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As a NielsenIQ analysis this week found that South African shoppers had significantly reduced the frequency of their monthly purchases, from an average of five trips per month two years ago, to an average of three, Statistics SA said this week’s September retail sales. volumes rebounded 2.1% year-on-year after an unexpected 1.5% drop in August.
FNB senior economist Siphamandla Mkhwanazi, commenting on September retail sales, said sales volumes showed the impact of the riots on the industry could be greater than initially thought.
“Nonetheless, factors such as improved deployment of income support, improved use of consumer credit (credit cards and general loans), better than expected civilian salary deal and recovery Rapid non-wage income is expected to support retail sales volumes ahead of the holiday season, âhe said.
However, Mkhwanaz said these need to be weighed against high transportation costs, still depressed consumer sentiment, slow readjustments in the labor market and perhaps a less favorable interest rate environment. NielsenIQ said 500,000 households were forced to expand their monthly store beyond one month. . The latter trend emerged strongly in the third quarter, indicating the ongoing financial fallout from Covid-19 and correlated with the unprecedented rise in unemployment rates in South Africa.
NielsenIQ’s analysis also noted the impact of unemployment.
He said 500,000 households had been forced to expand their monthly store beyond one month, a trend that had strongly manifested itself in the third quarter, indicating the ongoing financial fallout from Covid-19 and correlated to the unprecedented rise in unemployment rates.
NielsenIQ South Africa Managing Director Ged Nooy said: âThe reduction in shopping frequency has also resulted in an increase in basket size, with consumers adding four more items to their basket, which has gone from one total from eight to 12. However, what we found is that consumers have not increased the number of categories in which they shop. On the contrary, there has been a reduction in the number of categories landing in their basket as they increase on essential items. This change in behavior resulted in an increase in the average value of the pre-Covid-19 basket from R226 to R427.
The NielsenIQ analysis also found that there had been behavioral changes in all walks of life, but at different rates due to the income disparity between the groups. The higher LSMs had a more marked drop in the frequency of races.
âBefore Covid-19, the average number of shopping opportunities in this target market was seven per month, but by August 2021 it had dropped to four. The lower LSMs were already limited and while their travel frequency has also decreased, it’s not as big a drop as what we see in the upper LSMs, but it is significant nonetheless, âNooy said.
NielsenIQ’s analysis also found that the well-known and long-established historic ‘A-brands’ gained strength during Covid-19.
In light of this, 75% of the top 20 brands have increased or maintained their share since the onset of Covid-19.
âThese brands have been able to maintain the supply chain and provide confidence and security to cash-strapped consumers. Consumers are cautious about spending and making choices based on their cash flow and sticking to brands that deliver on their promises, âNooy said.
This year, South African consumers also switched stores due to limited movement.
âInterestingly, this continues, where wholesalers have gained buyers over the past year as constrained households look for better deals and in some cases switch to buying wholesale. However, this is not the majority, as grocery retailers still have the highest levels of household shopping on this channel, âNooy said.
Another factor in the store change was consumers looking for promotions.
Nooy warned, âWhat remains essential, especially as we move into the annual Black Friday promotion period, is for the industry to fully understand the effectiveness of promotions in order to better manage substitution in light of the reduced frequency of races. It is therefore important to control the price elasticity of the category and the brand, to allow precise pricing and aligned with brand equity.
Looking ahead, Nooy said that with rising oil prices, ongoing power cuts and a potential fourth wave of the Covid-19 pandemic, the outlook was unfortunately not very optimistic and brands and retailers would feel the pressure of a forced consumer in the last two months of 2021 and into 2022.