2.2.2 Uncertainties in income level and consumer spending behavior among Malaysian working adult during the outbreak of COVID-19
Consumers make purchasing choices consistently, and many do not have the slightest idea about the factors that drive them to their decision. The attributes behind each purchasing option can emerge from psychological, social, cultural, social, personal, or economic factors. Undeniably, one of the significant factors influencing consumer behavior during the outbreak of COVID-19 would be changes in the income level. Income can impact an individual’s buying behavior, in a way where higher income yields higher buying capacity. It is rather straightforward that as extra cash increases, consumers will have a more significant opportunity to spend on luxurious items. On the other hand, low-income or middle-income consumers tend to spend most of their income on essential needs, such as groceries and garments (Clootrack, 2020). Substantially, the COVID-19 crisis has caused significant economic impact; productions have come to a halt, business operations are disrupted, and individual developments are severely affected, bringing losses to corporations in terms of business opportunities and human capital (Secretariat, 2020). At the ground level, social protection programs allow individuals to survive the COVID-19 crisis, particularly those who cannot stand to lose their income. Small-scale farmers can be supported in this trying time by accessing collection places, warehousing, or linkage to a web-based business. The crisis mustn’t be about food shortage, but logistics.
Underemployment is also an issue that may be magnified during the outbreak of COVID-19. During past crises, wage levels and working hours decreased substantially. While self-employed individuals are not usually affected by financial uncertainties, they are always bound to maintain their income levels, even during regular economy cycles. Consequently, informal employment tends to increase during times of crisis. However, the current measures that limit the movement of people and products may substantially diminish such phenomena (Organization, 2020). Working poverty is also expected to increase substantially. The strain on financial circumstances resulting from the decrease in their income level will diminish workers to near or underneath the poverty line. Due to the ongoing crisis, an extra 8.8 million individuals worldwide are expected to be categorized into working poverty. For instance, working poverty declined by only 5.2 million in 2020, as compared to pre-COVID-19, where working poverty decreased by a massive 14 million (Organization, 2020). It is believed that there will be 20.1 million to 35 million more individuals globally that will fall in working poverty due to the current crisis.
The crisis has caused a substantial shock to the economic and labor markets, affecting both supply (production of goods and services) and demand (consumption and investment). Disruptions in production that originated in Asia have now expanded to supply chains worldwide. All organizations, regardless of size, are facing real challenges. Notably, the aviation, travel, and hospitality industries are facing a massive decrease in income, bankruptcies, and employment losses. It will also be especially hard for Small and Medium Enterprises (SMEs) to sustain their business operations (Organization, 2020). Following travel bans, fringe termination, and quarantine measures, many individuals cannot go to work, which substantially impacted their income level, especially for informal and informally employed authorities. Given the present condition that increases vulnerability and fear, businesses are likely to postpone their investments, stock purchasing, and worker employment. Hence, the following shows the first hypothesis formulated in this research.
Hypothesis 1 (H1): Uncertainties in income level has a significant effect on consumer spending behavior among Malaysian working adults during the outbreak of Covid-19.
2.2.3 Access to credit facilities and consumer spending behavior during the outbreak of COVID-19
According to Manuela Pulina (Pulina, 2011), a credit card is a payment instrument used to buy products and services on credit, as permitted by a guarantor, for a specified period. Today, there is a broad scope of payment instruments, ranging from cash, electronic transfer, prepaid cards, direct debit, deferred debit, and credit. These payment mechanisms are suitable for heterogeneous customers’ needs. During the outbreak of COVID-19, the changes in consumer behavior among Malaysian working adults have significantly affected the e-commerce industry. Lockdown measures implemented by countries around the world have severely impacted consumer spending behavior, as consumers could no longer shop physically for goods that they need. Eventually, consumers have switched to shopping online. Substantially, an individual’s accessibility to credit facilities may also be significantly affected by the uncertainties brought upon COVID-19. For instance, consumers have shifted considerably towards online business methods, which is considered one of the main approaches that people should undertake to survive this pandemic. More and more people are trying to earn profits from online groceries. Apptopia, a renowned mobile platform that provides app downloads data, implied that the daily downloads of popular grocery applications such as Walmart Grocery, Instacart, and Shiipt had increased significantly since the end of February (Mehraeen, Salehi, Noori, & Seyedalinaghi, 2020).
Apart from that, consumer spending behavior tends to alter during an economic crisis. Consumers respond to the more significant part of the economic situations around them, thus changing their consumption patterns. These changes result from the shifts in the consumers’ perception of risk. The past financial crisis during 2008 has influenced consumers financially as well as mentally. Individuals become extravagantly cautious when spending. They tend to reduce their consumption on premium items, even if they can still afford to do so. They tend only to purchase necessities, switch to lower-end brands, and focused more on promotions (Muniady, Mamun, Permarupan, & Zainol, 2014). They even began to compare similar goods and select the most worth based on price, compromising the quality. The entire spending process has changed from limited decision-making spending behavior to extensive decision-making buying behavior. As such, the spending behavior before the crisis did not depend on comprehensive decision-making and data gathering, but after the crisis, the process has become much more complicated.
Furthermore, consumer spending behavior during the outbreak of COVID-19 has changed to credit facility instruments such as credit cards. Credit cards have a significantly positive impact on consumer spending behavior, deriving their many advantages and benefits (Jan, 2013). For instance, credit card payment has gained trust and prevalence around the world. Besides that, even though it has become normal to own a credit card, its effects are still questionable in both developed and developing nations. Moreover, the demand for online business has overwhelmed due to the COVID-19 pandemic. In Alibaba’s online store, sales volume was up by 220% year-on-year during Chinese New Year, when lockdown measures began taking place (Accenture, 2020). In the United States, Instacart’s, an online delivery service, witnessed their membership grew 10–20 times in states with the most number of COVID-19 cases. One of five users who ordered their groceries online is first-timer. For consumers that are 56 years and above, one of three users is first-timer. While new users increase, many existing buyers have struggled to get delivery slots. UK online supermarket, Ocado, has stated that, in 2019, almost all of their active users have placed an order at least once weekly. However, as the demand increases, so did the basket size, developing by over half and diminishing the number of requests the business could handle and deliver (Accenture, 2020). This lack of system limit seen over the retail landscape has implied that some new consumers have replaced existing faithful customers. Existing customers are presently going somewhere else when they could not get delivery slots, reflected by the purchasing of more local brands.
Hypothesis 2 (H2): Access to credit facilities has a significant effect on consumer spending behavior among Malaysian working adults during the outbreak of Covid-19.