Consumer behaviour has changed. The Pandemic accelerated digital transformation and ecommerce adoption. The boardrooms of consumer facing brands the world over are awash with talk of “omnichannel marketing”, “hybrid strategies”, “digital sales enablement” and “phygital marketing”. These are laudable, but futile without a solid understanding of consumer behaviour. Trade and Brand Marketers must understand local prevailing market conditions if they are to survive and thrive.
Let’s explore 4 South African market conditions impacting consumer goods and services that every brand must take note of:
- Inflation is taking its toll: Basket spend is up but volume is down.
- Constrained consumers prioritise perceived value over brand affiliation.
- The Pandemic changed consumer behaviour – but not in ways that were predicted or expected.
- International FMCG Marketing Trends don’t address the sizable Township Economy and Informal Sector in South Africa.
1. FMCG Basket Spend is up but Volume is Down.
According to Alisdair Sinclair, Managing Director, South Africa at Mondelēz International times are only going to get tougher for consumers as continually rising electricity and fuel prices drive up the cost of food.
So while, according to NielsenIQ’s State of the Retail Nation, Value per Buyer increased during the Pandemic, unit sales (volume) haven’t kept pace – a clear indicator of inflationary pressure on consumers.
In essence, with inflation at a 13-year high, South African consumers may be spending more per basket, but they are getting less.
Consumers are responding by redefining what they consider essential staples. And what was previously considered ‘discretionary’ is now ‘luxury’. As a result, previous must-haves like fresh milk, viennas, breakfast cereals, margarine, cheese and soap have seen decreases in units sold. And spend on grooming, entertainment and clothing have also decreased.
2. FMCG Consumers prioritise perceived value over Brand Affiliation.
According to NielsenIQ Managing Director Ged Nooy, South African consumers are among the most price sensitive in the world.
Inflationary pressure only added to consumer woes triggered by the Pandemic. Consumers faced downsizing, liquidation, reduced salaries and forewent bonuses. Despite a return to some semblance of normality, unemployment remains rife, and added inflationary pressure has resulted in increased price sensitivity and growing disloyalty in terms of brand preference across multiple categories.
The upshot? Value for money is no longer a priority of lower-income consumers, only. It’s a key driver of consumer behaviour across LSMs. This is evident in the growing popularity of private house brands in South Africa which are seen to meet the need for value for money.
The Growth of Private Brand Equity in South Africa
NielsenIQ reports that private house brands (think Pick ‘n Pay’s ‘No Name’) share of total basket value sales increased from 22.8% in 2019 to 23% in May 2020 and rose further to 24.3% by May 2021, equating to R71bn in annual sales.
And according to TradeIntelligence 98% of South African shoppers buy private brands, and 64% of shoppers purchase private brands every time they shop for food, household, and personal care products.
The takeaway here is that brands cannot rest on their laurels in terms of consumer legacy loyalty and brand equity.
Innovative marketing strategies that address consumer perceived needs and meet them where they are at are necessary to attract and retain consumers. By some estimations, up to 70% of buyer decisions are made in-store where intent to purchase is highest. Incorporating trade marketing promotions and activations into your omnichannel, hybrid strategy is essential to remind consumers of your value at the point in the buyer journey that matters most.
Learn how to adapt your trade marketing strategy to evolving consumer buyer behaviour to maximise sales and win brand loyalty.
3. The Long-COVID effect on Consumer Buyer Behaviour.
Changes like this in consumer behaviour and priorities are enduring.
Retailers also report that consumers continue, in the wake of COVID, to shop locally and less frequently. That means planning and taking advantage of bulk offers at month-end.
Is eCommerce the Death Knell for Bricks-and-Mortar?
It seems South Africans love the shared experience that malls and shopping centres offer, more than the convenience promised by rapidly digitising ecommerce platforms.
Despite the surge in online shopping during the Pandemic, South Africans have embraced a return to shopping centres and malls, according to Capital Connect.
According to a Mastercard study conducted in May 2022, while South African online retail doubled during the Pandemic, largely because of National Lockdowns, growth will be subdued in future as more people return to pre-Pandemic shopping behaviour.
Indeed, online sales only account for just 4% of retail in South Africa. Moreover, in the grocery space, consumers still prefer to buy perishable goods in-store. And very often, this dictates purchase behaviour and decisions outside of this category.
4. International FMCG Marketing Trends don’t address South African Diversity.
The “township economy” is worth billions of rands, with the informal retail market estimated at R157-billion – about a third of the FMCG market. And according to Pick n Pay, the ‘less affluent’ market in South Africa accounts for 64% of their total consumer market.
The 2022 Township CX Report, released in June 2022, reveals that customers in South Africa’s townships don’t trust influencers or “community leaders”, and prefer to spend their money within their communities, using food delivery services that offer traditional street foods, and from brick and mortar stores, where cash remains king. In terms of brand trust, a recent Nielsen report found family and friends’ recommendations made the biggest difference for 98% of respondents.
What this tells marketers is that segmenting your audience, understanding the market opportunity and meeting consumers where they act and transact is key.
Treating South African consumers as a homogenous tech-savvy mirror of Eurocentric trends is likely to mean alienating a sizable sector of your market.
At Tradeway, we’ve been helping leading consumer brands understand, engage and influence target consumers where they act and transact for over 2 decades. We’ve enjoyed a front row seat to changing consumer behaviour and pride ourselves in coming up with innovative trade marketing tactics for our clients.
We live in the Information Age. But emerging markets like South Africa are underrepresented when it comes to market analysis. Basing our go-to-market and route-to-market strategies on international trends means we are likely to alienate local consumers, and miss a sizable opportunity to meet them where they are at. And where they are at is under significant financial pressure. Brands who acknowledge this and seek to deliver against consumer needs during this difficult time stand to gain long-term brand loyalty. Getting this right means truly understanding consumer pain and perceived needs. Localised online research is a great first step, but engaging consumers where they act and transact will give you the greatest insight and influence.
At Tradeway we specialise in Trade Marketing activities geared to deliver not only awareness and influence, but market insights, too. We specialise in Brand Activations, Events, Promotional Marketing and Field Services. All underpinned by proprietary technology that delivers real time results and insights.
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