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

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. Graduate School of Economics, University of Tokyo. E-mail: watanabe@e.u-tokyo.ac.jp. Website: https://sites.google.com/site/twatanabelab/ We would like to thank Yasutora Watanabe, David Weinstein, and Tomoyoshi Yabu for helpful discussions. This research forms part of the project on “Central Bank Communication Design” funded by the JSPS Grant-in-Aid for Scientific Research No. 18H05217. An earlier version of this paper was featured in Covid Economics, Issue 32, 208-241, 26 June 2020. Graduate School of Information Science and Technology, University of Tokyo; Nowcast Inc. Email: ohmori@jsk.imi.i.u-tokyo.ac.jp.