Ella Smook
4 July 2008
South Africans are ditching their possessions and "down-shopping" in a desperate effort to relieve the pinch on their purses, business and industry said.
And while many industries have taken a knock as a result of the economic crunch facing consumers, some anti-cyclical businesses are seeing an upswing as a result of changing shopping behaviour.
"People are looking at alternatives and sourcing products that are cheaper," says the managing director of Cash Converters, a company that buys and sells pre-owned goods.
He says the company has witnessed a "dramatic increase" in activity, reading it as a sign that people are getting rid of and liquidating that which they don't need, turning their possessions into cash.
June was also a record month for a loan product offered by the company, which allows customers to borrow money against the collateral of the products they offer as security.
On the transport front, commuters are increasingly opting for public transport instead of private vehicles to travel to work.
And while the sales of new vehicles have plummeted, those looking to buy vehicles are opting for the second-hand variety.
Gary McCraw, director of the Motor Industry Organisation, says while overall sales in the industry have gone down, there has been an upturn in the used car market, which also reacts inversely to economic pressures.
"They would've bought new, now they are going for old," he says.
Chief Executive Officer of the Tobacco Institute of South Africa Francois van der Merwe says it is too early to judge whether the economy has pushed smokers into quitting, and that the industry has not yet seen changes in sales volumes.
While the situation could change soon, he doubted that it would, because "somehow people who smoke always find money it is usually the last in line to be affected," says Van der Merwe.
There is an old saying that no matter how bad things are, people will always find money for booze or cigarettes, he says.
There was, however, a concern that people would start choosing cheap, illegal products instead of the pricier, regulated ones, he said.
The director of the National Council Against Smoking, Peter Ucko, says while there is no empirical research, the "biggest factor in people quitting" is affordability.
"If the price of a packet of cigarettes jumped to R100 on Saturday, (people will) find it easy to quit," he says.
Economist Hugo Pienaar, of the Bureau for Economic Research at the University of Stellenbosch, says anecdotal evidence does suggest that a trend of "down-shopping" is likely to occur, with people straying from their regular places of shopping to find cheaper alternatives.
"There is no doubt that consumers are under pressure, and some of them are under extreme pressure, as reflected in a range of economic figures," he says.
It is especially expenditure on durable goods which are sensitive to interest rate hikes, such as vehicles and furniture, which is taking a knock.
But while the prices are rising across the board, food prices are a special cause for concern.
"Poor people must pay significantly more for food. It affects them more (as) they spend most of their income on food," says Pienaar.
Many people have also taking to switching from expensive brand names to cheaper alternatives when shopping, he says.
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