Amidst a financial pressure cooker and a continued barrage of power cuts, the 2023 NielsenIQ (NIQ) Consumer Outlook report for South Africa shows that 70% of surveyed consumers feel that they are living in a recession, while 76% say that increased costs of living are to blame for their recent financial struggles.

Despite the additional burdens on family spending, SA consumers still plan to spend as much on groceries and household items by adapting their spending habits to counter growing price pressures. Key moves include buying in bulk (50%) and chasing promotions (36%), while 56% are keen to take advantage of loyalty schemes.  

Online shopping remains popular for bargain-hunters

As many as 32% of consumers say they have turned to online purchasing to get better deals and minimise shopping trips. NIQ’s South Africa market leader, Gareth Paterson, says another fascinating aspect of consumer behaviour is the differentiation between shopping and buying habits. NIQ’s 2023 Consumer Outlook study confirms that while offline channels are essential to consumer buying habits, there is also strong omnichannel shopping familiarity across the globe. 

NIQ forecasts a blurring of shopping habits across channels and a renewed interest in e-commerce, particularly as a strategy to save money. 

“Even though the bulk of local shoppers still spend the most offline in physical stores, shopping habits are evolving and will continue to influence how spending budgets are allocated across online and offline channels,” Paterson says.

A Takealot representative confirmed that the online retailer is seeing signs of financial strain, with an increase in the use of payment methods such as Payflex and Mobicred. Buy now, pay later (BNPL) is emerging as a cashflow-friendly budgeting tool that helps consumers by allowing them to  spread the cost of their purchases across three months without paying any interest or fees while receiving the goods immediately. 

This payment method is booming, with PayJustNow more than tripling its customer numbers in 2022. Its chief executive, Craig Newborn, expects this growth trend to continue through 2023. The company signed up 41,443 new customers in March alone.

BNPL is not only used by lower-income consumers, says Newborn. The average PayJustNow customer is a salaried woman, who earns close to R17,000 per month. These financially secure consumers are using BNPL as a tool to improve their buying power, with nearly 60% of purchases made by repeat customers, who are continually looking for ways to stretch their income. 

“We’re seeing many ordinary South Africans struggling right now. They’re cutting back on their discretionary spending to make sure they have enough money for the essentials. As a result, we’re seeing a clear shift in spending behaviour, with more people than ever looking to stretch their rands, and take advantage of promotions and discounts,” says Newborn. 

Most BNPL activity takes place from the 24th of a month until the 4th of the following month. There is also a spike around the middle of the month, when government employees are paid. 

In February, the last five days of the month accounted for 51% of the entire month’s sales. Newborn says this shows users are being smart about using BNPL, because they use it as soon as they get paid their salaries to align with their budgeting, rather than as a last resort when they have a certain amount of money left. 

Decline in consumer confidence

FNB’s chief economist, Mamello Matikinca-Ngwenya, notes that the recent fall in the FNB/BER Consumer Confidence Index points to a marked decline in consumers’ willingness to spend and foreshadows a significant slowdown in real consumer spending growth. 

“With an increasing number of high-income households now investing (at considerable cost) in solar power and other backup power systems, these households will need to slash their discretionary spending in order to balance their budgets. Consequently, sales volumes of big-ticket durable goods items such as new vehicles, furniture and household appliances are likely to face increased pressure in coming months, although replacement purchases of electronic goods due to load shedding-related breakdowns should counter some of the adverse impact,” she says. DM/BM