In­come spend de­ter­mines con­sumer dy­nam­ics, re­port says

The Star Early Edition - - NEWS - Ka­belo Khu­malo

IN­COME dis­tri­bu­tion rather than av­er­age in­come is key to un­der­stand­ing mar­ket op­por­tu­nity and con­sumer dy­nam­ics in emerg­ing mar­kets, al­low­ing for tar­geted port­fo­lio strate­gies.

This is ac­cord­ing to a re­port re­leased by Econ­o­mist In­tel­li­gence Unit Can­back, which looked into how sub-na­tional dif­fer­ences and the com­po­si­tion of in­come brack­ets across ge­ogra­phies played a key role in iden­ti­fy­ing mar­ket op­por­tu­nity.

Can­back man­ag­ing di­rec­tor Staffan Can­back said that dis­tri­bu­tion data could be in­ter­preted to in­form risk man­age­ment and mit­i­gat­ing strate­gies as well as un­der­stand­ing new cus­tomer seg­ments for prod­uct reach ex­pan­sion.

“The in­come dis­tri­bu­tion data al­lows com­pa­nies to ac­cu­rately as­sess po­ten­tial op­por­tu­ni­ties and pri­ori­tise mar­ket ex­pan­sion.

“While tap­ping into these op­por­tu­ni­ties can be chal­leng­ing, com­pa­nies can look to in­come dis­tri­bu­tion data for a deeper un­der­stand­ing of emerg­ing-mar­ket dy­nam­ics,” Can­back said.

Ac­cord­ing to the lat­est Stan­dard Bank Con­sumer Trends re­port, in­come per per­son in South Africa grew mod­er­ately at 0.4 per­cent in real terms be­tween 2011 and 2016.

The re­port found that to­tal per­sonal in­come was es­ti­mated at R3 tril­lion in 2016, up from R2.8trln in the pre­vi­ous year, a nom­i­nal growth of 6.5 per­cent year-on-year.

How­ever, ac­count­ing for pop­u­la­tion size, an av­er­age adult South African was poorer in 2016 than in 2015.

The 2016 adult pop­u­la­tion was es­ti­mated at about 39.7 mil­lion, from 36.3 mil­lion in 2011.

Can­back said that in­come dis­tri­bu­tion data could be in­cor­po­rated into pre­dic­tive mod­els for a more de­tailed un­der­stand­ing of mar­ket dy­nam­ics and it was bet­ter to break down the data by city-to-city and prov­ince-to-prov­ince to high­light op­por­tu­ni­ties that ex­isted than just fix­at­ing on av­er­age in­come.

“How­ever, these mar­ket siz­ing mod­els can be aug­mented to in­clude fac­tors out­side in­come. Ad­di­tional vari­ables come in two lay­ers: the first in­cludes other macro data cov­er­ing in­dus­try and trade dy­nam­ics such as cat­e­gory data, mar­ket­ing spend or dis­tri­bu­tion cov­er­age and the sec­ond cov­ers mi­cro data such as in­sights gen­er­ated from con­sumer sur­veys, for ex­am­ple, us­age and at­ti­tude sur­veys”, Can­back said.

South Africa is re­garded as hav­ing one of the worst wealth dis­tri­bu­tion rates in the world, with its share of wealth held by the top 1 per­cent earn­ers hav­ing in­creased to 20 per­cent by 2015, with 10 per­cent of the pop­u­la­tion hold­ing 65 per­cent of the coun­try’s to­tal wealth.

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