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SA consumers may be ‘living in a bubble’, research giant warns
By our News Team | 2022
People are going to the shops far less frequently, but are still spending more and may be in denial about difficult economic conditions.
South African shoppers are not visiting retailers as frequently as they once did. But they continue to spend more and shrug off food inflation and the rising cost of living.
This is according to the latest NielsenIQ ‘State of the Retail Nation’ report, which notes that consumers may be in denial about the difficult economic conditions in the country.
Ged Nooy, NielsenIQ Managing Director for South Africa, believes this creates a dangerous situation for consumers and retailers alike.
Photo by Cottonbro from Pexels
“The danger of this is that we’re living in a bubble. This will eventually burst and will create a crisis mentality amongst shoppers. As a result, price increases and a reduction of promotions driven by external factors could see significant volume impacts in 2023,” Nooy warned.
Notable shifts in shopper behaviour
Data measured over the four weeks to the beginning of September 2022 shows notable shifts in shopper behaviour by South African consumers:
- Shoppers are venturing out to stores half as much as they used to.
- More shoppers are bargain-hunting and making promo purchases.
- Shoppers look for retailers that provide the best overall basket – not single-item deals.
- Shoppers are starting to drop costly items from their baskets.
Despite this, overall annual consumer packaged goods sales showed a 10.3% annual increase – while the latest month (to the end of August 2022), versus the same month last year, showed a 17.2% increase in value sales.
This spike is due in large part to higher inflation in the shopping environment, as well as the base effect from the liquor ban last year.
When consumers do go to the shops, they visit fewer shops but are adding more product categories to their basket and spending more per trip, Nielsen said.
There has also been a significant uptick in promo-hunting, with 30% of FMCG products currently being sold on promotion – a 2% annual increase. In the liquor category, 47% of the top 20 products are being sold on promotion, which is up 9% from a year ago.
“As brands look to gain share in the short term and assist in managing shelf inflation, we see higher and higher reliance on promotions to gain market share. The problem is that over-promoting drives down value perception resulting in disloyal promo-only buyers,” Nooy said.
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