Promotions appeal to price-sensitive consumers

Online since 31.08.2016 • Filed under Industry news • From Issue 4 - September 2016 - February 2017 page(s) 62-63
Promotions appeal to price-sensitive consumers

The chaotic scenes of frantic shoppers taking advantage of promotions on the opening day of The Mall of Africa in Centurion, Gauteng, was proof that despite South Africa being on the brink of recession, local shoppers retain their appetite for promotions and special offers.

The annual Nielsen study of South African Shopper Trends 2015/2016 found that promotion-seeking behaviour among South African shoppers is high, with consumers actively looking for these types of offers within their repertoire of grocery retailers. In terms of their sensitivity to promotions, the highest number (36%) said they seldom change stores but actively search for promotions when shopping, while the second highest number (22%) regularly buy different brands because of promotions. The strength of the study lies in the fact that it has been carefully balanced to be representative of income, age and gender across South Africa and is drawn from a highly robust, national sample of 2 524 main grocery buyers and influencers and is based on in-depth, face to face interviews. Of the main shoppers interviewed, 68% were women and 32% men, and of the influencers, 64% were men and 36% women. Looking at the study’s results, Nielsen Consumer Insights Director, Esti Prinsloo, says: ‘Consumers have always been price conscious but have now become even more so within their choice of stores. Consumers actively search across media platforms, such as broadsheets, and investigate retailer websites for promotions. Given that consumers are pursuing this form of research, there is definitely a big gap in the market for the provision of more information via mobile channels.’

Price awareness remains high

Against the backdrop of extremely tight economic conditions, the study found that consumers are understandably exhibiting even more price-conscious behaviour and are likely to notice any price fluctuations among categories they regularly purchase. In terms of how consumers respond to rising food prices, the majority (54%) said they now buy only essentials and have cut down on luxuries; 36% said they buy in bulk to get lower prices, and 30% said they buy less in total. The same figure shows they have switched to cheaper brands; 29% said they buy products on discounted price and 8% seems to living comfortably as they do not see rising prices as affecting them. Overall, spend on food, groceries, household and personal care items, has increased by 6% in the last year from R1 610 in 2014 to R1 702 in 2015.

Consumers make a plan

The study also clearly shows that grocery purchases are planned activities, with the highest number of respondents (81%) saying they usually plan what they want to buy before they shop, while 76% often purchase items that they notice in-store that are on sale or promotion. 73% say they buy named brands because they trust them, and 72% have regular shopping routines and buy most products out of habit. 71% say they have a strict budget for groceries and only buy the items that they need.

Back to basics

To provide strategies for the path ahead, a key focus concerned the shopping habits of consumers. When asked, ‘which type of stores have you visited in the past seven days?’, the results revealed that despite supermarkets showing a 9% decline from 92% in 2014 to 83% in 2015; they remain the most popular retail channel in South Africa. Spaza shops maintained their usage at 45% in 2015. However, it’s important to note that the results for how often consumers shop on average per month, at the same selection of stores, are markedly different. Supermarkets have seen a decrease in shopper frequency levels from 4.5 times per month in 2014 to 4.3 times in 2015. However, Spazas have risen from 18.2 times per month to 18.4, as have butchers (2.7 to 3.2) and vegetable vendors 4.3 to 5.3. Prinsloo comments: ‘The increased use of more locally-based stores points to a trend towards the ‘neighbourgoods’ type approach to retail connections. Their close proximity also means welcome fuel savings. In contrast, Hypermarkets declined from 2.8 to 2.0 per month.

Online’s strength is information

Looking at the digital retail realm, the study revealed that 7% of South African shoppers have visited a retailer website in the last month, the same figure as in 2014. However, the interesting finding is that consumers mainly use websites for information rather than shopping – 63% of respondents say they check retailers’ websites for special offers; 31% to look up product information; 29% to look up recipes, tips and ideas; 20% respond to a retailer event or competition; and 19% to buy groceries online. Additionally, 18% read product reviews, 16% sign up for a loyalty card; and 10% check their loyalty status.

Looking ahead

As a result of the data gathered during Nielsen’s Shopper Trends Study, an accompanying report includes the following points to consider:

• Expect to see shifts between premium, mainstream, and economy brands as consumers are forced to consider cheaper options.

• Consumers will forego larger pack sizes and move to smaller options to maintain their product choice.

• Consumers are likely to shift between branded products and retailer private label offerings if the latter is the cheaper alternative with similar or better quality perceptions.

• While grocery e-commerce is still small, shoppers – especially the upper income and digital decision makers – recognise the deal-seeking and convenience aspects. Retailers will need to overcome the main barriers of quality/accuracy, in-person experience, and fulfilment to drive scale and growth.

• Loyalty programmes with benefits that result in cheaper products are gaining in popularity and in return.

Retailers offering these are reaping the benefits. In the shoppers’ quest for better deals, loyalty cards are seen as a way to get the best for their buck. In the current economic climate, the shopper is constantly challenged to trade-off between available budget and what they need on a monthly basis to provide for themselves and their families. Their assessment of essentials vs nice to haves is increasingly critical as it drives their decisions to exclude certain products from their basket to meet their much tighter budget needs. In light of this, consumers are enticed by price and promotion and are willing to go the extra mile to get the better deal. However, quality remains significant and brands that continue to delight their customers will reap the benefit of being chosen – thus the value proposition will always remain more than just the actual price. For more information, visit www.nielsen.com

Issue 4 - September 2016 - February 2017

Issue 4 - September 2016 - February 2017

This article was featured on page 62-63 of SABI Magazine Issue 4 - September 2016 - February 2017 .

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