Addressing a rational informed consumer

Addressing a rational informed consumer

If I were to describe the consumer in 2 words, and I am referring here to the consumer in the medium segment, I would say he is a "rational informed".

Throughout all these years we have witnessed a dramatic but at the same time natural change in attitude towards consumption and personal budget, in general.


Changes targeted both consumption and shopping habits on one hand and the attitude towards stores and retail in general, the level of communication and the expectations, on the other.


Going back to the first period I mentioned, 1990-2002, this was a difficult time for the Romanian consumer. Caught between the explosion of imports and the surging inflation, he still showed a massive interest in new things and proved himself open, yet without much discernment. His enthusiasm was only tempered by the low purchasing power. However, 1998 was the first peak of consumption, peak to be barely topped merely five years later (in 2003).


1999 wasthe beginning of a shorter period of slow consumption, which also marked our debut on the market. In 2001 we opened the first hypermarket in Romania, located in Bucharest, facilitatingthe general public’s access to modern trade. The need for change felt among the population translated into the enthusiasm with which consumers received this new store format.


Is still remember the euphoria of the opening, when our customers’ reactions amazed and delighted us at the same time. Despite the tough economic context, this was a period of abundance rediscovery, of unraveling a store format that was only seen abroad or in magazines; and weare talking here about the same consumer open to new, who met brands and embraced them.


Back then, buyers were thrilled to spend time in the new shopping center even if they could not afford all the products on the shelves (let’s not forget that inflation at the end of 2001 was 30.3% and the minimum income, of about 55 euros).

Price, though rarely expressed, was the most important buying criteria. For consumers, price made the difference between what and how much they could buy and at the same time it was a way of evaluating items, while retailers became more and more aware that in the minds of consumers, the price shaped the image and the whims slowly turned into necessity.


2003 was another banner year for consumption and the onset of the first wave of retail expansion in Romania, that that lasteduntil 2008.


We opened several supermarkets and thenstepped away from Bucharest to meet consumers in Transylvania and Moldavia. Other competitors entered the market, new formats began to develop (supermarkets, discount stores or online even if and a discreet fashion) and so, the share of modern retail took a big leap from the 19% in 2004 to 41% in 2008 (acc. to GfK Romanian Retail Report).


It was a time of major turning point. The prior uninformed consumer, who was willing for more than 10 years to accept without many questions any imported product, even if he could not understand the labels, suddenly gained Internet access and began using IT technologies to his own benefit, being more and more concerned (under the influence of mass media) with his comfort and health. The consumer began to emancipate.


Then, the entering of a new period occurred. Peoplemade plans and their dreams were fueled by the new products onthe market that were now within reach. Aspirations overlapping the favorable economic environment (+5% economic growth, reaching 8.5% in 2004 and 7.9% in 2006) triggered the explosion of mortgage and consumer loans.



For the consumer, the context seemed to change for the better. The interest showed towards acquisitions determined by the Latin spiritand orientation towards novelty, so typical to the Romanian consumer, along with having access to sources of financing, created proper conditions for the development of consumption. Thus,consumption boomed (141% increase in household consumption expenses in 2008 compared to 2003)and with it, the curiosityfor hi-tech gadgets or hi-fi, bio, sports, leisure, vacations abroad sparked. A new step was made.


It was during this time that people opened outwards. Those who were working abroad not only sent money to relatives in Romania but also changed in time, mentalities. Consumers become extremely demanding with products and retailers, they familiarized themselves with promotions and for the first time sought both quality, as well as price. It was the time of brands and impulse purchases.


However, this outstanding favorable periodcharacterized by an upward trend in terms of retail trade, suddenly stalled, as we started to feel the effects of a steep decline in economy.



By the end of 2008, the crisis struck.


After several years in which we had a constant economic growth (+7.3% increase in GDP 2008 vs 2007), the crisis hit us hard, leading to a major contraction within only 1 year (- 7.1% decrease in GDP 2009 vs 2008).


The vulnerabilityof the financial system materialized in a loss of security, fewer jobs, low incomes andhigh levelof debt, combined with a decreasing exchange rate and escalading inflation.


All these, as well as the un-easing rumors and accentuated instability took their tole on the population, leading to the lowest levelof trust and a dramatic decline in consumption.


As a result of people’s decreasing standards of living, the crisis brought afundamentalrepositioningtowards consumption in the following years.


Since 2009 until now,customers have gradually limitedtheir shopping, abandoned or postponed buying goods that were not strictly necessary (e.g.: appliances or clothing items), have searched for solutions to maintain their lifestyle, found strategies to avoid spending or to identify the best prices, for price has become a key factor in choosing stores or products).


Specifically, we have witnessed a tendency of reducing the quantities purchased (in order to avoid the waste), of migrating from well-established brands to retailers’ private labels (so that if in 2010 their share was 6%, in 2 years it doubled), of actively searching for promotions (if in 2008 only 20%-25% said they went into a store for a certain promotion, now this percentage reaches 60% and also, 90% of customers in general seek promotions in stores) and of visiting a total of 2 to 4 stores per week to find the best deals.


Beyond the difficulties of the time, there was always the concern for innovation, for quality service, for information (especially among young people in the medium and upper segments), for health.


Thispopulation segment was the first to shift their buying behavior towards online purchasing, slowly starting to lay the foundations for the digital market.


The opportunity to find products “one click away” and being able to shop around while browsing through all available information, seemed very appealing and was received with great interest and enthusiasm.


Proof stands the fact that only in the IT and electronics sector, over 80% of customers inform themselves about products online, no matter if the actual purchases are made in stores or online.


As a result, while the offline market decreased, the online market had a positive trend.


Allthese consumers choose healthy products, are interested in Romanian and organicproducts and significantly contribute to the market growth. The opportunity was noticed on the market, retailers continuing to expand (event if at a lower rate) so that in 2012 the modern trade reached 50% of the total market. Barely surpassing half of the modern trade’s weight in European countries (France: 95%, Spain: 90%) there is still room for further development on almost all channels.


We were talking at the beginning about the rational, informed buyer.


He is rational for all the reasons stated above, because he thinks twice if he really needs a product, because he selects with discernment both stores and brands. He wishes to buy in a pleasant environment, to beoffered good service,be rewarded for loyalty, listened to and considered as partner by store chains.


And he is informed, because now, he has access to information, he reaches for details, is interested and takes the time to compare in order to make the best deal.


If at first, we could say that retailers’ jobs were limited to merely selling products and satisfying consumers’ basic needs, this situation no longer applies.


As customers’ behavior changed over time, retailers must now acknowledge that their capacity of ccomprehension, reasoning, issuing proper judgments and finally making decisions has become more refined and whims grew to be more and more demanding.


In this context and with increasingly stronger competition, they must adapt and make their best efforts to stay ahead of the game.


In which direction are we heading and what to expect from consumers from now on?


On one hand, there is still a difficult economic context that for consumers and their shopping habits translates into restrictions. This has already made consumers to learn the lessonof moderation, a lesson that will most probably put its mark on this generation. On the other hand, the Romanian buyer in food retail has currently reached the same attitude as the European one, and moreover, he has nearly as many alternatives.


All these reasons lead us to believe that in the future, consumers will be increasingly difficult to attract, convince and retain and no matter how their behavior changes, they will remain the driver of retailers’ actions.


What is clear is that people now (2013)value convenience and are more concerned with fast serving. Merely having a vide choice of stores, no matter how well performing in terms of offer and services, no longer suffices.


Moreover, consumers desire to find everything they need under the same roof, but in their close proximity, so that they can finish shopping quickly. As a general trend, they seem to find it easier to go to neighborhood stores, especially for day-to-day needs.


Therefore, we must go beyond present boundaries, get closer to customers and constantly adapt to their changing profiles. Placing ourselves in customers’ shoes helps us anticipate their necessities and be the first to accommodate their requests.


Furthermore, as the taste for digital also becomes more pregnant, if retailers can follow the trend and involve the social media as well as their own websites in the relation with customers, they have a better chance at succeeding in their difficult but rewarding mission.