By: An Hodgson

Our recent webinar “Megatrends: Middle-Class Retreat’s Effect on Consumer Behaviour” provided insights into changing middle-class behaviour in developed markets driven by factors such as greater use of technology, low-income growth, and rising socioeconomic uncertainties. It explored how companies innovate and adapt to the changing consumer behaviour – from Fickle Consumers and Trading Up, Trading Down, through to the Sharing Middle and the Thrill of the Deal.

The webinar was followed by interesting questions from attendees, a selection of which are answered here.

Q: This is very insightful about what middle-class consumers are doing today. What do you see happening to this group in the next 10 years? Said differently, how long do you expect this mega-trend to last?

By definition, a megatrend in Euromonitor’s view will exist for at least 10-15 years. We selected megatrends such as this based on historic performance and the fact that the drivers we have identified – including Technology, Shifting Economic Power, Changing Values, Population Change, and Environmental Shifts and Pressures – are unstoppable and resulting in long-term shifts/changes that are megatrends. The Middle Class Retreat and key trends arising from it are here to stay in the long term, as the values, attitudes, lifestyle changes, and consumption habits formed as a response to the 2008-2009 global financial crisis have become engrained in the mindset of middle-class consumers while the drivers feeding the Middle Class Retreat continue to occur around us.

Q: What about the middle class in emerging markets? Is the changing behaviour reflected in emerging markets?

Although we identified this megatrend as rooted in developed markets, its interpretation and manifestations can change over time. For example, Healthy Living is a megatrend but what is healthy living today is different to healthy living ten years ago. The same goes for the Middle-Class Retreat: although it started in developed markets, its manifestations has changed over time to apply also to emerging markets especially where the key drivers shaping the Middle-Class Retreat are at play. At Euromonitor, our consumer and industry analysts will continue to explore trends and themes relating to the Middle-Class Retreat beyond developed markets, including the changing consumer behaviour of the middle class in emerging markets and the future of the global middle classes.

Q: Do the trends highlighted in the webinar apply to South Africa?

Yes, the trends associated with the Middle-Class Retreat can also be observed in South Africa. Between 2012 and 2017, South Africa’s middle class expanded from 1.9 million households to 2.3 million households. But despite this expansion, the country’s middle class is suffering a financial squeeze, as the real median income declined by 0.6% during the same period. As we discussed in the webinar, falling incomes is one of the key driving forces for changing consumer behaviour. Other drivers at play include technology; changing values (e.g. a greater value placed on time, convenience and a simpler life); and environmental shifts and pressures (with South African consumers being acutely aware environmental issues directly impacting their lives).

An example of how businesses are adapting to changing consumer behaviour in South Africa is the frequent promotional deals, price discounts and reward programmes on offer at supermarkets, which are the most popular choice for South African middle-class consumers for their food and non-food household purchases. Between 2012 and 2017, per household expenditure in discounters rose by 19.7% in real terms while spending per household at supermarkets declined by 5.4%. Whether middle-class shoppers are turning to discounters or are snapping up deals at supermarkets in their search for value, these are all the manifestations of the Middle-Class Retreat and highlight trends such as “Trading Up, Trading Down” and “Thrill of the Deal”.

Q: Many of the trends explored in the webinar seem to be focused around thriftier lifestyles, but a lot of our research up to now points to premiumisation – how can this be the case?

This really boils down how much better informed middle-class consumers are becoming – through technology, and through brands constantly stepping up their offer with initiatives that engage their audience. It’s this notion that is driving the middle-class consumer’s pursuit of value for money: sure, they love a deal and want to be thrifty and sustainable, but they are also happy to pay more for something special. This is probably best highlighted in the Trading Up, Trading Down trend where consumers save in one area to go premium in another. They might take a budget long-haul flight with Norwegian Airlines to afford a more expensive hotel and other treats at the destination, for example. Overall, premiumisation and the middle-class retreat can coexist alongside one another.

Watch Megatrends: Middle-Class Retreat’s Effect on Consumer Behaviour on-demand now.

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