Reality bites when it comes to Kenya’s latest Nielsen Consumer Confidence Index score (Quarter 4, 2017), which has dropped six points from the previous quarter to 94, the lowest level since the country was first measured in Quarter 4, 2013 and means it is now well below the ‘tipping point’ of overall optimism i.e. 100.
Nielsen East and South Africa MD Bryan Sun comments; “Prolonged uncertainties around elections, drought, and a credit cap resulted in a decline in consumer sentiment. Rapidly rising inflation has also driven food prices to five-year highs, which has plagued consumers and retail trading conditions. Consumers are therefore less confident about their personal finances; their spare cash is limited and their mindset remains cautionary, with them opting to save rather than spend”.
This has resulted in a drastic drop in immediate-spending intentions, which has declined by four percentage points to just 23% of respondents who said now is a good or excellent time to spend versus the 70% who said it was not. Sentiments around personal-finances also declined six percentage points to 58% compared with Quarter 3, 2017 and the outlook for jobs declined by six percentage points to 42% compared to 48% in the previous quarter.
Elaborating on these results, Sun says that a recent Nielsen analysis found that 70% of Kenyan consumers buy based on price. “While consumers the world over and in Africa buy based on
price, this is not a long-term success driver and especially so in more difficult times; when growth is about more than price in the long- term.
“Availability has also become more important, as retailers struggle due to limited access to credit, to manage their stock supply. This means consumers must settle for what products are available in store. In addition, the most interesting factor is the changing trust relationship.
Consumers buy brands they know and trust, however, what is becoming prominent is the increasing importance of recommendations from friends, family and retailers when faced with brands they may not know.”
The number of retail outlets in Kenya has also increased, with a rise in more specialist and out-of-home retailers and more suppliers, experiencing double digit growth every year. Modern Trade store numbers now extend to 660 (up by 36 stores), while the number of Traditional Trade (Dukkha’s and Table Tops) and Specialist Outlets (Hair, Beauty, Electronic and Baby Retailers) also continues to increase. This has resulted in a retail landscape which is far more competitive and requires greater precision and optimisation to reach the right consumers.
Sun reports; “Existing modern trade is gaining shoppers and spend from traditional trade. Mid-term growth is particularly evident in Nairobi, (17% growth year on year) which accounts for 36% of sales. However, rural trade cannot be ignored, as it still accounts for more than two thirds of consumer purchases.”
Convenience is king
Looking ahead, Sun says retailers need to realise that to meet consumers current ‘need for speed’, the future will be “all about convenience”, underpinned by innovation. Against this backdrop, it’s interesting to note that a quarter of Kenyans use social media to find out about brands, yet online FMCG shopping is almost non-existent. This points to a large eCommerce gap within the Kenyan retail consumer market.
Success therefore depends on meeting changing needs and changing demand for products, shopping experience, and fulfilment that will offer opportunities for growth. This emerging on the go lifestyle of Kenyans creates this need for speed, whether it is the Consumption Experience, which requires ready to consume solutions and a broader range of products and packaging, the Shopper Experience that requires proximity, efficiency, in the moment rewards and additional services, and the Engagement Experience, which requires on demand, 2-way interaction, easy-to-use apps and addressable advertising.
Sun adds; “By keeping an eye on the future, retailers will be able to find pockets of growth and truly leverage Kenyans growing demand for greater ease, utility and suitability to meet consumers’ shifting needs and fluctuating confidence levels.”