Recent months have seen consumer behaviour heavily influenced by major economic upheaval worldwide. South Africa's consumer industry is similarly influenced and will need to look at possible ways to adapt in order to deal with tighter belts and spending habits in these tough financial times.
Latest figures show a 5,3% drop in retail spend in March year-on-year, the worst fall since 2003. Together with cutbacks in South Africa's major industries, like mining and motor, this indicates that the global economic crisis is taking hold in South Africa.
Added Value and Glendinning, two top marketing consultancies, have joined forces to offer wisdom to both the manufacturer and the retailer, aiding both to reach the shopper in the most effective way in the present economic climate.
"It's hugely important to be able to identify the challenges facing the South African shopper," says Carmen Roets of Glendinning Managements Consultants.
Loss of jobs and increased living costs pose a huge challenge to retailers in the months ahead as brand loyalty is replaced by price and value awareness. This is a shift of focus from the consumer of the product and onto the shopper – not always the same person. "Think of it like this: the shopper who buys dogfood isn't the consumer of it," Roets says.
The key implications for manufacturers and retailers is to be aware of the needs of the shopper.
Andrea Ellens of Added Value explains: "Everyone still has to eat and drink. Already, this is a huge opportunity for those who can target shoppers best in a rapidly changing economy. For example, Tesco has consistently targeted the changing needs of the shopper to drive share since the 1970s."
Ellens adds that factors such as product availability, trading down by buying more affordable products or buying those products less often, the cashless week at the end of the month and the fact that all shoppers are more value conscious are all influencing the shopper's buying decisions.
Answering the needs of the shopper amidst economic difficulties is about offering them value for money. Instead of driving the prices of known value items (KVI) at or below cost, it may be worthwhile to offer relatively more premium products at discounted prices, offering the shopper value for money whilst ensuring that the retailer is still making a profit.
"Selling KVI even cheaper does little for your business, your brand or the category, rather, manufacturers and retailers should work together to reward changes in shopper behaviour by driving value added offerings that shoppers are still looking despite the economic situation," Roets points out.
Value-packs such as a combination of meal items, or three-for-one specials are some ways that retailers and brands can look at boosting sales. Value propositions like these not only give the shopper something to show for money spent, but are a way to highlight savings.
Roets and Ellens agree that offering effective value propositions means understanding the shopper's particular environment and the needs and occasions that occur within that environment. Offering special snack deals for specific occasions, such as a biltong, chips and cold-drink value pack for rugby season, is an example of this.
The bottom line is that retailers must understand how their shoppers shop in order to maximise sales. Recent figures show that South Africans are becoming more cautious with their money, no longer buying impulsively. By offering value, retailers and brands can ensure continued sales.