Covid-19 has had a remarkable impact on the perception of South American consumers. While the majority of the population in Argentina (78%), Chile (59%) and Colombia (51%) indicated that their country was experiencing an economic crisis before the start of the pandemic, this percentage increased by 10 to 15 points in the case of Chile, Colombia and Peru during the current contingency. This is reflected in the study of Consumer Sentiment that Boston Consulting Group (BCG) has made for South America.
On the other hand, when asked about the long term future 75% are optimistic. “Looking ahead to the next five years, 85% of consumers in Colombia and Peru and 65% in Argentina and Chile are optimistic about the economic situation in their countries,” says Sandro Marzo, managing director and partner of BCG in Colombia, and co-author of the study. “This shows us the first signs of a contrast that is repeated in other dimensions of consumption in the region between the north and south.
The current economic perception, mostly negative, is reflected in consumers’ intention to reduce their spending during 2020: 80% said they want to contract their consumption, being similar in all countries (81% of Peruvians and Colombians; 77% of Chileans; and 74% of Argentines). This net decrease in consumer spending affects all categories except fresh foods. “Although the trend is towards a reduction, in all categories there are around 15% of consumers who expect to increase their spending,” says Alfonso Astudillo, a BCG partner in Chile and co-author of the report. “Understanding these consumption growth spaces is fundamental for companies. In addition, it is important to stress that two-thirds of consumers who want to make changes in their spending plan to do so in volume (by increasing or reducing) rather than price.
Another aspect detected by the Consumer Sentiment study for South America conducted by BCG is the importance of promotions to promote sales. On average, 75% of consumers in Argentina, Chile, Colombia and Peru perceive that they make their purchases in promotions with some kind of regularity. This purchasing trend is high in all categories, with “personal care and clothing” standing out at ~85%. “Despite having a high starting point, 40% of those surveyed indicated that they expect to buy even more in promotions during this year,” notes Rafael Agudo, managing director and partner of BCG in Peru. “Additionally, for South Americans, promotions have great power to influence brand choice, as about 85% of consumers indicated that they are willing to switch brands based on promotions”.
COVID-19 impact on consumption
The current pandemic does not leave consumers indifferent: 75% believe that Covid-19 has adversely affected their country. Feelings of instability and pessimism have intensified in much of the region (between 10 and 15 percentage points on average), except in Argentina. In addition, nearly 80% of consumers in South America say the economy will not improve in the next six months.
Due to the awareness that exists regarding the current contingency, consumption patterns have been immediately impacted. “In particular, we saw a drop in spending expectations for the ‘Travel and mobility’ category from the pre-Covid period while we saw an increase in ‘Food’ spending expectations particularly for fresh produce due to the need to stay healthy,” explains Cristián Carafí, managing director and partner at BCG in Chile, and co-author of this report. “This increase is explained by the fact that a third of the increase is due to the need for stock up, pushed by the quarantines and states of exception announced in the countries at that time.
The crisis has also generated new perceptions among consumers, who point to the possibility of contracting the disease while carrying out everyday activities, such as using public transport or going to the supermarket, as one of their concerns. “This is pushing consumers to adapt more quickly to digital channels, as shown, for example, by the explosive increase in the use of purchase and delivery applications throughout the region,” says Andrés Anavi, managing director and partner of BCG in Argentina and Chile.
In this complex consumer scenario, BCG’s report points to four key actions for companies: (1) Reinforce consumer knowledge leveraged on data and analytics, (2) Differentiate through pricing and brand building, (3) Drive digital Customer Journeys end to end, and (4) Redouble efforts for greater efficiency.
This is the first time that the Boston Consulting Group has conducted a Consumer Sentiment study for Spanish-speaking countries in South America. Specifically, it has focused on Argentina, Chile, Colombia and Peru, the main economies in the region. A field study was carried out between January and February of this year, which was complemented during the end of March to reflect the impact of the Covid-19 contingency (and the established quarantines) on the perspectives of South American consumers.
Author: Edgardo Mora, DiarioConcepcion