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A third of Australian consumers newly constrained

MEDIA RELEASE: March 9 2021: A rapidly growing group of “newly constrained” consumers have been identified in a NielsenIQ study. These newly constrained consumers are those who experienced worsening income or financial situations and hence consciously watch what they spend. Almost half of (46%) global consumers expressed they were newly constrained, whereas only a third of Australian consumers (33%) felt the same according to the NielsenIQ Unlocking Consumption global survey. Still, Australian consumers are not entirely immune and they have been actively finding ways to tackle the uncertainty brought on by the COVID-19 pandemic.

The study, conducted across 16 countries by NielsenIQ’s Customised Intelligence team, aims to reveal how consumers have been impacted by the pandemic and how their spending behaviours have changed. The study found that the change in consumer circumstances has led to greater scrutiny around how consumers will plan their spend.

In 2020, NielsenIQ identified a polarising impact from COVID-19 and two distinct consumer groups emerged as unemployment numbers soared. The two groups were defined as “constrained” for those who faced job losses and “insulated” for those who held their jobs and felt secure in general. But the study conducted in December 2020 found that consumers’ circumstances and intentions relative to spending had changed so significantly that further segmentation is required. The initial 2 segments have been expanded to 4 segments, namely existing constrained, newly constrained, cautious insulated and unrestricted insulated (please see the boilerplate for the definition).

Australian consumers less impacted by COVID-19
As the pandemic effects continue, many global consumers may face further income reduction and shrinking governmental support, and 33% of global consumers said they feel less secure about their income prospects over the next 3-6 months.

Relatively speaking, Australian consumers were less negative towards the future as only 22% showed insecurity about their income prospects in the first half of the year, likely due to a range of measures implemented by the Australian government such as Coronavirus Supplement, Economic Support Payment and the Extension of Income Support.

Additionally, developed markets like Australia had a correspondingly higher proportion of total consumers who indicated they have had little to no impact on finances as a result of COVID-19. Consumers in these markets have benefited from valid governmental support programs and higher levels of consumer confidence. Australia (45%) together with the United Kingdom (49%), Canada (44%), Germany (44%), and the United States (39%) have the highest proportion of total insulated consumers, including insulated cautious and insulated unrestricted consumers. Nevertheless, only a small proportion of these consumers said they can spend freely, showing this group has not been completely shielded from impacts.

Australian consumers are already adjusting their spending with various coping mechanisms
When asked if purchasing behaviour has changed since the onset of COVID-19, 56% of Australian consumers indicated they have changed the way they buy categories and brands. Despite Australian consumers being less impacted by COVID-19, they are still finding ways to save on their household spend, including buying whatever product is on promotion regardless of brand (49%), choosing the lowest priced products irrespective of brand (48%) and opting for private label/store brands (45%).

“Brands are under much more scrutiny with consumers weighing up what brand attributes really matter to them to justify a place in the basket,” said Gillian O’Sullivan, Executive Director, Consumer Insights, North Asia & Pacific. “Over 60% of the Australian respondents said they would switch to the lowest priced option among their preferred brands to save money, indicating that brands will need to work hard on ranging to ensure they are catering for their new consumer needs within their portfolios.”

Brands and retailers should recalibrate product and channel offerings to match changing consumer needs
As each consumer group is so distinct, it is crucial for retailers and brands to understand the profile of these consumer groups, how they are shopping and what they need to do to secure growth in the year ahead. For example, newly constrained consumers weigh up all aspects of their wallet spend, looking to rationalise in discretionary areas, but also recalibrating on what is essential.

“The implications of changing shopping behaviours will have consequences for brands and retailers when it comes to planning optimal promotional calendars/cycles, and having the right pack sizes on shelf. Assortment, pricing, innovation, and distribution of products will need to be quickly recalibrated.” O’Sullivan said.

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About NielsenIQ Unlocking Consumption Global Survey
Nielsen IQ’s Customised Intelligence Unit conducted a global consumer survey in mid-December 2020 across 30 categories and surveyed more than 11,000 consumers across 16 countries, including Australia, Canada, China, France, Germany, India, Japan, Mexico, Russia, South Africa, Spain, Thailand, Turkey, UAE, UK and U.S.

The study shows four consumer groups driving spend this year:
1. Existing Constrained: were already watching what they spent prior to COVID-19 and this has not changed
2. Newly Constrained: experienced worsening household income/ financial situations and are consciously watching what they now spend
3. Cautious Insulated: limited impact to their income/ financial situation, but watching what they spend a lot/ much more
4. Unrestricted Insulated: same/improved income/ financial situation and do not have to watch what they spend

Website: NielsenIQ

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