The global financial crisis has altered the spending habits of South Africa’s rich forever.
The cream of the LSM 10 grouping has become more cautious with money, more family focused and less inclined to trust big business, says Bateleur Brand Planning director Alan Todd who heads up the research for RamsayMedia Research Solutions.
“The great recession has influenced consumer behaviour in ways that will continue long after the recession ends. These behaviours have become ingrained, not only among the hard-pressed, but also among the well-to-do. There are numerous behaviour shift trends that we see in the data we work with,” says Todd.
This data comes from research such as the TopEnd 2013 survey, conducted by RamsayMedia Research Solutions and the Unilever Institute at the University of Cape Town. TopEnd was conducted among 80 000 consumers with a monthly household income of more than R100 000 and is the biggest survey ever on SA’s richest consumers.
In terms of spending habits, Todd says the data show that it’s not just the poor who have tightened their belts in difficult times. SA’s well-heeled classes are showing a distinct inclination towards thriftiness. Says Todd, “We are not saying that the affluent are no longer buying non-necessary luxury goods – they are. What we are saying is that for any purchase that can be classified as a necessity there is a marked trend towards conservative spending behaviour.”
While 68% of TopEnd respondents said they felt that they were better off now than they were during the worst of the crisis, a massive majority – 84% – said they are more cautious with their money than they were in the past.
“The affluent post-recession consumers… are looking harder at price, value and quality, not only at price,” says Todd. “Because they are tending to shun excessive consumption, they are tending to buy better quality goods that last longer. The value equation has moved away from ‘buying more’ to ‘buying more intelligently’.”
Todd cites the 2013 SA Fashion Shopper Survey, which found that 78% of this elite demographic think that “clothes are much less disposable these days because I am wearing them for longer”. Forty-nine percent said they were shopping for clothes for themselves far less often than they were a year ago.
The rich are also embracing thrifty behaviours like turning off lights when they are not needed and using loyalty programmes and coupons.
At the same time, affluent consumers say they are simplifying their lives and prioritising family and friends. Many are retreating from the ‘always on’ lifestyle provided by information technology, by, for example, turning off their cellphones more often.
“Complexity is forcing consumers to decide what they value and, for many, traditional values have become more motivating,” says Todd. These consumers will embrace marketing that provides them with trustworthy information that simplifies the decision-making process.
TopEnd finds that South Africa’s wealthy are placing more emphasis than before on the value of family and friends. Affluent consumers think their children are growing up in a more difficult economic environment than they did, so they worry about their children’s futures and have a great need to provide for them.
“In TopEnd 2012 we saw that 52% of affluent males and 58% of affluent females worry about their children’s futures (versus only 14% worrying about carbon emissions),” says Todd.
TopEnd respondents show a certain amount of suspicion towards big business and are likely to take issue with unethical business governance and excessive executive pay. “Through the cavalier behaviour of large businesses, especially banks, affluent consumers have lost trust in and become cynical of many large corporations… They desire to punish large corporations for their irresponsible ways. There is more emotion than rationality influencing their perceptions about which companies are ‘good’ and which are ‘bad’,” says Todd.
The study also found that the post-recession wealthy are becoming suspicious of authority and are less likely to trust the word of politicians, business people, doctors, lawyers and financial advisers. They are increasingly confident in their ability to solve their own problems and increasingly likely to turn to the internet and social media for alternative opinions and information.
These high-end consumers are also showing a decline in loyalty to brands. The internet is a major driver of this trend, says Todd, because it provides consumers with product information and bargains. Wealthy consumers are also ceasing to buy ‘green’ or ‘ethical’ brands. “The green movement has had to be put on hold till after the recession. Even the affluent consumer has to pay their school fees before they can save the planet. Charity begins at home,” says Todd.
Studies like TopEnd show that South Africa’s wealthy are a much more heterogeneous group than traditionally supposed. And, with an estimated spending power of over R300 billion, their influence cannot be ignored.
IMAGE: Super yacht for the super rich. Wikimedia Creative Commons