepting online payments for the first time since the start of the pandemic has remained at least 28% above pre-pandemic levels for virtually every month, peaking at 256%. Ultimately, this helped them reach more consumers and required less overhead and real estate than expanding for in-person customers. 22

These spending choices clearly show that consumers have re-evaluated their wallets in the face of ongoing price pressures, economic uncertainty, persistent Covid cases and geopolitical tensions.

Consumers are changing their essential spending choice for food, with restaurants gaining ground and shifting some of their spending away from grocery. We expect this to continue, especially for in-person restaurant spending as people continue to seek out large and small experiences. In discretionary spending, consumers continue to fulfill their need to travel, with high potential for further recovery when China and other countries in Asia Pacific loosen mobility restrictions. We also expect to see consumers continue to blend their leisure and work travel as corporate "work from anywhere" policies endure. They're also changing their choices for how they buy, with small services businesses showing great resilience after innovating their digital presence and large businesses dominating e-commerce. We expect to see small services companies remain competitive as consumers seek out differentiated, disruptive services. Consumers are also changing when they buy as hybrid work environments allow for more flexibility for online and in-person transactions. The days people choose to make certain purchases may continue to shift as some workers start hybrid work schedules and others maintain their virtual schedules.

The shifts in consumer spending preferences comes as more structural changes than temporary as we consider the re-evaluation of consumers for all aspects of how they live, work and spend due to the pandemic. Clearly there's no going back to pre-pandemic habits and preferences, and consumer spending choices will continue to play out as macroeconomic trends take shape.

Notes & Disclaimer

Footnotes

  1. Reflects the YTD growth rate of aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) as of August 2022 YTD. Seasonally adjusted and price adjusted global estimate.↩

  2. Figures reflect aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) for the month of August 2022. Reflects a cross-country average of small & medium-sized versus large retailers and service businesses across 22 countries. Small and medium-sized businesses derived by a proprietary classification model developed by the Mastercard Economics Institute.↩

  3. Reflects the YTD growth rate of aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) through August 2022 YTD. Seasonally adjusted and price adjusted global estimate.↩

  4. Reflects the deviation above the pre-pandemic trend. Measures aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) through as of August 2022. Seasonally adjusted global estimate.↩

  5. UN FAO World Food Price Index.↩

  6. Reflects the growth rate of aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) as of August 2022 YTD. Seasonally adjusted and price adjusted global estimate.↩

  7. Travel 2022: Trends and Transitions, Mastercard Economics Institute, 2022.↩

  8. Corresponds with the number of flight bookings made during reference period relative to the same time in 2019. Based on aggregated & anonymized flight booking data provided by third party partners, sourced by Mastercard Economics Institute.↩

  9. Reflects the deviation above the pre-pandemic trend. Measures aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) through as of August 2022. Seasonally adjusted global estimate.↩

  10. Based on aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) for the month of August 2022. Seasonally adjusted.↩

  11. Reflects the deviation above the pre-pandemic trend. Measures aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) through as of August 2022. Seasonally adjusted global estimate.↩

  12. We use entry-level cards as a simple proxy for lower income and premium cards as a simple proxy for higher incomes. See https://www.federalreserve.gov/econres/notes/feds-notes/are-income-and-credit-scores-highly-correlated-20180813.html↩

  13. Based on an evaluation of online spend for groceries and restaurants across 19 countries and disaggregated by premium and standard cards.↩

  14. Reflects the deviation above the pre-pandemic trend. Based on aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) through the end of August 2022.↩

  15. Corresponds with the number of flight bookings made relative to the same time in 2019 through the end of August 2022. Based on aggregated & anonymized flight booking data provided by third party partners, sourced by Mastercard Economics Institute.↩

  16. Corresponds with the number of flight bookings made during reference period relative to the same time in 2019. Based on aggregated & anonymized flight booking data provided by third party partners, sourced by Mastercard Economics Institute.↩

  17. Corresponds with the number of flight bookings made relative to the same time in 2019 through August 2022. Based on aggregated & anonymized flight booking data provided by third party partners, sourced by Mastercard Economics Institute.↩

  18. Figures reflect aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) through August 2022. Reflects a cross-country average of small & medium-sized versus large retailers and service businesses across 22 countries. Small and medium-sized businesses derived by a proprietary classification model developed by the Mastercard Economics Institute.↩

  19. Figures reflect aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) as-of August 2022. Reflects a cross-country average of small & medium-sized versus large retailers and service businesses across 22 countries. Small and medium-sized businesses derived by a proprietary classification model developed by the Mastercard Economics Institute.↩

  20. Figures reflect aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) as-of August 2022. Reflects a cross-country average of small & medium-sized versus large retailers and service businesses across 22 countries. Small and medium-sized businesses derived by a proprietary classification model developed by the Mastercard Economics Institute.↩

  21. Figures reflect aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) as-of August 2022. Reflects a cross-country average of small & medium-sized versus large retailers and service businesses across 22 countries. Small and medium-sized businesses derived by a proprietary classification model developed by the Mastercard Economics Institute.↩

  22. Derived by a unique measurement of new online acceptance developed by the Mastercard Economics Institute. Reflects the aggregated & anonymized count of existing brick-and-mortar merchants in the Mastercard network who went online for the first time.↩

  23. Source: Mastercard Economics Institute, Euromonitor. Reflects weekend to weekday share shift derived by aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) as of August 2022 YTD. The change in share corresponds with the change in the average share of spending by day of the week in 2019 versus the average share of spending by day of the week in 2022. Global market size for department stores sourced through Euromonitor. Assumes day of the week share shift is representative across all tender types.↩

  24. All the data points in this section are derived by aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) as-of August 2022. The change in share referenced throughout this section corresponds with the change in the average share of spending by day of the week in 2019 versus the average share of spending by day of the week in 2022.↩

About the Mastercard Economics Institute

Mastercard Economics Institute launched in 2020 to analyze macroeconomic trends through the lens of the consumer. A team of economists, analysts and data scientists draws on Mastercard insights - including Mastercard SpendingPulse™ - and third-party data to deliver regular reporting on economic issues for key customers, partners and policymakers.

Disclaimer

© 2022 Mastercard International Incorporated. All rights reserved.

This Mastercard Economics Institute presentation (This "Presentation") and content or portions thereof may not be accessed, downloaded, copied, modified, distributed, used or published in any form or media, except as authorized by Mastercard. This presentation and content are intended solely as a research tool for informational purposes and not as investment advice or recommendations for any particular action or investment and should not be relied upon, in whole or in part, as the basis for decision-making or investment purposes. This presentation and content are not guaranteed as to accuracy and are provided on an "as is" basis to authorized users, who review and use this information at their own risk. This presentation and content, including estimated economic forecasts, simulations or scenarios from the Mastercard Economics Institute, do not in any way reflect expectations for (or actual) Mastercard operational or financial performance.