Consumers choose home improvement and loungewear over expensive luxuries
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Fearful of contracting COVID-19, most South Africans have resorted to staying indoors and shopping online. When they do go out, their spending habits have also drastically changed.
According to Isana Cordier, Consumer Goods and Services Sector Head at Absa Corporate and Investment Banking, many traditional consumer-facing businesses in South Africa must re-assess and re-configure their business models and investment plans in the face of a changed landscape.
It means the ‘lipstick effect’ – a scenario in which consumers indulge in retail therapy despite being under economic strain - has shifted.
In the past when there was a crisis, people scaled-down, but still bought luxury items such as lipstick instead of going out to buy expensive items.Isana Cordier, Consumer Goods and Services Sector Head – Absa Corporate and Investment Bank
But because this pandemic has confined South Africans to their homes, they are not buying lipstick. Instead, there has been a fundamental shift in retail spending, with most people choosing to upgrade their homes.
Consumers now indulge in home improvements
We’re continuously seeing more people buy home improvement items and building activity is picking up. Home improvement has become their luxury spending.Isana Cordier, Consumer Goods and Services Sector Head – Absa Corporate and Investment Bank
According to Absa's data, all categories of home spending have improved, including flooring and garden plants.
Loungewear brings comfort to consumers working from home
Working from home has also affected retailers. Consumers – after improving their home environment – seek comfortable clothes that will get them through their days.
There is a shift to casual clothing as people want to feel more comfortable. They choose to wear something they can still go out in, but which also makes them feel more comfortable while staying home.Isana Cordier, Consumer Goods and Services Sector Head – Absa Corporate and Investment Bank
With no end to the pandemic insight, loungewear will likely be around to stay, as more consumers choose home over the office.
Consumer delivery needs: Can big businesses keep up?
While consumers navigate the pandemic, retailers are finding ways to capitalise on the opportunities presented by the pandemic, including delivery services.
I’ve seen so many businesses coming up with little loungewear-specific shops. It is fairly simple for a small business, logistically, to have your order delivered within a day or two from making an online order. It is becoming a different way of life. Small businesses are seeing this opportunity and adapting to it.Isana Cordier, Consumer Goods and Services Sector Head – Absa Corporate and Investment Bank
But can big corporates keep up? Retailers who are not sure of where they play anymore are forced to adapt.
Takealot is the only site where you can buy general merchandise and have it delivered the next day. Where are Massmart and the other businesses that can deliver your stove and kettle? There’s a whole market that we’re potentially missing out on.Isana Cordier, Consumer Goods and Services Sector Head – Absa Corporate and Investment Bank
Online market growth is held back by consumer concerns over the delivery of big items, such as fridges, that might not make it on time or the absence of delivery options from certain stores. Big business must keep up.
According to Absa's data, this year still looks fairly positive at a 1.5% increase in overall spending on comparative year-on-year spending. While consumer financial health is finely balanced, much will depend on how quickly the economy can get back on its feet and how quickly retailers respond to consumer demands.
For data-driven insights that match foresight with sustainable possibilities, re-visit our Absa Insights page regularly to listen to thought-provoking conversations with Absa Corporate and Investment Banking sector experts in the Absa Insights podcast series.
Source : https://cib.absa.africa/home/insights-and-events/