PERSONAL FINANCE: SA Consumers Cut Back On Socialising As Tough Economic Conditions Bite, Deloitte Survey shows
Recent Western Cape Business News
South African consumers will cut back on travel and socialising in favour of food purchases over the festive season as tough economic conditions force people to be more pragmatic in their spending habits, according to Deloitte’s Year-End Holiday Survey 2014: Savvy Spenders on the Rise.
The average proportion of the consumer budget that will be spent on food has jumped to 44% in 2014 compared to 36% last year while spending on socialising drops to 13% from 23% in 2013. Nevertheless, consumers will still allocate a significant portion of their holiday season budget to gifts with 43% of expenditure going towards presents in 2014, roughly similar to last year’s 42%.
“In line with the overall increase in the cost of living in South Africa over the past year, 66% of South African consumers surveyed have indicated that they are spending more on essential household expenses such as groceries and energy bills this year,” says Rodger George, African Consumer Business Leader. “Consumers are showing signs of conservatism as general day-to-day living expenses continue to rise while consumers try to stretch their budgets as far as possible.”
The spending patterns in South Africa appear to mirror trends in Europe where consumers are also grappling with poor economic growth. Food (40%) and gifts (39%) are expected to account for the largest share of consumers’ wallets in Europe while travelling (12%) and socialising (9%) take a back seat for many this festive season.
This year’s Deloitte Holiday Survey indicates that South African consumers are becoming increasingly concerned about the strength of the domestic economy, with 56% of respondents holding a negative view of current economic conditions compared to 53% last year. South Africans are, however, less negative about the current economic climate than they were during the recession in 2008 and 2009.
Although only 26% of South Africans believe the economic environment will be positive next year, this is still significantly better than the 19% of Europeans who are upbeat about economic conditions in 2015. Interestingly, South African males are significantly more positive about economic prospects next year than their female counterparts, with 33% of men holding a positive view compared to 19% of women.
South Africans have also ditched the sweet taste of chocolate for hard cash as the number one gift they are most likely to receive. No less than 39% of respondents indicated this, compared to 36% last year followed by chocolates (38%), books (36%) and clothes/shoes (34%). Gift expectations also differ starkly according to demographic profile, with 18-34 year olds ranking cash as the most preferred gift, whilst the 35-64 year cohort appears to favour books this festive season.
“Gifting preferences also differ between men and women, where men show a strong preference for tangible products (books, cash and CD’s), whilst women rank pampering, beauty treatments, cash and chocolates as top of their wish list. Looking at the younger generation, teenagers prefer games; CD’s and books as gifts during this festive season, with the rest of the top ranked products consisting of digital and high tech gadgets. Children under the age of twelve have had fairly consistent preferences, with games, action figures and dolls dominating the festive shopping list,” says George.
Consumers are increasingly engaging more with the online channels, but remain rooted in wanting the personal touch through physical store visits. South African retailers will continue experiencing high volume foot traffic in stores, especially in traditional Department Stores, Specialty Chains as well as Hypermarkets and Supermarkets, which are ranked first, second and third respectively as the preferred shopping destination. When engaging with online channels, the predominant use of the internet by South Africans is to conduct product research, mainly through search engines and brand/supplier websites. The relatively new social media buzz has also gripped the South African consumer market, evidenced by the strong growth seen in social media usage to conduct product research, solicit consumer views, opinions and demands or to search for information.
Furthermore, South Africans see social media as a key channel to engage with retailers and provide feedback and advice. Mobile purchases have also increased during 2014, with half of all respondents suggesting that they have made mobile purchases in the past year. The interaction of mobile and social media may provide an opportunity for retailers to strengthen their consumer engagement.
Loyalty programs once again will feature this year. Half of the survey respondents indicated that they will be using loyalty points more, preferring immediate cash discounts and vouchers. In addition, price will play an important role in driving consumer choices. With inflationary pressures still lingering in the economy, consumers will choose shopping destinations that offer good value and low prices.
“I envisage that this year we will increasingly see pre-Christmas discounting such as “Black Friday Sales” taking place as retailers try and attract a bigger proportion of spend into their outlets” says George.
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