A scarcity of unified, ethical, and visionary leadership is now the single biggest risk facing the country according to the newly released Institute of Risk Management South Africa (IRMSA) Risk Report 2021. The annual ranking is compiled by IRMSA after extensive interviews with risk managers and business leaders.
The continuing private and public sector governance failure; a failure to root out and/or curb deeply entrenched corruption; new shifts in consumer behaviour and a failure to move forward in reforming the healthcare system, were identified as part of the top five risks.
IRMSA’s fourth big risk warning is not understanding shifts in consumer behaviour and habits brought on by the pandemic. A risk that is key to any financial advisers’ success.
According to IRMSA’s Chief Risk Advisor, Christopher Palm, businesses more than ever need to be agile in scaling operations up or down based on changing patterns. IRMSA says close to eighty percent of consumers in the past year have changed stores, brands, and the way in which they shop.
In South Africa five fundamental shifts in consumer behaviour were identified:
- Up to 45% shift to value and essentials.
- Up to 90% to digital and omnichannel.
- 79% changed stores, brand or the way they shop.
- 46% are not yet resuming “normal” out of home activities.
- 88% intend to maintain or reduce holiday shopping spend.
McKinsey’s consumer research echoes these findings and indicate that there are five key behavioural changes that will impact the future:
- Flight to online – Globally, categories where expected growth in online shoppers exceeds 35 percent include essentials such as over-the-counter (OTC) medicine, groceries, household supplies, and personal-care products. Another trend is that Millennials and high-income earners are in the lead when it comes to shopping online.
- Shock to loyalty – The crisis has prompted a surge of new activities, with an astonishing 75 percent of US consumers trying a new shopping behaviour in response to economic pressures, store closings, and changing priorities. Shoppers have cited a number of reasons for switching brands, with availability (in-store and online), convenience, and value leading the pack.
- Need for hygiene transparency – Research indicate that Technologies that enhance hygiene, particularly contactless activities such as food and grocery delivery and curbside pickup, are taking off.
- Back to basics and value – Overall consumer spending is declining, bur intent to spend in essential categories is increasing.
- Rise of the homebody economy – There is a change in how consumers spend their time, dedicating more time to domestic activities, media and news.
Berenice Francis, Group Executive: Corporate Affairs Risk and Sustainability of Motus Holdings Limited agrees: “Lockdown regulations around the world have changed the way in which people live, work and socialise. Some of these changes may be temporary – for example: spending less and reducing social interaction. However, many may be more permanent in nature – for example: the use of omnichannel or online retail, blended learning and online meetings.”
Francis further points out that what has changed is that all consumers, given concerns around disposable income and debt, are more conscious of budgets and the amounts that they are spending on luxury or non-essential items. As mentioned in the McKinsey study, they plan to continue doing so in future.
How has South Africa responded?
“Businesses have changed their interactions with customers, using online and more traditional methods of enticing consumers. Brands have increased investment in online-purchasing experiences and increased transparency around how they leverage their supply chain to ensure that consumers are getting value and remain safe,” Francis highlights.
How to predict future consumer behaviour
“Since it is very difficult to predict consumer behaviour, it is important for businesses to build capabilities within their companies to ensure quicker and more confident reactions when faced with changes. Businesses must find new ways to engage with their customers so that they can be at the forefront of change. As consumers deal with the “New Normal” or the “Next Normal”, it is imperative that businesses not only keep track of changing customers’ needs but pre-emptively strike to influence their behaviour,” Francis concludes.
Click here to download “Shift in Consumer Behaviour” as published in the Risk report.
More risks, as well as competencies needed to own the future will be discussed in future articles.