Photo by Delwyn Verasamy/M&G
South African consumers are bracing for rising inflation and food prices over the next 12 months, yet most still hope to be able to tighten their belts and save any extra income.
These are among the findings of the PwC’s Voice of the Consumer Survey 2024, released on Thursday, which surveyed the perspectives of 20 662 consumers across 31 countries and territories, including 1 009 South Africans, on a range of issues, including finding value for money, caring for the environment, embracing artificial intelligence (AI), social media, being open about data and attending to their health.
PwC Africa retail industry leader Anton Hugo said during a webinar launch of the findings of the local chapter of the survey that the research had been conducted “in a very challenging environment” where consumers globally are facing low GDP growth, high unemployment and low disposable income.
He said six points emerged from the survey. These included the need for businesses to: meet consumer expectations while effectively managing price increases; strike a balance using social media as a sales platform, bearing in mind its limited credibility; forge bonds with eco-conscious consumers and experiment with AI while not losing the human touch.
Businesses must also safeguard personal data when using it to offer personalised services and provide products that reflect consumers’ desire for wellness, nutrition and sustainable food production.
According to the study, although consumers largely accepted price increases during the Covid-19 era, they have shown little tolerance for continued rises, especially since attention has shifted to mounting non-discretionary spending on expenses such as electricity and transport.
“The first imperative that came out of our survey was the importance of navigating the conflicting priorities in an economy which has rising prices, and thus meeting consumers’ expectations of value, while trying to manage these price increases effectively,” Hugo said.
He said 77% of consumers surveyed expect to increase spending on groceries over the next six months, while about 60% said the amount spent on clothing, footwear and home improvement would rise.
A total 44% of consumers said they shop around online or on mobile apps to check prices and switch to generic house products or discounted brands based on affordability. Most prefer to go to a physical store to make purchases.
“Consumers are expecting inflation to increase and this is a challenge for them,” Hugo said.
He said the survey ranked the risks facing consumers in South Africa and globally over the next 12 months and inflation topped the list.
“Interestingly, in South Africa, 75% of our survey ranked inflation as the highest risk, compared to 65% in our global survey,” Hugo said.
Other risks consumers expect to face include macroeconomic volatility, for example, changes in economic growth and unemployment (55%); social inequality stemming from income (40%), gender, race or ethnicity (36%); climate change and health risks such as pandemics, chronic illness and strain on mental health (33%) and geopolitical conflict such as resource and trade disputes and terrorism (26%)
“Nearly 70% of our consumers in our survey indicated that they would save or invest their extra income with only 7% indicating they would buy a luxury item. This flags the tough environment that consumers are facing, and that, if they do have extra income, they’ll use that to save or pay down debt or support family members,” Hugo said.
PwC’s Africa customer transformation lead, Jesse Twum-Boafo, said 41% of local customers are using social media to purchase a product directly, which is lower than the 46% global average, but higher than the 21% recorded during the pre-Covid-19 period.
Influencers and social media
“Forty-one percent of consumers are saying they are being persuaded by influencers to make a purchase and we can think about that in the context of the formalisation of the influencer profession.
“On the other hand, we’re also seeing social media adverts being more successful with 45% saying that they’ve likely been influenced by some kind of advert on social media,” Twum-Boafo said.
“We’re seeing 83% of consumers using social media as a channel to discover a new brand and 82% are using social media to validate that a company is, in fact, true in its promise. This is well above the global averages of around 67 and 70% so it just tells you how engaged local consumers are,” he said.
The survey also found that Generation Z is a lot more likely to be influenced by the digital interaction they have with consumer-facing companies.
PwC Africa South Africa chief economist Lullu Krugel said the survey had also revealed the growing trend of eco-conscious consumers as climate change affects lives directly.
“Ninety-three percent of South African consumers say they have noticed climate-related disruption to their day-to-day lives, with a third saying it’s to a great extent,” Krugel said
“That was quite a shocking statistic, and also much higher than the global average of 85, so there is quite a significant difference where we South Africans are saying it is really impacting our lives,” Krugel said.
These include the closure of schools and businesses, disrupted supply chains and people not being able to get to work.
“Four in 10 consumers say climate change is one of the top three trends that could impact the country in the next 12 months. Climate change is not a risk anymore. It’s the impacts of climate change that are the risks that we need to deal with. Climate change is not a risk because it’s a reality,” she said.
Krugel said 52% of consumers said they would buy more sustainable products, while 41% said they plan to reduce overall consumption to save money and reduce climate change.
In addition, 88% of consumers are willing to pay extra for sustainably sourced goods — up to a premium of 11.9% for goods that meet specific environmental criteria, including “locally-sourced”, “recycled or eco-friendly materials” and “produced in a supply chain with a lower carbon footprint”. This is higher than the global average of 9.7%.
“I think what has come through very strongly here is the voice of the younger consumers in South Africa who are saying, ‘We’re making different decisions,’” Krugel said.
Factors that companies should consider to attract these consumers include eco-friendly packaging (41%), waste reduction and recycling (37%) and having a positive effect on nature and water conservation (37%).
The survey also showed that consumers are “very willing” to change their travel behaviour to reduce their carbon footprint.
“But the challenge is that some of these options are not that freely available for South African consumers as yet. Seventy-six percent say they would have an appetite for driving an electric or hybrid vehicle,” Krugel said.
But the cost of electric vehicles and uncertainty regarding recharging facilities are factors impeding the switch to renewable-energy fuelled transport, a point manufacturers should note.
PwC Africa consulting leader Dave Ives said AI would have a “massive impact”, not just on how products are manufactured and supplied, but how consumers use products in future. However, he said 92% of consumers surveyed had raised concern about the risks of cybercrime, such as hacking and impersonation, while using AI technology, such as chatbots.
“We will start seeing more AI being used in chatbots but I think it’s important that the customer wants faster response times and to be able to solve their problems quickly. More than 54% of customers want to know that they can be escalated to potential agents to solve a particular issue,” he said.
Twum-Boafo said a high level of trust was needed when dealing with AI and consumer data online. He said 89% of consumers said it was important to know their data was being kept private, while 92% said the protection of their personal information was “crucial”. Only 56% were confident that they understood how their data is being shared.
“Globally, only 80% of consumers are as concerned about their information being private. So, South Africans have a stronger view on privacy,” he said.
PwC Africa Workforce of the Future platform leader, Marthle du Plessis, said consumers are also becoming a lot more educated about and focused on wellness.
“Consumers are exceptionally health focused and we are seeing that, over the next six months, that is going to increase. There is a focus on plant-based diets, a lot more inclusion of fruits, vegetables and fish. But, interestingly it’s not just because of the health aspect, it’s also because of the impact on the environment.
“They are very aware of food production and we can see that the purchase of red meat is declining because consumers know what it is doing to the environment [in terms of] the increase of greenhouse gas emissions,” she said.
“This is spilling over even into the workforce space, where the workforce is saying that they will not only buy from consumers with sustainable practices, but they also want to work for employers with sustainable business practices.”