Will Xmas 2022 be merry for SA retailers? What to expect from consumer spend

These may be tough times, but South Africans are set to dig deep and plan for a happy and festive holiday season, even though their approaches to festivities and gift giving may be very different this year. Most remain motivated by the desire to feel a sense of connection and community and aren’t prepared to compromise on this because budgets are tight.

A recent survey from marketing, research and data specialists, KLA, found that financial stress is a reality for many South Africans, a fact confirmed in the Momentum Unisa Consumer Financial Vulnerability Index Q3 report. The latter found that “the overall state of South African consumer finances improved slightly in Q3 2022, but people remain under pressure”. 

This is further supported by a recent McKinsey Report (March 2022) that unpacks the tangible financial pressures, with 87% of South African consumers describing their personal financial situation as “stretched”; 70% reporting substituting branded products with cheaper alternatives; and 42% saying that cheaper alternatives are good enough for everyday use.

Here are the key takeaways from KLA's research, which highlight what to expect from consumers when it comes to spending this Christmas:

Mindful gifting will fulfil the desire to give and will enable consumers to stay within the reality of their budgets.

The mantra “it's the thought that counts” will hold more truth this year than ever. Christmas gifting remains important, with the majority (72%) saying they will be buying gifts, but 18% deciding to forgo gifts entirely despite having bought them in previous years.¹

Spending will be curbed for some. Relative to last year, the indicated spread of spend² is:

• 42% plan to spend more;
• 32% will spend similar amounts;
• 22% will spend less; and
• 5% don’t celebrate Christmas.

There are clear reasons why spend will be carefully considered, and three main reasons³ are not surprising:

• 63%: inflation (rising cost of living);
• 51%: pressure on disposable income (money left once expenses are paid); and
• 51%: transportation.

In addition, monthly expenses are demanding⁴ — 31% indicate restraint as a result of too much debt, 29% cite housing costs, 27% say school fees, and the cost of health care is a challenge for 22% of respondents. Only 7% of respondents have no financial concerns and have no need for restraint.

When it comes to the choice of gift this year⁴, consumers are mainly opting for clothing and shoes (83%), toys (53%), food/drinks/consumables (52%), vouchers (52%) and beauty or personal care products (49%). 

The survey results indicate the gifting categories:

In the context of financial and gift-giving caution, consumers are set to apply equal care when it comes to paying for gifts. 

Survey results suggest reticence to endure more debt during this time, and consumers are looking for the comfort and control that comes with paying with cash; 74% plan to pay cash, while 59% plan to use a debit card, which equates to cash.⁵

Efforts to accumulate points and rewards⁵ are realised for 41% of respondents who will use these to pay for gifts and 39% will use gift cards/vouchers. However, credit will be used by some⁵: 25% will use a credit card and 11% will use a Buy Now, Pay Later platform.⁵

Retailers should connect with consumers to create anticipation and build the excitement of Christmas.

Consumers want festive cheer and fun after a rough and complex year, so this is the perfect opportunity for retailers to create experiences that do just that — bring cheer and build a sense of celebration. 

Given that discretionary income is limited, retailers could leverage festive feelings and support consumers through this time. Consumers seek Christmas sparkle as they wonder through stores, be they physical or digital. So it would be wise to create experiences that deliver cheer and draw on all the senses, building feelings of joy and celebration. 

Consumers will be in stores and online, ready for festive experiences — 34% of respondents are likely to shop in-store, 46% will combine online and in-store shopping, and 20% will shop online only.⁶

Creativity in gifting and celebrating Christmas might just be the most important ingredients for consumers and retailers to have the most magical time this year. For more information, visit the KLA website. 

This article was paid for by KLA.