Online Consumption During the COVID-19 Crisis: Evidence from Japan

Abstract

The spread of novel coronavirus (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 study is to investigate whether online consumption will continue to increase even after COVID-19 subsides, using credit card transaction data. 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 coronavirus pandemic, they would have no reason to return to offline consumption after the pandemic has ended, and high levels of online consumption should continue.
Our main findings are as follows. First, the main group responsible for the increase in online consumption are consumers who were already familiar with online consumption before the pandemic and purchased goods and service both online and offline. These consumers increased the share of online spending in their spending overall and/or stopped offline consumption completely and switched to online consumption only. Second, some consumers that had never used the internet for purchases before started to use the internet for their consumption activities due to COVID-19. However, the share 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 as COVID-19 subsides.