Executive Summary

Prior to pandemic, Sri Lanka’s economy was not in a good shape and due to the pandemic and its implications the economy worsened and reduced the income and spending capacity of the consumers. Sri Lankan consumers basically spend on eight types of commodities. Due to the pandemic the consumption pattern on these commodities changed. Share on monthly budget remained unchanged for essential food and clothing and drastically reduced for transport, entertainment, and leisure activities. But the expenses on internet, electricity, and water increased than prior levels. Work from home model is introduced in many sectors and this pattern will continue even in post pandemic period. Remote learning is also preferred than physical classes by the parents to protect their children from human contact. Consumers are shifting towards an online consumption model for the commodities. But we need to explore more on the sustainability of this model with respect to the availability of internet to the whole population of the country. Next, importantly we can observe a tendency to support local industries and locally manufactured goods by the consumers and thus contributing to country’s economy.

Consumption Patterns in Sri Lanka

As we stated earlier, income level determines most consumption decisions made by the Sri Lankan consumer. Goods and services which are widely consumed can be divided into main 8 categories (see Table 1).

Table 01

Classification of Commodities

Commodity Group	Description
Food	Food, Non-alcoholic and Alcoholic beverages
Clothing	Clothing and Footwear
Housing	Rent, Fuel and Power
Durable	Furniture, Furnishings, Household equipment and operation
Medical care	Medical care and Health expenses
Transport	Personal transport equipment and Communications
Recreation	Educational, Recreational, Entertainment and Cultural services
Miscellaneous	Personal care, Expenditure in restaurants, Cafes and Hotels and Other

Over the period of from 1976 to 2016, statistical data shows that on average Sri Lankan consumer spend nearly 80% of their income on food, housing, and transport combined which also is a common trend among developing nations (Rathnayaka, Selvanathan, & Selvanathan, 2019). Average Sri Lankan consumer spends the least for medical care which portrays the advancement of government health sector in the country. This consumption trend is viable until the pandemic hit the country. Relative prices of the commodities did not affect the expenditure share allotted by the consumer according to the study (Rathnayaka, Selvanathan, & Selvanathan, 2019). The country’s consumers are also subjected to modern urbanized market-oriented economy whereas the earlier, Argo-based economy is shrinking and comparing to the service industry the contribution to the GDP is also minimal by the Argo-based industries. This will certainly put most of the rural population just above the poverty line and with unemployment which in turn result in lower income level and less purchasing power to most of the rural based population. We will focus on the changes in consumption patterns of Sri Lankan consumers towards these categories.

Influence on Consumption Patterns

Food Consumption

Expenditure on Food

Expenditure on food has the highest share on monthly expenditure done by all households. Pandemic situation enabled consumers to consume food without any wastage which in turn proved that per-pandemic consumption level was not efficient. This trend resulted in consumers to efficiently consume food which eventually reduced the monthly expenditure share on food (Faculty of Humanities and Social Sciences, 2020, p. 25). We can safely assume that this pattern will continue even after the pandemic is over since the income sources of consumers will take time to regain their per-pandemic level. But if you consider cigarettes and alcoholic beverages, the consumption level has not reduced due less income (Faculty of Humanities and Social Sciences, 2020, p. 25). Even though this fact is bizarre we must conclude that due to the reduction in expenditure in other commodities, savings have increased, and consumers redirect those extra purchasing power towards cigarettes and alcoholic beverages. This is an encouraging fact to government which depends on the tax revenue of these products. And future consumption pattern will also follow the same trend in these two commodities which will not see any reduction in consumption level in post pandemic period.

Way of Procuring Food

Now let us focus on way of consumption of food commodity. In per-pandemic situation, majority of consumers solely depended on brick-and-mortar model of all the suppliers. This includes wholesale shops, retail shops, and supermarkets (E.g., Keells, Foodcity) which allowed consumers to physically visit these shops and choose the specific item needed. This method faced a huge barrier in functioning due to the lock downs imposed by Government during the pandemic. This paved way for the online shopping model, where consumers can select the items through an online platform and get the goods delivered to their home through a delivery service which increased the safety of consumers from COVID 19 virus. This method is easier and safer than physically visiting the stores. A survey conducted by Asia Pacific Institute of Digital Marketing (APIDM) indicated that 51% respondents will continue to shop digitally for the essential grocery which in turn show us the mentality of the consumers who opt for online shopping for its easiness (Asia Pacific Institute of Digital Marketing, 2020). Again, this will not be the end of brick-and-mortar model because consumption culture among Sri Lankan consumers cannot be changed overnight. But all suppliers should invest in an online platform to retain their clients because this model is here to stay for a long time.

What Consumer Look in Food

The third factor to be considered would be the choices consumers make with respect to the attributes of the product. Due to the pandemic situation, personal health has been placed at the topmost priority for each consumer. So, this will direct them to consume more health consciously and consumer will spend much time on researching about the food ingredients prior to purchase. As the two month all island lock down drastically reduced the day-to-day activities of the human population, the environment revitalized itself with high quality air and clean water. This portrays the effect of human consumption on environment and here after consumers will try to go along with sustainable products which will help to preserve the environment for the generations to come. Next attribute of the product will be price of the product. As the actual income is reducing for majority of consumers, the consumption decision will mainly favor the cost-effective product. This attribute will be strongly followed since every household will spend majority of the income to food monthly. Locally manufactured products will be consumed more to support the local industries and effectively contributing to their revenue. All the above-mentioned consumption patterns are supported by the survey conducted by APIDM (Asia Pacific Institute of Digital Marketing, 2020). These factors point us that there will be severe change in the consumption patterns regarding food commodity.

Another pattern we observe with essential food commodity is that now affluent consumers tend to stock items at least for a month with the expectation of a sudden lock down to be imposed in their area. This will result in shortage of items and day earners will shift to cost effective, locally manufactured goods. So, again this pattern will enforce rural population to support locally manufactured goods which will in turn contribute to country’s revenue generation.

Clothing Commodity

Clothing commodity includes all the items consumed by the consumer to wear in daily basis to occasional basis (E.g., Dress, footwear). So, we can divide this commodity into essential clothing and branded clothing which will be easy for us to discuss further. Since there are restrictions imposed on social gatherings and many organizations opt for ‘work from home’ model, consumer will restrict their choices only to essential clothing. Reduced income will be another factor which will force consumers to save income revenue by cutting down on branded clothing. This pattern can be observed strongly during the post pandemic period. Even if the clothing brands introduce online model to choose and purchase, the reduction in income which will prolong even after the lock down is removed, will make the consumers to save up their money. According to the APIDM 56% of the consumers think that it will take more than 4 months for them to come back to the normal financial status after crisis is over (Asia Pacific Institute of Digital Marketing, 2020).

Next factor would be the limited means of spending on this commodity. Due to the lock down and restrictions on public gathering, people will not have chance to celebrate festivals and family functions. This will obviously remove the need for branded clothing to the consumers. In response, these deferred expenditure on clothing and fashion will contribute to the involuntary savings occurred by people not spending in a lock-down (Faculty of Humanities and Social Sciences, 2020, p. 33).

Transport Commodity

With the removal of lock down and restrictions on mobility, consumers will begin to transport themselves around the country for work and leisure. Since work from home model is used by majority of the organizations, there will be reduction in people looking to hire vehicle, using public or private transport medium. This will reduce the consumption of fuel too. Consumers will try to utilize the online services to reduce the time they spend out of their own house. The main reason for this would be that COVID 19 virus can spread to another person easily by just standing next to an infected person. This forces people to stay indoors and in unavoidable case people will opt for a private vehicle for transportation rather than a shared vehicle (Asia Pacific Institute of Digital Marketing, 2020). This pattern of reduction of usage of transport will continue in post pandemic period and will directly affect the industries related to transportation. Industries such as fuel supply, automobile spare parts trading, and auto care services will face severe reduction in demand in following months.

Housing and Durable Commodities

We would focus on electricity bill, water bill, and internet cost as the first commodities in this section. As we can certainly find that the consumption of these commodities will be high during the post pandemic period. This is mainly due to the ‘work from home’ culture and mobility restriction for the house members. This consumption pattern will be followed even after the mobility restrictions are lifted considering the consumer’s willingness to stay indoors.

In durable commodity we can include all the furniture, electronic gadgets, and household equipment. According to the survey conducted by APIDM, 39% of the participants responded saying that they will reduce or completely cut down the expenses for electronics and gadgets (Asia Pacific Institute of Digital Marketing, 2020). With low income and uncertainty on future cash flows consumers will cut down on expenses on household equipment since they are not in the priority list for most of them.

Recreation and Miscellaneous Commodities

Education

Prior to the pandemic consumption with respect to education were mostly private tuition classes and the expenses on the materials needed for those classes. During the lock down, these educational classes shifted to online platforms. So, the level of expenses for education did not reduce drastically as other commodities. But remote learning showed another dimension to the consumers. Especially, to the parents of young students remote learning will be the preferred method of learning due to the lack of human exposure to their children. Health of their children will take the front line when they make decisions during post pandemic period.

Recreational, Entertainment, and Leisure

The worst affected industries during and in post pandemic period would be local and foreign tourism, hotels, restaurants, and entertainment establishments. The consumption of these services and products will reduce due to the mobility restrictions in place by the government. Even in post pandemic period, consumers will not allocate share of their income to these commodities due to the low income and uncertainty in future cash flows. According to APIDM, 66% of participants will cut down expenses on foreign travel, 34% will cut down expenses on leisure & local travel and 59% will reduce eating out in restaurants (Asia Pacific Institute of Digital Marketing, 2020). Even after the mobility restrictions are lifted consumers will tend to have gatherings in own places with minimal crowd to reduce their chance of exposure to COVID 19 virus. This pattern will continue until the fear of exposure is removed from the consumer’s mind. Sri Lankan institutions should work on methods to encourage consumers to visit their premises without any fear. Some of the methods used by tourism and travel industry organizations would be contactless check-in in hotels and bio metric pathway facilitated by face recognition technology in airports.

Online Consumption Model for Sri Lankan Consumers – Will it Work?

So, we have been talking about the changes in consumption patterns in the types of commodities and most of the organizations shifted to an online platform to retain their clients during the lock down. But whether this online model will be followed in the post pandemic period is a fact to be analyzed. Certainly, the online model has its perks such as time saving, higher number of options available, and less exposure to human contacts. But the main factor is that the consumer needs to have an active connection to internet to consume in this way. As we mentioned earlier the rural population has the highest share among the population of Sri Lanka (Faculty of Humanities and Social Sciences, 2020) and the internet penetration within the population is also low (World Bank, 2017). So, the online method will not be an alternative solution to most of the population unless the Government takes measures to reduce the cost of internet and the service providers bring the whole island under their connectivity umbrella. Now we might think about the population density, where the greatest number of consumers are situated, are the places covered by these service providers which are usually urban areas. We can assume that these consumers have active internet connection and have knowledge about the online platforms available for different commodity. So, I selected three main key words which these consumers might use to start searching about online platforms. They are “online banking”, “online shopping”, and “online classes”. We can see the number of times these key words were used in Google search for past year (see Figure 1).

Figure 01

Google Trends - Interest over Time

Note. Adapted from Google Trends, by Google LLC. (https://trends.google.com/trends/explore?geo=LK&q=online%20shopping,online%20banking,online%20classes).

As we can observe that consumers searched for online platforms of these commodities during the lock down period (March 2020 and April 2020) and after the lock down is lifted the interest on these online platforms returned back to the levels we saw prior to pandemic. We can even see the latest spike in interest on these online platforms due to the partial lock down imposed in Western province. With this data we can safely assume that consumers prefer the ways used prior to pandemic rather than the online platforms.

Conclusion

Pandemic has affected Sri Lanka’s economy severely and many industries have faced the shock waves generated by this situation. Lock downs, mobility restrictions, and restrictions on public gatherings are the major results of this pandemic situation. This resulted in low monthly income, loss of jobs, and interruption in availability of goods and services. With the reduction in spending capacity, consumers started to consume only essential commodities and that too with in an efficient manner to reduce wastage. All non-essential, luxury commodities were taken down in the priority list and even in post pandemic period that pattern will continue until consumers get back their income level back to prior pandemic level. In this situation, many consumers and suppliers shifted to online model where consumer can choose and place the order and supplier will arrange the delivery to the doorstep of the consumer. Apart from this, consumers are showing characteristics such as choosing to cost effective products, sustainable solutions, and locally manufactured products. The government and the telecommunication service providers should start working on reducing the cost of internet and increasing the connectivity throughout the island to help online consumption model to grow in the country. Further studies should be done on the extend of internet availability among population and how organizations communicate with consumers in this restricted period. Another factor to be considered would be the efficiency of service provided by the delivery network in the country.