Retailers under pressure as consumers snub bad service
Retailers will need to up their game as harsh economic realities are making South African consumers more demanding about service levels, a survey shows.
With 79% of South African consumers expecting store assistants to be knowledgeable about products and 46% of those surveyed expecting a prompt greeting and a welcoming attitude, retailers will need to take a close look at their in-store shopping experience levels.
“Not only do retailers face increasing competition from their rivals but they’re also grappling with the challenge of meeting increasingly high standards from the consumer,” said Johan Scholtz, associate director at Deloitte Consulting.
“Consumers want the best of all possible worlds – low prices, high quality and superlative service. The retailers that are able to best cater to these varied and rapidly changing demands are the ones that will be most successful.”
These sentiments are echoed by an industry expert. “The retail sector is likely to remain under pressure, with financially-strapped consumers trading down to more affordable products and services,” said Marius Muller, CEO of retail property investor Pareto. Value for money is expected to be a top priority for shoppers this festive season.
"Like the year so far, the 2015 festive season is set to be tough and highly competitive for retailers. Consumers are really feeling the pinch as there is massive pressure on their disposable income,” said Muller.
The survey found that as harsh economic realities force consumers to hit the brakes on discretionary spending, they are cutting back on non-essential items like furniture, home décor, gym, clothing and footwear. They are also demanding lower prices and better service levels from retailers.
Eighty-four percent of South African consumers are prepared to cut back on furniture, do-it-yourself projects and decorations followed by 82% also willing to spend less on entertainment or leisure activities like eating out, gym and going to movies.
Seventy-six percent of respondents are prepared to cut back on clothing and footwear, followed by 74% who would spend less on holidays.
“The weakness in domestic economic growth has definitely eroded consumer confidence and forced them to cut back on discretionary expenditure on luxury or non-essential items,” said Scholtz, associate director at Deloitte Consulting.
However, people dig in their heels when it comes to healthcare and essentials like groceries, education fees or energy bills, with 72%, 73% and 65% of consumers respectively not prepared to skimp on these.
Said Scholtz: "... even while times are tough consumers aren’t prepared to reduce spending on essential items like education, healthcare or groceries. At the same time they’re demanding more from their retailers in the form of lower prices, better service and responsible business practices.”
Local consumers’ inclination to cut back on spending differs substantially according to age and gender, according to Deloitte’s report. Younger consumers aged 18 to 24 are less likely to cut back on spending compared to those older than 25, particularly spending on non-essential items like digital or clothing and footwear.
Chocolate trumps cash in Christmas stocking stakes
When it comes to gifting options, cash remains a popular choice in line with the trend over the past four years, with 41% of adult consumers (18-34) naming it as their most anticipated gift followed by chocolate, vouchers and clothes.
But when asked what gifts they were likely to give to friends and family, respondents said chocolate topped the list, with 44% naming it as the gift they would most likely give to friends and family followed by books (40%), gift vouchers (39%) and CDs (32%).
“Our survey revealed that consumer sentiments about the economy are generally poor,” said Francis McDonald, Senior Manager: Consumer Business at Deloitte. “The emergence of cash as the top desired Christmas gift reveals the extent to which they’re under pressure from the rising cost of living.”
South Africa’s FNB/BER Consumer Confidence Index slumped to a fourteen-and-a-half year low in the second quarter of 2015 as weak domestic growth and persistent uncertainty about the prospects for recovery reduced the willingness to spend or use credit facilities. Finance Minister Nhlanhla Nene also lowered his economic growth forecast for the year to 1.5% in October, down from an earlier estimate of 2%.
Holidays may be taking a back seat, but most consumers (55%) will spend more during the festive season as they want to enjoy the holidays instead of focusing on their economic concerns. This view is prominent among male consumers (62% compared to 49% of female consumers); consumers between 18 and 24 years of age (68% compared to an average of 55% across all age groups); and consumers of below average income (66% compared to 55% average across all income groups).
Video games, CDs, cash and clothing items top the gift list for teenagers. Video games are the gift most likely to be given to teenagers both locally and in Europe. CDs are at number two in South Africa whereas in Europe, they are 6th on the list of gifts most likely to be given to teens.
Younger children under 12 are most likely to find educational toys under the Christmas tree, with 55% of respondents naming such items as their most likely purchase for their children followed by games (42%), dolls (41%) and clothes (40%).
This comes as Gavin Mansour, Hasbro South Africa’s business development manager, said that despite financial pressures, market indicators show consumers still spend a vast amount on toys, with a significant percentage of retailers' annual income coming from toy sales over the festive season.
Shoppers with a conscience
Manufacturers will need to keep a close eye on ethical and responsible practices, with 72% of consumers indicating they refuse to buy products involving child labour and 68% saying that product information on packaging influences their spending.
Online information is playing a prominent part in consumers' purchase decisions, with 60% likely to consult social media and websites to seek out product advice, including checking prices, researching gift ideas and finding information on discounts, coupons or sales.
“Information needs to be easily and – increasingly so – instantly available,” said McDonald. “Online platforms play a key role in achieving that for consumers, and in influencing their purchasing decisions and behaviour.”
But bricks and mortar still play a vital role, with over 80% of consumers still preferring to make their purchases in physical stores, particularly for products such as toys, fashion items, food and drinks, health and beauty and sports goods.