Consumers in command
Fragmentation leads to lower loyalty
Consumers in Latam are building a new omnichannel shopping habit. To better manage their budgets through the ongoing cost-of-living crisis, they are hunting for value for money across a greater range of outlets. As the FMCG brand landscape becomes more fragmented, the channel landscape is following suit.
The pandemic forever changed the way people shop, in particular driving the rapid growth of ecommerce. Now, as they remain under financial pressure, households are continuing to adapt their behaviour in a quest to maximise their budgets.
In the last two years the number of channels visited by Latam shoppers has increased 18%. Shoppers in the region now have a choice of 18 different types of retail channel, leading to fragmented spending and a decline in customer loyalty.
The omnichannel trend is strongest in Brazil, Mexico and Peru, due to greater post-pandemic mobility and the wide choice of channels available to suit different budgets.
At the same time, basket sizes in Latam are shrinking for the first time, as consumers shift away from bigger trips. This is especially the case in modern trade, discounters and wholesalers, as more shoppers visit these channels.
Consumers are purchasing more times, which is exposing them to more brands and increasing ‘moments of truth’. Every time they go to the point of sale, they have more options to choose from. Combined with the economic challenges shoppers are facing, and their openness to experimenting, this is leading to less brand loyalty.
The search for value
Discounters and wholesalers benefited the most in 2022, thanks to the lower prices they offer, while modern trade is increasingly attracting low-income shoppers. The rise of discounters continues, especially in Colombia, Ecuador and Mexico, with retailers focusing on diversifying their product ranges within both private label and traditional brands.
Ecommerce attracted three million new shoppers in 2022, opening up a new shopping experience. Retailers in the traditional trade channel, for instance, used WhatsApp as a tool to connect with shoppers and turn interactions into digital purchases.
On the other hand, shoppers are going back into physical stores once again, so they can compare prices and pack sizes, and take advantage of promotions and deals.
Shoppers have never had more opportunities to buy. They will take full advantage of all the opportunities available to them, to get the best deal – so offering value for money is absolutely critical.
To move up in the ranking, brands must earn more CRPs. This means they need to understand and adapt to channel movements. Nowadays, to ‘be omnichannel’, brands have to expand their channel strategy and be present in other formats – including emergent ones – as physical availability is an important part of the equation for a brand to be chosen.
However, understanding how your product is performing against the competition, and positioning it well through the correct execution, are key to winning at the moment of truth. The strategy must cover portfolio, advertising, price, and all other aspects linked to the value offer.
