There is no doubt that many of us were negatively affected by the Covid-19 pandemic. It is difficult to say just how deep this impact has been but what is certain and borne out by key data numerics is that consumers are more cautious on how they spend money — whether forced or by design — and opting for secure, easier and affordable channels.
While previously the sector experienced slow uptake of e-commerce and e-payments, the pandemic certainly accelerated the use of digital solutions in a market where many have now embraced online shopping with payments facilitated via digital channels. The e-change witnessed is fast becoming the norm fuelling aspersions that e-transactions are here to stay.
Trust in paying for goods and services via a click on a mobile phone’s USSD platform or bank app had quadrupled, prompting lenders to facilitate back-office integration allowing cashless transactions for purchases and payment for services received.
Spending slowdown
The hard times have also introduced a new trend among merchants who offer discounts for their goods and services, making them attractive for customers to splash their hard-earned cash during the special sales.
Despite this acceleration of trends, the current economic uncertainty has led to consumers being unwilling to spend on non-essentials to save money wherever possible.
The 2020 Black Friday and Christmas shopping ‘promotions’ did not yield much. There was a noticeable downturn in sales volumes compared to past years.
Although there have been many negatives, Covid-19 has forced many individuals to adopt a fiscally prudent attitude in saving and carefully planning their medium-term finances.
Banks have also suffered reduced card revenues due to low point-of-sale transactions, indicating that customers are swiping cards less often and are, instead saving. Benefits for online channels abound as customers reduce the risk of carrying cash around while retail chains save on costs incurred for bulk cash transfer to the bank.
There is hope that the roll-out of vaccination programmes across the continent will help revive economic activity as sectors, especially travel, leisure and tourism, which are key revenue generators in Kenya, begin to rebound.
Yet, it is fair to say that there is still a great deal of economic uncertainty linked to the Covid-19 pandemic. It will take some time before the situation gets back to pre-Covid normal.
To entice consumers, retailers are looking at deeper discounts for increased footfall and increased transactions. There remains the risk, however, that the extent and lure of the discounts in discretionary categories may convince some consumers to engage in potentially reckless spending behaviour, which they may come to regret with time.
What to spend on
Although every consumer has a different profile, they are increasing their savings by holding off on additional spending, particularly on expensive discretionary items. If you spend money, go with purchasing essentials and always keep in mind a ‘worst-case scenario’, buy what is necessary. For those who are financially secure, there are opportunities for relatively good deals.
Changed behaviour
There is also a reduction in trading on discretionary goods and cutting back on holiday spending — not least because of the large-scale shutdown of air travel, resorts and hotels — and many consumers have structurally adapted to spending more time at home. This has, unsurprisingly, led to a rise in home entertainment expenditure, along with an increase in the sales of electronic products, which support a work-from-home orientation.
Grocery purchases are also being delivered more often now, as people generally seek to avoid malls and large crowds, and traditional retailers are increasingly adapting to this trend to meet the evolving needs of consumers including stocking less of fast-moving goods to avoid tying down their capital.
The big picture
While the extreme effects of Covid-19 are starting to dissipate as the phased roll-out of vaccines take place as economies slowly recover, the uncertainty for corporate and small and medium enterprises’ financial outlooks remains material, which has ramifications for consumer spending patterns.
Barring a major unforeseen global event, the situation is predicted to be better over the coming year.
Retailers and financial institutions should use this time to understand the changing landscape and how best to meet the customer needs in this new normal.
Consumers should similarly use this time to entrench financial discipline, build up healthy credit scores, as well as financial buffers and save up some more.
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