Warning to SA retailers: Adapt to the declining middle-class

Retail company Pick n Pay has recently revealed that around 40% of its company-owned supermarkets will be converted to Pick n Pay QualiSave, its new supermarket brand focusing on middle-income customers under the pledge “where prices look better”. Picture: Supplied

Retail company Pick n Pay has recently revealed that around 40% of its company-owned supermarkets will be converted to Pick n Pay QualiSave, its new supermarket brand focusing on middle-income customers under the pledge “where prices look better”. Picture: Supplied

Published Aug 23, 2022

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Just as the world was returning to some kind of ‘normality’, it didn’t take long for war in Europe, surging inflation, soaring fuel and energy prices, along with severe bouts of load shedding to cast a particularly dark shadow over the first half of 2022.

Now, in an increasingly stressed economy and shrinking middle class, retailers and big businesses will need to re-think their strategies if they want to remain competitive.

This is according to Marilu Smit, Research Director at Red Fox Insight, the consumer research division of Red Fox Group, who says retailers and brands need to sharpen the saw when it comes to their responsiveness to consumers’ changing needs.

“As the world is buffeted by one crisis after another, the resilience that consumers have shown during Covid times is being put to a longer test,” she says.

“Keeping tabs on what consumers are putting in their baskets is not enough to understand the drivers as consumers dynamically adjust priorities and shift aspirations in reaction to ongoing disruptions and uncertainties.”

The FNB/BER Consumer Confidence Index (CCI), which surveys 2500 South African households, dropped from -13 in the first quarter of 2022 to -25 by the end of the second quarter, suggesting that South Africans may well tighten purse strings even more in the upcoming months.

Marketers, faced with increasingly cautious, budget-conscious consumers, will be challenged when it comes to sorting knee-jerk reactions from what might become long-lasting behaviours.

Andrew Harrison, Head of Sales at Alpen Foods, has been observing consumer patterns of his retail customers over the past months and says, “Supermarkets are seeing a marked increase in large month-end shops in store, with by far the majority of their revenue being generated between the 25th and 7th of the months. This is the time they need to be sure to have their pricing strategies fully implemented to gain maximum share of wallet. Online shopping is being used for pantry top-ups during the week, to save on fuel and time.”

Harrison further highlights the need for retailers to have excellent e-commerce platforms, a strong digital presence, and efficient delivery systems.

“Stores catering to lower-income families have started to act as collection points for Sassa grant recipients. This allows them to increase staff numbers over this time to accommodate the influx of people and offer value through special offers, so they shop at their store once they have received their grant.”

Smit adds that other consumer patterns that have emerged or intensified as a crisis response have endured. For instance, there was an accelerated uptake of online shopping, which has now become a preference, highlighting the importance of offering seamless omni channel customer experiences for both retailers and brands.

Health and wellness became a stronger priority in many South African households.

While the current global crises aren’t delivering the same overwhelming threat to our physical health as Covid-19, they are still impacting significantly on mental well-being, which has become an important aspect of the health and wellness trend.

In response to sharply rising prices over the past months, South African consumers have been quick to react. Brand loyalty has weakened as consumers are increasingly trading down by choosing cheaper own-label brands. Many consumers report putting their plans to spend on big items on hold, while more South Africans than ever are price-checking and shopping for deals.

At the same time, though, consumers’ expectations of both their in-store and online retail experiences are elevated.

Nathalie Schooling, CEO of customer experience company nlightencx, says, “Consumers across all markets are embracing the experiential retail concept, and even in these tough economic times, they still want an appealing experience at their local retailer. Customer experience is no longer a nice-to-have. It’s an imperative for retailers who want to stay competitive.”

The ability to be fast, flexible, and agile is underpinning this responsiveness to current consumer needs and priorities.

Smit concludes: “This is the big challenge for brands and retailers in these uncertain times. Consumer insights focused on understanding the underlying psychology and need-states can help to identify and even anticipate fast-changing consumer behaviours.

With consumers in a hyper-cautious mode, being capable of identifying and quickly acting on new opportunities and new emerging gaps can help to drive much-needed business growth.”

Pick n Pay launches QualiSave to cater to middle class

Pick n Pay in Eerste River, Cape Town, last week, formally launched its new supermarket brand QualiSave, a chain of stores significantly different from that of its mother brand, which will cater to emerging middle-class consumers.

The difference from the traditional old style Pick n Pay stores is very apparent in the new store. For instance, there is a large aisle dedicated to commodity foods often sold in bulk for price competitiveness, such as oil, flour, maize and beans.

Another example is the fresh meat section which allows for the purchase of smaller portions, such as single sausages, to cater for lunch time trade. There is also a large frozen food section. All products and prices are particularly well positioned to make shopping easier.

Each QualiSave store is unique to its region in terms of some of its products, with, for instance, the Eerste River branch selling the yellow raisin bread that is particularly popular with the surrounding community, and chicken feet, which might not be available at a Constantia Pick n Pay store.

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