Less brand loyal, more price conscious – How 2021 changed SA’s consumers

South Africa’s consumers have apparently become less confident and less loyal, switching away from their usual brands as they search for better deals, and changing the way they shop.

During the fourth quarter of the year, consumer confidence increased marginally but stayed low with a consumer confidence level of -9, equal to the first quarter and the period just before the pandemic hit in 2020, according to the FNB/BER Consumer Confidence Index.

The Deloitte State of the Consumer Tracker shows that 86% of South Africans worry about rising prices, putting them in fourth place of most financially anxious consumers in 23 countries surveyed.

One in four local consumers are still optimistic about their long-term financial situation though.

ALSO READ: Take-home pay eases after blistering increase in September

Household financial positions

The financial positions of households of employed people improved during the year and consumers are less pessimistic, which is demonstrated by the fact that they feel it is an appropriate time to buy durable goods such as vehicles, furniture, household appliances, and electronic goods, according to the latest BankServ index.

The nominal average BankservAfrica take-home pay reached R15 794 in September 2021 and in real terms, the average salary was R13 047.

ALSO READ: Consumers battling high food, fuel prices and higher repo rate with same salaries

Food prices and consumers

Consumers’ stress over increasing food prices should come as no surprise.

According to the Pietermaritzburg Dignity and Justice group that conducts a monthly household affordability survey, more expensive food means that women in poor communities spend most of their purse on the core food needed to keep hunger at bay and prepare meals.

There has been a distinct drop in the variety of foods on the plate for these communities.

These women who do the price surveys says they eat whatever is available. They fill their plates with white starches, sugar, salt, and oil but over time their children’s bellies cry out for good quality meat protein, sugar beans, dairy, eggs, calcium, vegetables, fruit, vitamins, minerals and fibre.

ALSO READ: Consumer sentiment survey shows 86% of South Africans worry about rising prices

Shifting priorities

The Deloitte survey further showed that South Africans’ priorities are shifting and they are placing more emphasis on introspection, wellbeing, purpose, and experiences, while they also have greater intentions to save more for the future.

Consumers are placing more value on time than ever before and they save for the future to balance their experiences and material possessions. This trend is in line with the growth of consumers’ safety perceptions of returning to work that stabilised since June.

ALSO READ: Online shopping behaviour: consumers prefer a mix of online and physical shopping

Changing shopping behaviour

The pandemic changed also changed consumer behaviour in the way we shop.

After initially choosing online shopping during the first lockdown, 2021 has shown that people now prefer a mix of online and physical store shopping.

South Africa has an estimated 38.19 million internet users, who spend over ten hours per day online and 90.2% of them have searched for a product or service to buy, according to the second ODOmeter Index published by local e-tailer, OneDayOnly, to better understand South Africa’s online consumer behaviour.

Now that lockdown levels are less strict, 33% of respondents are still primarily shopping online, while the majority (61%) are splitting their shopping between online and in-store. Only 6% have started shopping predominantly in-store again.

The pandemic also changed how consumers feel about service providers.

A recent Consulta survey on how consumers feel about the telecom industry indicated that customers are now changing their behaviour and increasingly becoming less loyal, as they search for better value because they believe they pay far too much for what they actually get at the end of the day.

ALSO READ: Consumers battling high food, fuel prices and higher repo rate with same salaries

Consumers battling high prices

During 2021 consumers battled with high food and fuel prices, as well as a higher repo rate with the same salaries they earned last year.

Add to that the high price of electricity, the cost of alternative energy for load shedding, higher transport costs, and you have the perfect storm to destroy what is left of consumer finances in South Africa.

ALSO READ: Black Friday: consumers spent more money, bought online and spent a lot on electronics

Black Friday

However, this battle with high prices did not deter consumers from supporting Black Friday.

They spent more money, bought online, and spent a lot on electronics, showing that they are ready for a new way of shopping and paying. People bought more than in 2020, showing that their finances are recovering from the hardship of the past 18 months.

According to FNB, Black Friday spending increased compared by 19% to 2020, with transactions to the value of more than R2 billion processed on FNB Speedpoints, and FNB card holders buying goods for more than R2.5 billion on Black Friday, an increase of 15% compared to last year.

However, it is clear that they did not spend money they saved, with a boom in unsecured credit even before Black Friday.

Consumer debt has become an even greater problem during the pandemic.

ALSO READ: Boom in unsecured credit as SA sinks into debt ahead of Black Friday

Consumers and debt

The National Credit Regulator found in a recent study that consumers struggle to repay their short-term credit, with most consumers (23%) having credit card debt that increased due to ‘late or missed payments’ for unsecured credit transactions.

Consumers who had available funds in their credit cards used them more regularly, especially when they had lost a portion of their income or savings.

According to the most recent TransUnion Consumer Pulse Study 41% of consumers remain under financial pressure as they have been in arrears with a bill or loan in the past three months, with 33% reporting that they missed one and two payments, while 17% missed three.

A recent Debt Rescue survey indicated that 86% of women who participated indicated that they will buy during the Black Friday weekend, compared to 15% of men who participated, while 60% planned to buy on credit to prevent missing a good deal.

The survey also showed that women use store and credit cards far more than men, mainly because they traditionally do the household shopping.

Consumer debt was 25% more than in 2016 with 24% less disposable income for consumers due to flat average net incomes that means they have to supplement their income with unsecured borrowing.

The effect of various lockdowns and payment holidays in 2020 has become clear in 2021, with the latest statistics for the third quarter of 2021 in the DebtBusters’ Debt Index showing that the situation for consumers struggling with debt is deteriorating.

ALSO READ: Here’s how Covid-19 has changed the way South Africans view risk, insurance

Change in risk and insurance

Covid changed the way we see risk and insurance significantly during 2021, regarding what we insure, as well as new risks, such as increased digitisation, cybercrimes and identity fraud. Our driving behaviour has also changed completely, while we are for obvious reasons also more concerned about or health.

People are keeping their cars for much longer and delaying buying new cars, while hey are adopting more pets because they work from home and have more time to spend with them.

The cost of healthcare and access to quality healthcare in a crisis have also become more important.

Gap insurance has become non-negotiable as members buy down on medical scheme benefits due to financial pressures, while many consumers and even employer groups migrate to health insurance as they find they are unable to afford the high cost of medical scheme benefits, but do not want to lose access to quality private healthcare when they need it most.