What makes a best-selling product? Remember ‘S.A.V.E’!
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Korea Chamber of Commerce and Industry, ‘Consumption Trends for the Second Half of 2024’ Seminar commemorating the 1st anniversary of Retail Talk, a newsletter specializing in distribution
Brands that showed sales growth over the past year despite inflation can be classified into 4 types with acronym of SAVE: ‘Sound wellness,’ ‘Adaptation of lifestyle,’ ‘Variation of price,’ and ‘Elaboration.’
The Korea Chamber of Commerce and Industry (Chairman Taewon Choi) held ‘Seminar on changes in consumption trends and implications for the second half of 2024’ on June 19th at the Chamber of Commerce and Industry in Jung-gu, Seoul, to commemorate the first anniversary of the launch of Retail Talk, a newsletter specializing in distribution. In this seminar, experts from global market analysis organizations spoke and provided insights based on recent data in order to look at the changes in consumption trends and identify what companies should do in the era of high inflation.
Nielsen IQ Executive Director Park Chun-nam said, “As consumers reduce impulsive buying and the increase purpose buying, frugal consumption with consumption patterns centered on essential goods is strengthening.” He continued, “If you look at the common keywords of brands that are growing despite difficult conditions, they are characterized by the pursuit of wellness, reflection of changing lifestyles, price differentiation, and customization.”
According to Nielsen IQ sales data, sales of protein drinks reflecting the wellness trend grew 35.8% last year. Health conscious meal kits targeting the elderly population grew by 78.6%, and the consumption of mini home appliances also increased significantly due to the increase in households of one or two persons.
As the mid-price product market is shrinking and the polarization of consumption into low-price and premium markets is deepening, the sales volume of low-price per-unit high-capacity products and high-end home appliances are simultaneously increasing. In addition, the market for personalized products, such as home appliances with customized designs where you choose the color and material, is also expanding.
According to the presentation at the seminar, as recession-type consumption patterns have become entrenched in the domestic consumer market due to high prices and the economic downturn, consumption patterns centered on daily staples like groceries that can be cooked at home rather than eating out are becoming more evident.
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Shim Young-hoon, head of Kantar, said, “As we enter the era of high interest rates, high inflation, and high exchange rates (weak KRW against USD), the size of the domestic consumer goods market in the first quarter of this year, including fresh food, grew by 6% in purchase volume and 9% in purchase amount compared to the same quarter last year.”
Director Shim analyzed, “This growth is due to the increase in the amount of consumers’ shopping carts due to rising prices and increased consumption of meals at home.” In fact, as of the first quarter, the items with the highest annual growth rate in the food category were frozen foods (23%) and sauces/condiments (20%).
Deok-Hwan Yoon, director of Macromill Embrain, said, "Consumers who have experienced a decline in asset values such as real estate and stock prices and a rapid price-hikes that started in the second half of 2022, appear to have entered into a long-term war to prepare for an uncertain future. “Despite the continued safety and quality issues, there is a significant number of consumers using Chinese low-cost e-commerce malls such as Ali or Temu; the thrift spending trend is expected to continue for the time being.”
Euromonitor's general manager Kyeong-sun Moon said, "The ‘Zalpha’ (Gen Z + Gen Alpha) generation aged 15 to 34 is the only generation that did not reduce their consumption even amid the coronavirus pandemic. Although they have the smallest available budget, they minimize spending by targeting the optimal purchase channels and timing. “They show a ‘premium-thrifty’ consumption trend of purchasing the products they want while spending less,” he explained. He added, “This is why Chinese low-cost platforms first targeted the domestic Zalpha generation.” ?Zalpha is a compound word of Generation Z and Generation Alpha, and are born between the 1990s and early 2000s, very familiar with the digital environment. This generation is characterized by an emphasis on individuality values and active participation in social issues.
Taehee Ahn, partner at Kearney, a global consulting firm who was the keynote speaker, said, "Global distributors are launching 'reverse shrinkflation' products that increase capacity and lower prices per unit prices to respond to the decline in demand due to inflation. They are also diversifying their private label lines. ‘Bettergoods’, a premium food Private Brand launched by Walmart in April of this year, is a representative example of private label diversification.” BetterGoods is a premium product that Walmart has focused on while focusing on low-priced PBs. It aims to secure high-income customers and is characterized by strengthening health factors such as using organic plant-based ingredients and excluding artificial additives.
“Distribution and consumer goods companies are experiencing a double whammy due to rising costs and pressure to reduce sales prices,” said Jang Geun-geun, president of the Korea Chamber of Commerce and Industry. “Strategic collaboration with companies is also necessary,” he added, adding, “The number of overseas tourists is increasing recently, and the ‘Korea Sale Festa’, a large-scale discount event in the second half of the year, will help boost the shrinking consumer market.”
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