Where You Shop Matters: How Thinking Local Can Help Kickstart The COVID-19 Recovery
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While everyone around the world has felt the effects of the coronavirus in some way, small businesses have been hit particularly hard as they manage tremendous financial uncertainty amid varying levels of lockdown orders and distancing guidelines. As economies begin to reopen, understanding new shifts in consumer trends are more important than ever especially for those more exposed to the crisis than others. SMEs represent more than 94% of the total number of companies operating in the UAE, and employ over 86% of the private sector workforce.
To help gain a deeper understanding of the impact of the COVID-19 pandemic on commerce, Visa has conducted a survey of merchants and consumers in the UAE and wider Central Europe, Middle East and Africa (CEMEA) region. The COVID-19 CEMEA Impact Tracker shows just how severely some of our local businesses have been affected and how the outbreak has impacted consumers’ purchase behavior and attitudes, level of spending and payment preferences.
As expected, the negative impact from the pandemic on merchant revenues and profits has been high in all regions, merchants in the UAE said they felt increased anxiety with nearly 9 out of 10 (89%) reporting a plunge in average spend by consumers, though the figure tracked higher for merchants across all markets. Consumers in the UAE said they spent 59% less amid COVID-19, although merchants suggested customers are spending even less than they admit.
Not surprisingly, the largest drop was recorded in fashion, dining and entertainment segments, most of which relied on foot traffic to generate revenue. In the face of such a decline, merchants are, understandably, now most concerned about cashflow, whether they can afford to pay salaries and retain all their staff, and not being able to engage with their customers in person.
Although many countries are making efforts to stimulate business, the path to recovery may not be straightforward. Visa’s survey also shows that COVID-19 has changed the way consumers shop, with the majority of consumers in the UAE saying they have optimized their purchasing- buying in bulk (56%), making lists to avoid impulsive purchases (50%), and stocking non-perishable items to ensure fewer trips (37%). For those shopping in-store, seven out of 10 said they avoid rush hours with 79% more cautious about hygiene of where they shop.
Consumers are also changing their eating habits. More than half stated a preference for outlets that enforce hygiene measures and are avoiding unwrapped produce or deli shopping. When dining out, people in the UAE said they were now more hygiene cautious although more than half said they preferred home cooked food during COVID-19 or contact-free delivery.
A preference for contactless payment is also seen at point of sale, where consumers are increasingly looking to use contactless cards and mobile wallets. Two-thirds of UAE consumers (68%) said that COVID-19 has led to their first online grocery shopping experience, while 70% made their first online purchases from pharmacies.
Overall, according to our study, current conditions have served as a catalyst for online commerce with 10% of merchants in the UAE reporting they have introduced online offerings as a direct result of the pandemic, while the vast majority (91%) had an e-commerce presence before the pandemic. As consumers and merchants focus on safety and hygiene, the use of contactless payments has also increased during the crisis with merchants expecting a further 32% growth post COVID-19. Despite challenging conditions, prospects for future growth remain optimistic as merchants anticipate an incremental increase in online retail across the region.
Visa recognizes the importance of supporting local merchants, a vital part of our economies and the communities in which they are present. According to the World Bank’s International Finance Corporation, small-to-medium enterprises contribute more than half of employment and GDP in most countries irrespective of income levels. Small businesses create jobs and support innovation- and as we have seen during the COVID-19 crisis, local businesses can be a focal point for social interaction and initiatives.
With all this in mind, Visa has launched the "Where You Shop Matters" initiative to provide focused support for small businesses to tackle the various challenges they are facing as a result of the pandemic, and to encourage consumers to support the businesses in their communities.
Based on the findings and insights of our COVID-19 Impact Tracker, we will be rolling out a number of different programs to help get local economies adapting faster during and after the crisis, and to build resilience for a better future. This includes a Small Business Hub, which will include resources, including a digital toolkit with information and articles on how small business owners can enhance their business or start a new enterprise, and how to adapt to new digital ways of working. We will also be encouraging consumers to think about where they spend, and how shopping local can support sustainability, build community spirit and create economic opportunities for all.
At Visa, we are committed to making a difference, and we hope Where You Shop Matters can contribute to helping business owners and their customers become a part of rebuilding local economies and create businesses that can thrive.