According to the EY Future Consumer Index, 33% of consumers in the MENA region plan to stay frugal with less spending, make deep cuts to their budgets, change the way they shop as a result of the COVID-19 pandemic. These consumers are also pessimistic and worried about the future. However, 23% of consumers expect to be back with a bang — a segment that consists of younger consumers who are working and expect to be better off financially over the next year. They are optimistic that they will shop more online in the next one to two years and are willing to pay a premium for high-quality products. In addition, 21% of consumers expect to keep making deep budget cuts and focus on pricing, while 14% will be cautiously extravagant and willing to pay a premium for certain products. Only 8% of consumers surveyed said that their spending is unchanged and that their daily lives were not really affected by the pandemic. Ahmed Reda, MENA consumer leader, EY, said: "As can be expected, many consumers are concerned about their family, finances, freedom, jobs, the way they shop, the products they buy, and the availability of essentials due to the COVID-19 pandemic. "In fact, COVID-19 has done something that no amount of advertising by brands could do — it has made consumers change their preferences. Changes in consumer behavior that were expected to happen gradually, such as the shift from brick-and-mortar to online shopping, have been accelerated. The pandemic and its retail implications will continue to influence future consumer consumption patterns." Consumer behavior has shifted from the initial pandemic outbreak The EY Future Consumer Index, which tracks consumer sentiment and behavior across the world, surveyed 2,263 consumers from the Kingdom of Saudi Arabia and the United Arab Emirates. The questionnaire found that during the COVID-19 crisis, four distinct consumer behavior segments emerged: ‘save and stockpile', ‘hibernate and spend', ‘cut deep', and ‘stay calm and carry on'. At the start of the pandemic, 34% of MENA consumers fell under the ‘save and stockpile' segment where they were not as worried about the pandemic but more focused on their families, though pessimistic about the long-term effects. They were more likely to spend on household and home hygiene and were less likely to spend on clothing, footwear, and cosmetics. A separate 31% of consumers were in the ‘hibernate and spend' category and were greatly concerned with the impact of the pandemic, but were spending more on fresh food and continue to spend more on personal care items and electronics. Another 31% of consumers had to ‘cut deep' in their spending due to being the hardest hit by the pandemic, and were therefore spending less across all categories apart from household and home hygiene. Lastly, 4% of consumers in the MENA region felt unaffected by the pandemic and did not change their spending habits drastically, but they were worried about others stockpiling. They also spent more on grocery daily services, beauty, clothing, and footwear. The return to ‘normal' shopping behavior among consumers When asked about how quickly they believe "normality" with regard to shopping will return once the pandemic is over, 55% of consumers think it will be a matter of days/weeks, 37% expect it to be a matter of months, 6% predict it will be a matter of years, and 3% think that normal, pre-pandemic shopping habits will never return. MENA consumers expect to spend more on specific categories once the COVID-19 outbreak is over, with 43% predicting they will spend more on fresh food, 34% looking to spend more on household items, and 32% spending more on personal care. Overall, 58% of MENA consumers agree that the way they shop will change over the next one to two years. Consumers also expect that the way they socialize (55%), the products they buy (52%), the way they spend time with their family (49%), and the way they maintain their physical and mental wellbeing (49%) will change over the next one to two years. The retail sector needs to evolve as quickly as the MENA consumer Consumer-facing organizations in the MENA region have had to adjust their operating models to accommodate the shifts in consumer behavior. Six areas that businesses are focusing on to win the market are: e-commerce, the optimization of supply chain costs, making trade spend work smarter, improving consumer understanding and creating innovative consumer engagement platforms, building robust risk assessment capabilities, and reimagining employee management practices. Ravi Kapoor, MENA consumer advisory leader, EY, said: "The COVID-19 pandemic and its implications came as a surprise to many retail businesses, but it is important to note that the MENA consumer was already evolving at great speed. As the pandemic has influenced changes in behavior and consumption, consumers have started rethinking what is important and what they should value the most." "The focus for the retail sector now should be on transforming to succeed in a new business landscape. Companies can take certain steps to anticipate the future, understand the changes, explore the market and respond to the opportunities effectively. With changing situations and lifestyle, customer behaviors and consumption will undergo a massive transformation." — SG
