Across age-groups, consumers are adjusting differently to minimize the effects of inflation.
The rising inflation across the world has led to a decrease in consumer spending, especially around discretionary items. A recent article by Kasi Insight on inflation further revealed that discretionary spending in Africa experienced a 6% drop from January to May 2022. In Ethiopia, the situation is not different as the rising cost of living has forced consumers to cut back on expenses and focus on the very basic necessities.
Alternatively, consumers in Ethiopia have found other ways to minimize the effects of inflation besides choosing cheaper alternatives and delaying purchases on discretionary items.
Inflation tops as the country’s major issue of concern
A poll conducted by Kasi Insight in June 2022 revealed that inflation was a major issue amongst Ethiopian consumers.
Looking at the major concerns facing Ethiopians, the constant rise in prices proved to be by the majority of the respondents at 75%, followed by 44% Government corruption , 43% supply issues, 40% political instability and 31% possibility of war. It is worth noting that the difference between the 1st and 2nd issue of concern is quite high with a 31% difference. Across different consumer segments, inflation still tops as the major issue of concern.
All sectors hit hard by inflation, but the impact varies
The poll assessed several sectors in the country’s economy, and it was established that all of them were hit by inflation but the extent of the impact varied. Surprisingly, the Ethiopian education sector felt the most impact.
The rise in the costs of the education sector can be explained by two major factors. The first being the increase of both the cost of labor and rentals. Though the Ethiopian government provides free education up to grade 12, expensive private schools exist. Additionally, when it comes to labor cost following the boom in urbanization, more private schools are being opened. This coupled with the prevailing rate of inflation has led teachers and school administrators to ask for higher salaries. In the end, these two-sided costs are passed down to the end consumer who feels like prices in the education sector have greatly increased.
Consumers are looking for cheaper alternatives and delaying non-essentials to curb inflation
The rising prices have forced consumers to adopt various coping measures that have enabled them to cut their spending. Among the top 3 coping measures; consumers are purchasing cheaper alternatives, delaying non-essential purchases and changing purchasing habits.
Across age-groups, consumers are adjusting differently to minimize the effects of inflation. For Baby Boomers, they rank purchasing cheaper alternatives at the top followed by searching for sales & promotions and lastly changing purchasing habits. For Gen Xers, delaying non-essential purchases (discretionary spending) comes in first, followed by purchasing cheaper alternatives and changing purchasing habits.
As for Millennials, delaying non-essential purchases (discretionary spending) comes in first, followed by changing purchasing habits and purchasing cheaper alternatives coming in third. According to Gen Zers, purchasing cheaper alternatives comes as priority, followed by searching for sales & promotions and finally delaying non-essential purchases (discretionary spending).
Brands must be proactive and creative with pricing and not pass on cost to consumers
Based on the current trends, inflation is here to stay. Brands need to come up with strategies that will ensure they retain their current customers regardless of their ages, in order to remain competitive. For example, Baby Boomers and Gen Zers consumers look for brands that are on sale or promotion. For brands that are targeting these consumer segments, ‘sales and promotions’ is the way to go.
Brands should try to lower their bargaining power by reducing the price of commodities to ensure that manufacturing costs are not felt by consumers. As a way to curb inflation, consumers prefer purchasing cheaper alternatives.
Brands should repackage their commodities into smaller units. Breaking larger quantities into smaller packages reduces the prices of products thus, brands are able to retain their initial market share.
Our data intelligence platform can help you track these trends in consumer behaviors in Africa over time. Kasi Insight has comprehensive data that can provide valuable insights to help your business make fast data-driven decisions.
Contact our team today to explore how our consumer intelligence can empower your decision-making process. Win with confidence with Kasi insights https://www.kasiinsight.com/thehub
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