Recession: Shifting Consumer Responses – October 2011
Welcome to the latest edition of Euromonitor International’s global consumer tracker designed to help you keep in touch with consumer responses to the recession all over the world and more crucially to map signs of recovery via shifting consumer purchasing behaviours and attitudes in 60 developed and developing countries as they emerge.
We explore the latest news within consumer themes including the newest thrift news, shifting consumer loyalty and downsizing and to what extent consumers are trading up or back to normal. This tracker includes stories on the Argentinian consumption boom; Hong Kong foodie bargain hunters and Poles taking to the skies.
THRIFT UPDATE/FRUGALISTA NEWS
Targeting those Americans at the bottom
With the impact of the last recession still lingering, American marketing experts are increasingly advising manufacturers of consumer goods to target those on lower incomes. An Economist magazine article claims this represents a huge opportunity, as even the poorest Americans are relatively well off compared to most consumers in emerging markets. Examples of companies that have found success following this strategy include fast-food giant McDonald’s, which has enjoyed stellar sales growth over recent years due in large part to its affordable pricing. Meanwhile, retailers Wal-Mart and Target are entering new markets, such as basic healthcare, and opening new stores in poorer neighbourhoods, particularly in inner city neighbourhoods. German discounter Aldi has also found success in the USA.
SHIFTING CONSUMER LOYALTY (TAKING IN LUXURY/ BRAND NOSTALGIA/PRIVATE LABEL GOODS)
Going one step further to lure Chinese luxury shoppers online
Luxury internet retailer Yoox and FedEx have teamed up to launch a service targeting those buying luxury goods online. When a shopper clicks on a luxury clothing item on fashion website thecorner.com.cn, they can choose to have the goods delivered by FedEx to allow them to try on before they decide whether or not to buy. A survey of more than 1,500 consumers in 17 Chinese cities conducted by consultants McKinsey during summer 2011, found 44% of luxury shoppers preferred to try products in bricks-and-mortar stores before they buy. However, this type of service may not be enough to win over some shoppers who are more price conscious. 46-year old Beijing resident Jin Yunduan, who often shops online for luxury items, said: “I don’t really need a FedEx man to stand at my door. I just want to know I’m getting the best prices.”
Korean consumers wait for month for a Birkin bag
Over 1,000 people in Korea are on the waiting list for a Hermes Birkin bag, which comes with a price tag in excess of KRW10 million (US$9,000). They have paid in advance to secure this coveted status symbol, and are willing to wait months to get them. Per-capita demand for luxury brands in South Korea tends to exceed that of many countries where incomes are higher. According to Euromonitor International data, current value sales of luxury goods in South Korea grew by 11% in 2010, to $2.9 billion. In comparison, current value sales of luxury goods in Japan declined by 6% during the same year, to US$24.9 billion.
ATTITUDES TO PLASTIC, OTHER FORMS OF CREDIT AND SAVING
Mexicans live for today
A study conducted by research firm Metlife has found only 25% of Mexican workers plan for their financial future. The remaining 75% “do nothing” to plan for their future financial needs, even retirement. The head of Metlife Mexico explained that most respondents showed little interest in long-term saving or retirement plans. However, many respondents also said the prospect of not being able to pay for their children’s education worried them. “It is impossible to make plans for the future in a country like Mexico, where you do not know what will happen tomorrow,” commented one poster on Comunidad M, the online forum of the Milenio newspaper.
Canadians owe money, live better
Paraphrasing the well-known tagline of retailer Wal-Mart, it could be said the Canadian version of “save money, live better” is “owe money, live better.” According to a survey conducted online for the Royal Bank of Canada by Ipsos Reid during August 2011, 58% of respondents were comfortable with their level of debt, with another 22% claiming to have no personal debt at all. However, 39% of respondents said their families had to “delay or cancel” plans because of concerns regarding their financial situation. The survey was published the day after Statistics Canada released data showing the country’s ratio of household debt to disposable household income stood at a record 149% during the second quarter of 2011, 2% up over the previous three months.
DOWNSIZING, TRADING UP OR BACK TO NORMAL?
Already got a car, a TV and a fridge? Argentinians decide it’s time to go to a concert
Argentina’s consumption boom continues to power ahead: a record 79,826 cars were registered in August 2011. There is also strong growth in demand for services, ranging from education and tourism to personal care and cultural events, such as concerts. “With money in their pockets and an annual inflation rate of 25%, people want to spend now, and if they already own a TV set, a fridge and a new car, they opt for services,” says Guillermo Oliveto, who works for W, a Buenos Aires consultancy. Recently, former Pink Floyd bassist Roger Waters sold out eight shows at the city’s River Plate stadium, which has a capacity of 65,000. Over 500,000 in total will now see him play live, paying between US$40 and US$500 for the privilege.
Big boats all the rage on the Norwegian fjords
Over recent years, there’s been a noticeable towards bigger is best in Norway’s large fleet of leisure boats, an indication of the country’s growing wealth. “Small, 16-foot boats gave way long ago to large, luxurious vessels. They may well have flush toilets, a shower and state-of-the-art electronic equipment onboard, amenities unheard of a generation ago,” according to the website newsinenglish.no.
THE GREEN BAROMETER OR ARE CONSUMERS FINANCIALLY FIT ENOUGH TO CARE?
Energy-efficiency a priority for many Chileans
A study commissioned by IBM in June 2011 found 67% of Chileans unplug electric appliances in order to save energy. “I always do it,” said a reader of La Tercera newspaper. In general, Chileans were found to be aware and active regarding energy-efficiency issues, critical of energy providers and willing to invest in order to protect natural resources. The study also found 60% of Chileans had replaced their incandescent light bulbs at home with more energy-efficient ones. Moreover, 53% said they considered energy efficiency as a factor when shopping for electrical appliances. 85% of respondents claimed to be willing to change their habits in order to help to conserve natural resources.
Demand surges for eco-friendly idols in India
In preparation for the annual Ganesh Chaturthi festival in September, “Green Ganesha” was all the rage. A growing number of households in Mumbai and Pune opted to purchase idols made from eco-friendly materials like clay and natural dyes. Classes on making these idols also proved popular. Charity E-Coexist sold around 400 eco-friendly Ganesha idols in Pune. “We’ve run out of stock this year. Awareness of the importance of an environmentally-friendly Ganeshotsav (the Ganesh Chaturthi festival) has certainly spread in a big way,” says Lolita Gupta of E-Coexist.
WHAT’S FOR DINNER?
Peruvian gastronomy boom
According to the National Institute of Statistics, during the first half of 2011, Peru’s restaurant sector grew by 9.3% in year-on-year terms, with roast-chicken and fast-food chains performing particularly well. Alfredo Perret, head of the subcommittee of gastronomy of the Chamber of Commerce of Lima, claims “we are seeing improvements in food preparation techniques and fostering awareness about the proper handling of ingredients,” due to pressure from consumers, who he says are becoming “increasingly demanding.”
Hong Kong bargain hunters flock to Food Expo
During mid-August, thousands of bargain hunters, many armed with suitcases, trolleys and wads of cash, packed into the Hong Kong Food Expo, where stocks of food, ranging from instant noodles to dried black mushrooms, were being sold at discounts of up to 30%. Yuen Lai-si, a regular at the annual fair, stocked up on imported jelly, spaghetti sauce and vegetarian food. “I spent only HK$1,000 (US$129) on what would normally cost HK$1,300 at the supermarket,” said Yuen. One of the fair’s highlights was small samples of abalone from Japan. Two whole abalone (a type of marine gastropod), which normally sell for around HK$7,142 apiece (US$632), were cut into pieces for 20 early birds. A thousand tins of abalone priced at just HK$1 each sold out during the event’s opening minutes.
Regular restaurant trips the norm for most UAE residents
Nearly three quarters of those living in Abu Dhabi and Dubai eat out once or twice a week, according to a survey conducted by Table Talk, a bi-weekly newsletter published by Gulf a la Carte, an annual industry trade fair that will take place in Abu Dhabi during November 2011. 3% claimed to eat out every day. Social and family gatherings were found to be the most common reasons for eating out. “Abu Dhabi and Dubai account for 80% of total food service demand among the seven emirates,” according to Maggie Moore, Event Director at Gulf a la Carte.
TREATS THAT CONSUMERS CAN’T DO WITHOUT
Madrileños are the biggest gamblers
After spending around €3 billion (US$4.2 billion) on gambling in 2010, those living in Madrid are, according to the Ministry of Home Affairs, the biggest gamblers in the country. Around two thirds of that money was “invested” in the fruit machines that can be found scattered in bars and gaming establishments across the city, while bingo accounted for 16% and casinos (there are two in the region) 13%. Nationwide, €15.6 billion was gambled last year, with Catalonia, Andalucía and Valencia following Madrid as the leading regions in this regard. However, the industry has been affected by the economic downturn, with its nationwide turnover down 13% year-on-year.
South Africans say, Don’t touch my BlackBerry!
There was a recent public and media outcry when South African Vodafone announced it may implement plans to limit the download capacity of BlackBerry smartphones, causing the company to backtrack. Arthur Goldstuck of consultancy World Wide Worx said BlackBerry is the de facto standard in smartphones in South Africa, representing around 70% of those sold through the networks. World Wide Worx research at the end of 2010 indicated almost a quarter of adult cellphone users living in cities and towns in South Africa intended to buy a BlackBerry next.
Urban Indonesian consumers can’t do without the internet
According to a survey conducted by Yahoo and TNS in June 2011, the internet has overtaken newspapers and radio as the most popular media channel in Indonesia. The internet had a penetration rate of 33%, compared with 25% for newspapers and 24% for radio. Suresh Subramanian, deputy managing director of TNS Indonesia, suggested cheaper smartphones, particularly Chinese brands, are reshaping the country’s media landscape. Just as importantly, cheaper voice and data packages from mobile phone networks are encouraging a growing number of Indonesians to go online. According to Euromonitor International data, value sales of smartphones in Indonesia more than doubled, from US$644 million to almost US$1.5 billion, between 2008 and 2010.
THE LATEST FROM THE CONSUMER COCOON (THE HOME/ENTERTAINMENT HUB)
More online video options in Japan
US-based online video-on-demand service Hulu is going international for the first time, with plans to expand its subscription service to Japan later this year. Japanese consumers will be getting their own version of Hulu Plus with access to films and TV shows via PC, TV, smartphone and tablet for an all-inclusive monthly fee. Noting that Japanese audiences are “passionate” about video content, Hulu said it sees an “unfulfilled market” in the country for premium films and TV shows. To move its Japanese debut forward, Hulu has opened shops in Tokyo where dedicated teams are working to promote the service in the run up to its launch.
THE TRAVEL BUG?
Regional airports key to further growth in Polish air transportation
According to the Polishmarket.com.pl website, Poland’s accession to the European Union and the entry of low-cost airlines into the market have transformed Polish attitudes to air travel. It is no longer seen as a luxury, merely as a more convenient way of travelling. While the country’s air transportation infrastructure (particularly its regional airports) is still underdeveloped, a great deal of investment and EU funding is pouring in for upgrade purposes. According to the country’s Civil Aviation Office (CAO), regional airports have experienced significant increases in passenger numbers during the first half of 2011. The most popular international destination from Polish airports is London, followed by Frankfurt, which is commonly used by Polish travellers as a hub to transfer to long-haul flights. According to Euromonitor International data, airline passenger traffic in Poland grew from 6.2 million passengers in 2005 to 7.3 million during 2010.
Thai travellers look west to the Middle East
Natural disasters and lingering global economic problems, especially in Europe and the USA, are influencing where Thai tourists travel. “Turkey and the Middle East are still fresh and cheaper than travelling to Europe,” said Luecha Binsalem, managing director of Paradise on Earth Travel, a Bangkok based travel agency. “Thai tourists who have already visited Europe are looking for new destinations with reasonable prices. They want new experiences and memories,” she added. According to Binsalem, although many of them are concerned about political instability in the Middle East, they are attracted by Muslim culture and architecture.” The company’s average price for Turkish packages is THB59,000 (US$1,950) for eight days, around 50% cheaper than European packages.
Taiwan enticing the neighbours with local specialities
A project aiming to boost food exports by promoting local cuisine to Korean tourists was launched last month by Taiwan’s Tourism Bureau. South Korean tourists with air tickets to Taiwan can get coupons for free products like tea and pineapple cakes in duty-free shops at Taiwan’s Taoyuan International Airport and Kaohsiung International Airport. According to Taiwan Tourism Bureau statistics, South Korea is one of the leading sources of tourists to Taiwan, after mainland China, Japan, Hong Kong, Macau and the USA. Last year, 216,901 South Koreans visited Taiwan.
HOW ALLURING ARE FAKES?
Piracy and counterfeiting flourish in Moroccan souks
In Casablanca, the souk of Derb Ghallef has become a symbol of Morocco’s informal economy, as well as a byword for counterfeiting. Like many similar markets throughout the country, it is where consumers come to buy everything from smartphones and laptops to furniture, counterfeit sportswear and pirated DVDs. One local blogger opines: “Why buy a patented operating system in the regular market, when you can have the exact same copy at a price 500 timer lower in Derb Ghallef?”