Shifts in consumer spending

by Zak Haeri: Managing Director at NIQ South Africa.
Ecommerce is a buzzword in both local and global industries, but it is often surrounded by claims and counterclaims about its current performance and future prospects. In South Africa, the world of retail ecommerce is ever evolving and a recent in-depth analysis by NIQ South Africa has shed light on intriguing trends in this dynamic sector.

Delving into the current consumer mindset shaping ecommerce purchasing patterns, the NIQ Mid Year 2023 Consumer Outlook Report revealed that 72% of consumers cited an increased cost of living as the main driver of their financial strain, with NIQs Retail Measurement Survey (RMS) showing a host of price increases across the FMCG basket. This has resulted in 95% of consumers seeking to make changes to manage their financial situation with 45% having changed the way they shop to look for the lowest prices.

A convenient choice

The report found that although respondents were looking to save more, online purchases had increased. The report indicates that 27% of consumers are now choosing online platforms for better deals, notably above the global average of 25%. One of the main drivers behind this was to save on travel expenses with online shopping having become the more convenient alternative in light of unstable petrol prices.

Load shedding has further influenced this trend, pushing consumers towards online grocery shopping as a more convenient and economical option. Despite the overall stability in online shopping behaviour over the past three years, there's a clear uptick in online grocery purchases.

Looking specifically at ecommerce sales - such as computer hardware and household appliances - a noteworthy shift occurred post-2019, with the ecommerce share in South Africa's T&D jumping from 9% to 14%, significantly propelled by the COVID-19 pandemic. This shift is particularly pronounced in sectors like IT, which ended 2023 with a 23% online share, and small domestic appliances, witnessing a surge from an 8.5% share in 2019 to 22%.

Demographically, online purchases are predominantly made by consumers in the LSM 8-10 bracket, males, and individuals under 34 years of age. These groups are increasingly turning to online shopping as a means of budget management.

An imminent increase in competition

Looking ahead, the entry barrier for new players in the ecommerce channel is relatively low, suggesting an imminent increase in brand competition within the South African landscape. This is akin to developments in the Middle East, where ecommerce strategies have introduced 55 new brands to the market, spurring competitive pricing.

Overall, what’s clear is that the ecommerce sector in South Africa is at a crossroads. With the current economic climate and shrinking consumer wallets, the landscape is ripe for innovation and competition. Brands that can offer convenience, competitive pricing, a wider range of products and a personalised experience are likely to lead the charge in this rapidly evolving market.

Useful resources:
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