The Year of the Consumer Part 3: Impact by industry

As this year’s Stitch Scale Summit approaches, we explore the impact that some of the macro and micro influences discussed in part 1 – which have led to major shifts in consumer mindset and behaviour discussed in part 2 – are having on some of the biggest industries in South Africa. From greater expectations in omnichannel and unified commerce, to higher engagement and continued growth in online gaming and entertainment, consumers are exhibiting nuanced purchase behaviour across all aspects of their financial lives.

The impact of today’s consumer mindset, by industry

What are South African consumers spending on? In the e-commerce space, perhaps unsurprisingly, today items like groceries, retail and travel are the largest categories by spend. A significant trend is the growing preference for online grocery shopping, driven both by greater availability of and access to on-demand delivery services, and consumer preferences for more convenience and more time at home.

But spend on entertainment and streaming, services and gaming is also on the rise as people spend more time at home, and popular services become more accessible in the market.

E-commerce + delivery

Online grocery shopping has become increasingly popular in South Africa, with between 7% and 15% of grocery spending now happening online. According to a recent report from SpendTrend and Discovery Bank, “in the past year, average grocery spending in South Africa rose by 8%, compared to the 16% increase the year before.” Interestingly, the report also found that consumers are purchasing groceries online at an even pace across the week, as same-day delivery services become increasingly more accessible. This behaviour change means they’re ordering more frequently, rather than a big shop at the start or end of the week.

However it’s also important to contextualise this by looking at drivers like inflation and rising interest rates, and to evaluate spend by demographic segment. Most of this growth has come from higher net worth segments, as the mass segment did not grow their online grocery spend last year. This indicates that they’ve “adjusted their purchasing habits or bought less to cope with rising costs.” However, their spending has not decreased, meaning consumers across demographic segments are still taking advantage of online orders.

This accessibility is possible because logistics and on-demand delivery services have been rising to meet the demand coming from consumers. The entrance of new e-commerce players like Amazon, and the continued growth of delivery apps like Mr. D, Woolies Dash, Checkers60 and others, are both responding to rising demand and grooming consumers to expect faster, more seamless and more accessible on-demand services.  

The methods with which consumers are making online purchases are also shifting toward more convenient and seamless options. In 2023, the use of digital wallets in South Africa, such as Apple Pay, Google Pay and Samsung Wallet, increased by nine percentage points. According to the 4Sight Digital Banking Behaviour Survey, more than 60% of South Africans prefer digital wallets today because this technology eliminates the need for carrying a physical wallet or enter card details online. We’ve seen this reflected in our own consumer surveys, in which customers indicated a growing desire to pay with wallets for e-commerce purchases.

Additionally, as omnichannel retail continues to take shape, consumers have come to expect the same journey and experiences no matter where they shop. Innovative brands like Bash are making it easier than ever to access their products - whether delivered to your door, via click and collect or purchased in store - with the same checkout and level of customer experience that represents their brand promise.

We’ll be hearing from industry leaders in the e-commerce and retail space at this year’s Scale Summit, including Bash and OneDayOnly, and more.

Insurance businesses are getting creative to attract and retain customers

For many South Africans, the benefits of backing one’s health, property, technology, pets and family became even more critically apparent over the last few years. While the pandemic was a major factor, there were a number of other local incidents - from the floods and riots in Kwa-Zulu Natal and Gauteng, to the 2023 Johannesburg building fire, to rising inflation and unemployment, an increase in work from home and ongoing challenges with load shedding - that have contributed to a rising interest in and awareness of the need for risk protection.

However, disposable income has simultaneously become increasingly tighter. For many, in these times, spending on items like insurance premiums becomes a grudge purchase. As a result, insurance companies are responding with more, and more creative, ways for consumers to access insurance for both short-term (i.e. a trip) and long-term (i.e. life) coverage, including protections for missed premium payments.

Fintechs like Pineapple and Naked, as well as incumbents, are finding new ways to appeal to younger, more tech-native consumers. As we shared earlier this year, flexibility, digital-first self-service processes and creative benefits programming like Discovery’s Vitality Active Awards are getting young people more interested and excited about forward-thinking economic protections.

We’re looking forward to hearing from insurance industry leaders like Lee Corrigan, Head of Product Development at Vitality Global, who will present during the Innovation Showcase at this year’s Scale Summit.

Travel industry sees rising interest as consumers prioritise experiences over things

According to the SpendTrend Report from Visa and Discovery Bank, domestic travel in South Africa exceeded pre-pandemic levels in 2023, despite significantly higher costs. Some reasons for this include improvements to and more choices within the airline industry, and more packaged experience offerings.

Revenge travel is a term that has been used to describe the tendency for people whose travel plans were stifled or cancelled during the pandemic to engage more heavily in travel once they were once again free to do so. While revenge travel surged immediately post-pandemic, it has since begun to level off, though spending on travel remains high.

Similar to global trends, South Africans are increasingly engaging in things like “bleisure” travel, in which they combine business trips with leisure activities by staying longer or work remotely. This collective surge in experiences and exploration has required travel businesses to develop more offerings and a better user journey to attract and retain these customers.

For consumers that prefer experiential travel, quality customer support is also a significant selling point when choosing where and how they book. The ability to receive tailored recommendations and help from a real human throughout the process can set one booking platform apart over another. We’ve seen brands like Pentravel looking to solutions like conversational commerce to engage customers throughout their buying journey, including the ability to pay in-chat.

We’ll also be hearing from Carlien Parsons from The Travel Corporation, who will share her perspective on how the South African consumer has evolved, and how travel platforms like those within the Cullinan Group are leveraging technology to find new ways to interact with their customers.

Online entertainment takes centre stage

While the pandemic necessitated a fast and aggressive shift from physical betting spaces to online gaming, this space continues to thrive as consumers find ways of enhancing their enjoyment of live sports, and finding an accessible outlet.

Additionally, entertainment streaming services like Disney+, Netflix and new offerings from Multichoice are growing in popularity, especially as consumers continue to opt for more nights in. These solutions need easy and flexible payment options, including recurring collections, with the option to easily pause or cancel subscriptions as disposable income fluctuates and priorities change.  

The role of the payments process in facilitating a modern customer experience

Enterprise businesses need to remain ahead of the game when considering how to optimise for the best possible customer journey, particularly in highly competitive spaces. While offering customers choice in how they wish to pay and ensuring consumer preferences are taken into account is a critical baseline, today it’s even more important that the payment process is streamlined, optimised and highly reliable, as failed or complicated payments can quickly lead consumers to another site or platform.

At Stitch, we evaluate and benchmark industry data across our client base to ensure our clients’ payment processes are operating at peak performance. By partnering directly with banks and networks across the payments stack, we offer highly reliable solutions and remain ahead of any changes and innovations taking place in the industry, ensuring our clients understand how they might be impacted and how they can adjust their current offering.

Consumers today are spoiled for choice, and they’ll gravitate toward brands that they believe know and meet their needs best. The ability to pay quickly and securely, with enough flexibility to serve all needed use cases, is increasingly becoming a differentiator for brands that prioritise customer experience and engagement.

We’re looking forward to discussing how today’s enterprise businesses can remain ahead of shifting consumer behaviours and preferences - to attract and retain customers in an increasingly competitive environment - at this year’s Scale Summit.