South African consumers have faced a barrage of life altering events since the onset of the COVID-19 pandemic and subsequent lockdown in March, which has had a profound impact on what, where and why they shop. This insights stem from a new Nielsen report The Covid-19 Behavioural Reset, which delves into how shoppers are redesigning their product choices and predicts that many pandemic consumption patterns are set to become entrenched essential routines.
Nielsen Retail Intelligence MD for Sub-Sahara Africa Kelly Arnold explains; “Since the onset of the COVID-19 pandemic, many consumers find themselves in a radically adjusted financial position, with 41% of South Africans saying they have been personally impacted by job losses under the COVID-19 lockdown. These massive and sudden shifts in unemployment rates are among the many factors driving the declining spending power of numerous South Africans.
“As a result, things that may have been bought in a panic during February or March, fall under greater scrutiny today. This has seen consumers prioritise in-home spending over discretionary out-of-home expenses and become more risk-averse, driving them to seek products and services that deliver value, quality and peace of mind.”
The Nielsen Covid-19 Behavioural Reset Report identifies four behavioural changes which make sense of today’s fundamentally altered shopping landscape as they apply to two distinct types of South African consumers; namely Constrained Consumers who are stretched financially due to factors such as job losses and compressed income, and Insulated Spenders who are the more financially sound of the two groups, having managed to retain their job and therefore sustained their income.
A reconfigured shopping basket
Delving into the details of each behavioural shift, the Basket Reset relates to the product choices South African consumers will make when fundamental consumption is taking place. The report states that as more and more consumers become unable to maintain their peak COVID-19 spending levels, the consideration set for what is “essential” will shrink. Even insulated spenders are likely to scrutinise the contents of their above-norm purchase habits formed at the onset of the pandemic.
Expanding on this Arnold comments; “As emerging essentials, such as face masks which were not historically a part of budgets become mainstays and new preferences emerge among retail channels, consumers, especially constrained consumers, will seek justification for every purchase moving forward.”
However, whether they are employed or not, consumers are less optimistic about what the future holds. This cautiousness will impact where and how households continue to pad their pantries and shelves amid COVID-19 protocols. Decisions will need to be made to reconcile purchase habits, which consumers have had in place for years alongside today’s new reality where health and value priorities now compete side by side.
Home is where the wallet is
The Homebody Reset reveals where consumption will occur. South African consumers have formed a new DIY mentality concerning consumer goods during the months they spent at home under the lockdown. However, even though many lockdown restrictions have lifted some aspects of consumers’ ‘self-care and self-service’ attitude have remained.
Arnold explains; “What’s clear is that the homebound economy is here to stay. Within that, the constrained consumer will seek out self-fulfilment of needs, limit their exposure to price increases and look for cost savings, whereas for insulated spenders this means creative exploration and trial of new products.”
Overall, consumers continue to prioritise in-home spend, with spending on food and beverages being maintained or even increased compared to the end of 2019. This is borne out by 79% of South African shoppers who say they bought treats or indulgent categories; with the top three product types being juice, carbonated soft drinks and chocolates. This is important to note, particularly during current times where household expenditures are being minimised in many other ways.
The third Rationale Reset looks at how consumers will justify their purchases. This reset focuses on the fundamental shift in how products are used, what needs they fulfil and the new or altered occasion they have become part of.
Arnold explains; “Consumers still want to find enjoyment in life, and we anticipate that they will re-imagine the role that certain goods and services play in their routines. As a result, there will be room to grow the purchases of “small luxuries” particularly as bigger rewards and entertainment budgets are slashed within homes.
“For constrained consumers, it could be something as simple as a box of biscuits that now represents a significantly greater portion of a tightened budget and may well signify more of a reward than it ever would have before. For insulated consumers, there is more discretionary spending that could be directed to FMCG. For example, in lieu of a dining experience that is forgone due to COVID-19 concerns, the purchase of premium wines and cuts of meat to be cooked at home, will equate to a safer, customizable, modern-day luxury.”
A new era for private label & promotions
The fourth Affordability Reset reveals that consumers with less disposable income in their pockets will search for ways to optimize their basket spend. For example, this has seen a sharp increase in the popularity of Private Label products, specifically during the first 13 weeks of the lockdown, where PL showed significant increases. This is largely due to the acknowledged price competitiveness and quality of these products, as well as name brand supply chain constraints.
In terms of discounted prices, a Nielsen study has also found that South Africans have had to adjust their promotion obsessed purchasing habits during the COVID-19 lockdown, with R14-Billion fewer goods being sold on promotion during April and May 2020 compared to the same time last year.
This has led to a perception of price increases largely due to a reduction in promotions with an average of 64% of offline and online shoppers saying that prices are going up and 33% saying less promotions are available.
Arnold comments: “We see an early indication that the promotional baseline has been reset, prompting a huge opportunity to transform consumer behaviour around affordability. The recent lack of regular promotional activity leads to an important and perhaps historic moment where companies can reset their approach to affordability in ways that offer greater efficiency than before,” Arnold concludes.