August newsletter Aug 2021 Welcome to the August issue of...Read More
The world has experienced monumental change in the past few years, and it has impacted the way consumers behave.
A report by KPMG concludes that COVID-19 has had a polarising effect on consumers’ finances. While some have been directly affected due to a loss of earnings or employment, others have been less directly affected and will be building their savings. For example, 45% of respondents claim to be financially comfortable. McKinsey and Company agrees and says that consumer segment behaviour in the US varies significantly across the next-normal trends.
McKinsey identified a consumer segment that they call affluent and unaffected. These consumers express general optimism about the future, tend to be able to stay at home during the pandemic, shop more online and is slightly less price-sensitive than others.
Other consumer segments in the US identified by McKinsey include the following:
Uprooted and underemployed: These consumers are feeling major impact on both their finances and health due to job insecurity. Not surprisingly, this group is trading down to essentials and value, swapping out brands, and shopping online when possible.
Financially secure but anxious: This population is largely 65 years and older. This group has expressed the greatest need for hygiene transparency, with above-average concerns about safety and wellbeing, and the ability to get the necessary supplies.
Out trying to make ends meet: These consumers are being cautious about how they spend money and feel that their jobs and job security have been heavily impacted by COVID-19. They are less likely to be able to stay at home and are strongly moving toward shopping for essentials and value.
Disconnected and retired: This category denotes those who are retired, are over 65, and have a lower income level than the financially-secure-but-anxious segment. They are broadly optimistic about economic conditions after COVID-19 and are less likely to display any of the next-normal characteristics.
In the South African context, a NielsenIQ study, Unlocking Consumption in 2021, found that 78% of South African consumers say that they have changed their purchasing behaviour since the COVID-19 pandemic began, with no prospect of this returning to 2019 levels anytime soon.
The NielsenIQ study identified a rapidly growing group of newly constrained consumers who represent 66% of South African shoppers – compared to the 46% global average. Of the 15 countries surveyed, Thailand (73%), South Africa (66%) and Turkey (65%), had the highest numbers of newly constrained consumers across the globe. Nielsen IQ reports that the newly constrained segment is just one of four local consumer groups who will shape spending patterns this year.
Other groups identified by the study include the following:
Existing constrained consumers who were watching what they spent before COVID-19 and have not changed this behaviour since.
Cautious insulated spenders who have experienced limited impact on their financial situation but are much more cautious about their spending habits.
Unrestricted insulated consumers whose financial situation have stayed the same, or even improved, and do not have to alter their spending behaviours. While this segment currently represents only 2% of consumers, their ability to spend has translated into demand for premium products.
The NielsenIQ Global Intelligence Unit’s executive director, Ailsa Wingfield, says that the four new groups that they identified demonstrate real constraint in consumers’ ability and/or desire to spend freely. Within this, the newly constrained and cautious insulated consumers represent 84% of consumers who are scrutinising their budgets and changing their consumption behaviour based on the impact that COVID-19 has had on their personal circumstances.
While the expectation as the world recovers from the disease is for a return to a reality that resembles pre-COVID times, that is unlikely to be the case for the foreseeable future.
The information contained in this article is of a general nature and intended for information purposes only.