Consumer sentiments in Saudi Arabia:
TNS launches its latest syndicated study on the Middle East consumer entitled 'Saudi consumer sentiments'. Inflation was by far rated to be of highest concern to Saudis, with over 50% of respondents indicating that it was having a direct affect on their lives.
Whilst there is a degree of awareness of other regional and global issues, these do not appear to impact on the daily existence of the Saudi population.
Interestingly enough, even the global financial crisis is of little relevance as of now - though if the financial crisis starts impacting Saudi Arabia in a bigger way these sentiments too may change.
Substantial hikes in the cost of living do ultimately impact on consumer lifestyles. The knock on effect is that it also appears to affect general happiness, with many not happy with their current lifestyle or not expecting their lifestyle to change for the better.
Due to increased household expenditures and reduced disposable incomes, consumers are actively engaged in several cost reducing strategies, ranging from delaying purchase of big ticket items to searching for cheaper retail solutions. Variations across social class are also apparent.
Consumers have adopted different strategies in order to combat the higher cost of living. Broadly, these are based around delaying purchases of non-urgent / big ticket items and holidays, searching for cheaper retail solutions and reducing frequency of going or eating out.
Whilst claimed noticeable increases in expenditure are evident across most categories (entertainment, clothing, telecommunications, home electronics etc), the food and beverage categories are experiencing the highest rise in consumer expenditure over the past year (primarily due to price increases).
Consumer behaviour in times of rising prices:
The TNS Saudi Arabia Worldpanel monitors consumer spending and behaviour across food, beverage, home and personal care categories. Its recent consumer behaviour report highlights in detail the channels and categories that have been directly affected by increasing prices as well as pack size changes.
Overall spend has increased and whilst the majority of large shopping is still carried out in the hyper/supermarket channel, there has been noticeable movement in terms of increased frequency of shop. A shift to both local and cheaper outlets over the 12 months to December 2008 is apparent, particularly amongst the lower social classes.
Looking to the future : a financial outlook
Indications are that general consumer confidence is fairly low. However, despite mounting retail prices, demand in Saudi will remain high and organic population growth will naturally increase consumption, all be it slowly.
Saudi consumers remain cautious about the future. After the impact of inflation, whilst somewhat expecting the global recession to affect the country, only a relatively small percentage of consumers in a recent TNS Finance Survey expect the situation to get much worse in Saudi Arabia itself.
Many are changing or intending to change their banking arrangements and/or investments during this period of uncertainty. A substantial percentage of respondents are aware that they will not be able to save money.
It is clear that marketers need to look at both short-term options to help consumers deal with the cost of living and impact of the global crisis and also long-term strategy to build consumer connect with brands.
From TNS experience it is quite evident that brands with stronger commitment levels are better able to withstand the need for price discounting / promotions etc.
But consumers do expect brands to understand their state and come up with appropriate offers that do help the consumers feel they are getting better value for money and that their budget needs are taken into account.