Additionally, different markets respond variedly to inflation, when some are hit hard, others are already recovering. Brands need to keep a keen eye on such markets to come up with strategies that will help them remain relevant through this ‘pandemic’.
No sooner had the world recovered from the pandemic than inflation took over. Covid-19 forced millions of people out of work with central banks and politicians striving to lift their respective economies out of a pandemic-induced recession. At the time, inflation seemed like an afterthought.
A year later, inflation rate is rising, with policymakers insisting that price hikes are a transition – a consequence of snarled supply chains and labor shortages. However, rising inflation has persisted over the last few months. The National Treasury in South Africa projected that the headline inflation was to reach 4.8% in 2022 and 4.4% in 2023. This was attributed to rising food and energy prices, especially rising electricity prices, high domestic food inflation and elevated fuel prices, which were the key sources of inflationary pressure in 2022. These projections notwithstanding, the country’s inflation rate hit 5.9% in April 2022, and it’s expected to increase more in the coming months.
Inflation is real
In Africa, inflation has negatively impacted spending habits especially on discretionary items. For brands, the question is, how do you adjust to the constant increase in price? Though inflation jitters have been felt from late 2021, the situation was more manageable than in the previous year. Currently, prices of food and energy products are over the roof with consumers cutting back on their expenses. A tracker by Kasi Insight assessed consumer discretionary spending over the last 8 months.
In late 2021, those that spent on discretionary items on average were 29% while those that did not spend were 23%. In early 2022, we see a change in the trend; where those who do not spend surpass those that spent on discretionary items. January 2022, there was an increase in the will not spend to 24% and the spend decreases to 25%. A 6% negative change is seen on those that will spend on discretionary items between January to May 2022. Consequently, the percentage of those who are on the fence about their discretionary spending has constantly increased from January to May.
The truth of the matter is, inflation is rising by the day and with this in mind, brands should focus on remaining relevant through this ‘pandemic’.
Impact felt differently across countries
Though, the whole world is experiencing inflation, the effects are experienced differently across countries. Consumers in South Africa experienced the largest increase in prices pushing them to slow their spending on discretionary items. South Africa has experienced a fall in the number of people making large purchases from 28% to 9% from March to May, a drop of 19%.
In Ivory Coast, the drop was 6%, Democratic Republic of Congo 5%, Nigeria 2%, while Kenya experienced no change at all. This showcases the different methods various markets use in dealing with inflation.
Brands in the discretionary space should focus on consumers that are on the fence
All hope is not lost for brands that deal exclusively with discretionary items (vehicles, furniture, and large household appliances). This is because they can easily sway in consumers that are on the fence by using promotions or psychological pricing. Additionally, different markets respond variedly to inflation, when some are hit hard, others are already recovering. Brands need to keep a keen eye on such markets to come up with strategies that will help them remain relevant through this ‘pandemic’.
Our data intelligence platform can help you track these trends in consumer behaviors in Africa over time. This provides you with valuable insights that can help you or your business make fast data-driven decisions.
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