Brands must take heed during what looks like a partial economic recovery and continue to give consumers great products and services at fair prices, while being reliable in their offering, says the author. Picture: Independent Newspapers
By Julia Ahlfeldt
In an unexpected turn of events, South Africans are buying more now from retailers than previous years, causing a two-year high mostly among textile and clothing businesses.
This is according to Statistics SA. In August of this year,it showed that retail sales were up by 4.1% year on year in June 2024, despite the odds of load shedding in the first half of the year, a stubborn interest rate, higher cost of living overall and steep fuel prices.
South Africa also ranked higher in this year’s UN’s World Happiness Report, jumping to number 83, two up from 2023, with a happiness score of 5.422. This compared to the pre-Covid years where we ranked 106th.
There is also a noteworthy surge in consumer sentiment after the outcome of the elections in May, with the formation of the Government of National Unity – all of which is good for business after being so badly battered by the Covid years.
While this is promising for retail brands in particular, given that the upcoming Black November and festive season shopping spree is just around the corner, it’s important that they get the basics right and empathise with consumers whose wallets have been significantly smaller this year due to lower wage or salary increases and higher costs of everyday goods and services.
However, with a probable interest rate cut on the cards when the South African Reserve Bank announces its decision on September 19, after hovering stubbornly at 8.25% since July 2023, a continued drop in the fuel price, which is experiencing a five-month-consecutive price decline, coupled with the possible economic impact of the two-pot retirement system that came into effect on September 1, consumers’ purchasing power will probably increase right in time for the season.
What then are brands to do to ensure they remain top of mind among consumers who might spend more during quarter four of 2024?
First, it’s key to note that brands be cautiously optimistic about the retail rebound and avoid falling into thinking that everything is back to normal. Normal it is not. We have experienced two major economic crises back-to-back – Covid followed by the cost-of-living crisis – and this has changed many a consumer’s spending habits and behaviours forever.
During Covid many consumers either lost their jobs or had their salaries or days at work docked, impacting their ability to pay off debt such as homes and cars and manage their day-to-day living expenses on less money, while businesses lost large swathes of customers, leading to an economic apocalypse.
With fewer rand to spare, consumers traded down their purchasing habits, choosing to buy, for example, a second-hand car or retailers’ own brands. Plenty cancelled insurance policies, putting them at risk, or withdrew savings just to get by.
Even if we do see a positive uptick in retail sales in quarter four, to capture even a small increase in consumers’ extra money and maintain or increase their market share, brands must honour that the consumer has changed and developed buying behaviours that will be hard to change. It’s why smart businesses like Tiger Brands have partnered with retailers’ private brands across bread, flour, snacks and treats to satisfy the consumers’ appetite for less cost, more value.
As Warren Buffet famously said, “Price is what you pay, value is what you get”.
With this in mind, brands must take heed during what looks like a partial economic recovery and continue to give consumers great products and services at fair prices, while being reliable in their offering.
In fact, according to the South African Customer Experience Report 2024, which I co-authored with Rogerwilco’s CEO Charlie Stewart and ovatoyou’s Founder Amanda Reekie, consumers said reliability was the number one reason (71%) why they would buy from a brand again. Not price (63%), not trust (54%) and not loyalty programmes (42%), just reliability.
As we head towards the season, kicking off on November 1 with Black November, brands are advised to understand their customers’ needs better get to grips with their new frugal buying patterns and give them what they want, when they want it. For instance, during Black Friday weekend in 2023, deals on groceries and food were more popular than discounts on luxuries and electronics.
We do, after all, live in an instant-gratification world and consumers want what they want now, not now-now, or just now, but now. Consumers’ loyalty has waned too and where once they would only buy from their preferred retailer without question, today they toggle, largely using apps, between those that have the best price or offer the best value.
As consumers approach the holiday season with a few more rand in their pocket, there will undoubtedly be healthy competition among retailers hoping to make the most of a rebound in consumer spend. This provides an opportunity to stand out and earn customer affinity.
While being reliable as a brand and offering great value is essential to win the hearts of the consumer, especially if they have a little bit extra to spend, it’s just as important to avoid being bland and boring. Brands are wise to delight their customers by offering some magic or the wow factor – their differentiator. Otherwise, in a sea of brands that sell the same thing, the sector begins to look too same-same.
It needn’t cost a lot, but by going that tiny bit further by giving consumers a memorable – and unique – CX experience, a brand’s retention and acquisition will be positively affected – which, as the economy gets stronger – will pay greater dividends.
Should quarter four experience a similar spending surge like StatsSA reported on for quarter two, we will see a positive impact on the economy with retailers and other brands contributing a higher percentage to the gross domestic product, which, in turn, improves our growth outlook as a country.
This possibility, indeed this opportunity, is here, and businesses best be switched on to ride this wave of newfound optimism. If they do the right things, and that is as simple as doing the CX basics well, South Africa and South Africans will be better off for it – economically, socially, individually – in 2025 and beyond.
Julia Ahlfeldt, CX Professional and 2024’s SA Customer Experience Report co-author
BUSINESS REPORT