Navigate and Ride The Wave of Recovery: Staying Relevant in Turbulent Times
Coming from a very abundant growth phase in 2019 characterized by an improved economy, drops in inequality and very strong consumer sentiment, COVID-19 and the accompanying pandemic shifted everyone’s focus to safety and survival in 2020 and 2021. This period of unpredictability forced many to re-think their values and caused a significant shift in consumer priorities characterized by a cautious positivity that guides consumer decision making today. In this article, we look at the current year 2022, what has been and what we believe will be recurring themes and shifts to consider as we continue to navigate and ride this wave of recovery.
The future remains in flux
What started out as a hopeful January, coming from the most normal Christmas season the country had seen in two years, a much more open economy paired with the lowest inflation rates, as well as increasing employment, it seemed like there was much to look forward to in 2022. Businesses were projecting growth and recovery and consumers were showing much more willingness to go out and spend.
Fast forward to today, with half of 2022 done and today’s reality is so different from the start of the year, difficult to accept that this was just a few months ago. From a COVID surge just a week into the year to a possibility of World War III the following month, divisive electoral campaigns and runaway inflation rates and prices, the first two quarters of 2022 have certainly proven to be a case study in volatility and unpredictability leaving everyone bracing for the next whiplash.
Navigating business in this sea of ever shifting tides is a skill that most business leaders have become accustomed to over the years. One of the few constants that will help us find the right path? A deep and constant understanding and connection with our consumers.
Filipinos are proceeding with caution
So, where are most consumers today? Overall, the outlook remains relatively positive. 7 out of 10 Filipinos believe they will be happier than they are today. They believe they will be financially better off and that their lives will be better and this % has increased continuously since 2020. We are also seeing a resurgence in consumer spending compared to the early periods of the pandemic. Household final consumption expenditure had been growing since 2020 and consumer intent to spend has also been increasing as 57% of consumers say they will maintain, or increase spend in the next 12 months.
While there is a more positive outlook, consumer decision making and spending patterns remain restrained because of the unpredictability of the situation. It is this cautious positivity that is driving consumer behavior and attitudes across the major areas of living.
Essentials + Health and Wellness will remain a priority while select non-essentials will begin recovery
When we drill down spending by category, we see a continued rise in spending for essential categories such as groceries, education, housing and transportation. This is supported by a positive net intent across all essentials. On the health front, there is more willingness to move activities in person, but this is paired with continued safety efforts. 9 in 10 consumers will still take health and safety precautions when leaving home and half of consumers claim that they will increase spending on Health and Wellness related products and services in the next 12 months.
We also anticipate the beginning of recovery for non-essential categories. If we look at purchases of non-essentials, there is also an increase as well with 28% now expecting they will spend more in the next 12 months. Categories such as apparel, and new technology are showing positive/neutral net intent again after 24 months of contraction. While 2022 intended spend remains negative for restaurants, novelty experiences and travel, there are marked increases on net intent vs. 2021. Cinemas, concerts and theaters though will remain challenged as intent to spend continues to decline here. This may be due to increasing penetration of video-on-demand/streaming services like Netflix, supported by the increasing demand for smart TV and devices, and the push for at-home internet, thus, entertainment has shifted to at-home. Overall, there may be a permanent shift in preferences for these non-essential categories that will need to be observed.
Consumer segments present pockets of opportunities
Spending by generation and by socio-economic class within categories is also very divergent. Upper, Middle, Lower Income, Baby Boomers, Gen X, Millennials and Gen Z all prioritizing spend for different categories. This opens several opportunities for brands and businesses. Contact us to understand more how the generations approach spending today.
The fight ahead
What does this mean for companies? When we look at what consumers are spending today, it reflects the balance of their cautious positivity. There is continued intent to spend on essentials with an increasing number of consumers becoming more open to spending on specific non-essential categories such as apparel, technology, restaurants and travel. This intent to spend though is balanced by the continued desire of the majority to save.
Companies with products or services in these categories or with adjacencies to these categories will most likely grow behind consumer’s willingness to spend behind these essentials. The challenge here will be to drive relevance and differentiation by unlocking the dimension of that category that will resonate the most with the target segment.
Companies that play within what is considered a non-essential category, on the other hand, will need to fight for share of wallet by focusing on segments that are willing to spend and identifying essential needs they can deliver on.
Let us help your company understand the changing landscape in your industry and make sound decisions for your business. Contact us today for more information.
About the Author Anny Oliveros
Anny Oliveros heads Acumen's Knowledge and Intellectual Property Development Center. She is a certified Agile practitioner and has had over 15 years of experience in Business, Strategic Planning, Marketing, Sales and Capability Building both locally and in South East Asia building global and local brands.