Page 44 - IRMSA Risk Report 2021

3.4
SHIFTS IN CONSUMER BEHAVIOUR

The lockdown forced a change in consumer behaviour and habits. The approach to work and how people interacted with retail
businesses has fundamentally changed. Businesses have had to adapt to a significant drop in consumption patterns whilst
ensuring adequate realignment of working capital and workforce utilisation. Businesses had to re-invent their business models
to ensure that they could compete in these shifting circumstances and, in some cases, ensure that they take advantage of
unprecedented demand for some products.

SCENARIOS FLAGS SUCCESS STORIES
COUNTRY FLAGS C F Everybody having hosted meetings,
OWNING OUR FUTURE workshops, even game nights over video
1. LEADERSHIP chat or ordered groceries to be delivered
at home for the first time understands
2. INSTITUTIONAL CAPACITY
how profoundly the Covid-19 crisis has
3. POLITICS changed our behaviour as consumers.
The 5 key behavioural changes that will
4. SOCIAL COHESION impact the future are:
5. NATIONAL POLICY • Flight to online
• Shock to loyalty
6. SERVICE DELIVERY • Need for hygiene transparency
7. INEQUALITY • Back to basics and value
• Rise of the homebody economy
8. ECONOMY https:/ /www.m ckinsey.com/ business-
PERPETUAL FAKE IT UNTIL WE 9. GLOBAL TRENDS functions/marketing-and-sales/our-insights/
HANGOVER MAKE IT, OR NOT the-great-consumer-shift-ten-charts-that-
10. CLIMATE show-how-us-shopping-behavior-is-changing
https://media.enfasis.com/adjuntos/146/
C – CURRENT (2020/21) F – FUTURE (2030) documentos/000/142/0000142239.pdf
“Consumer confidence in South Africa rose to -23 in the third quarter of 2020 after hitting a 35-year low of -33 in the prior period, amid
the gradual lifting of lockdown restrictions and the resumption of economic activity, which allowed most of the businesses to reopen.
Main improvements were seen in the financial outlook of households and the purchase of durable goods.” SOURCE: Bureau of Economic
Research, SA Consumer Confidence, 7 September 2020.

TOP 5 CHALLENGES TO ACHIEVING TOP 5 RISK TREATMENT OPTIONS AND
TARGETS OPPORTUNITIES

1. Regulations: Uncertainty in regulations has made it 1. Government will need to strike a balance between economy
difficult for consumers to buy (hoarding) or retailers to and addressing the pandemic. Early communication to
allow businesses to plan and manage risks, e.g. liquor
predict demand (stock-outs).
regulations, food purchasing vs clothing.
2. Shift in habits: Shifts in consumer shopping habits – 2. Businesses need to be agile in scaling operations up or
larger basket/fewer trips to shop down based on changes in buying patterns.
3. Mobility: Restriction of movement caused a surge in 3. Businesses need to reconfigure production, supply
the move to online shopping. Supply chain processes, chains, operations and marketing to adapt/respond to
delivery logistics and technology. shifts in consumer needs.
4. Extremes: Demand for some goods/services have 4. Re-evaluate traditional business models and use a “blank
declined (record lows in hospitality) whilst others have page” strategic approach. May need to change the vision
soared (record highs in online entertainment). Impact of and business to a completely new direction, e.g. use 3D
public sector consumers capability to produce ventilators.
5. Build capability to monitor shifts in behaviour on a more
5. Temporary or permanent: Difficult to predict which regular basis. Understand your own business risk indicators
behaviour changes are temporary or which are and impacts, e.g. remote working and e-commerce may be
permanent.
more enduring compared to air travel.

FACTS AND FIGURES
FIVE FUNDAMENTAL SHIFTS IN CONSUMER BEHAVIOUR – SOUTH AFRICA
• Up to 45% shift to value and essentials.
• Up to 90% to digital and omnichannel.
• 79% changed stores, brand or the way they shop.
• 460% are not yet resuming “normal” out of home activities.
• 88% intend to maintain or reduce holiday shopping spend.
ONLINE
• Online purchases have grown between 6 to 10 percentage points across most product categories.
• 56% of individuals in SA use the internet, yet only 8% shop online – reflects structural inequality.
ENERGY
• 20 April 2020, the global petroleum industry witnessed a historic plummeting of benchmark US oil below $0 a barrel.
• Sasol fuel sales target for 2020 cut to 50-51 million barrels compared to 57-58 million barrels previously.
Source: UNCTAD, 8 October 2020, Covid-19 and E-Commerce Survey, McKinsey and Company, South Africa Consumer Sentiment during the Coronavirus Crisis, 5 November 2020,
Norton Rose Fulbright, Liezl Oberholzer, May 2020., Reuters, 8 April 2020.

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