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Online Consumption During and After the COVID-19 Pandemic: Evidence from Japan

Tsutomu Watanabe and Yuki Omori
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Tsutomu Watanabe: Graduate School of Economics, University of Tokyo
Yuki Omori: Nowcast Inc.

No CARF-F-524, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: The spread of COVID-19 infections has led to substantial changes in consumption patterns. While demand for services that involve face-to-face contact has decreased sharply, online consumption of goods and services, such as through e-commerce, is increasing. The aim of this paper is to investigate whether online consumption will continue to increase even after COVID-19 subsides. Online consumption requires upfront costs, which have been regarded as one of the factors inhibiting the diffusion of online consumption. However, if many consumers made such upfront investments due to the pandemic, they would have no reason to return to offline consumption after the pandemic has ended. We examine whether this was actually the case using credit card transaction data. Our main findings are as follows. First, the main group responsible for the increase in online consumption are consumers who were already familiar with it before the pandemic. These consumers increased the share of online spending in their overall spending. Second, some consumers that had never used the internet for purchases before started to do so due to COVID-19. However, the fraction of consumers making this switch was not very different from the trend before the crisis. Third, by age group, the switch to online consumption was more pronounced among youngsters than seniors. These findings suggest that it is not the case that during the pandemic a large number of consumers made the upfront investment necessary to switch to online consumption, so a certain portion of the increase in online consumption is likely to fall away again once COVID-19 subsides.

Pages: 38
Date: 2021-11
New Economics Papers: this item is included in nep-cwa and nep-pay
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