Faced with economic uncertainty and a mix of contradictory feelings such as vulnerability and resilience, consumers in Latin America are taking a step back and reevaluating what’s important to them. They have embraced a scarcity mindset that makes them closely monitor their spending and avoid excess consumption. In this search for things that matter to them, consumers are seeking not just affordability and convenience, but also safety, protection and support.
The pandemic has hit a region that was already vulnerable
For many consumers in Latin America, their financial status was already tight before the pandemic. Latin America is facing the pandemic from a weaker position than some other regions of the world since the region was already economically vulnerable and unequal. According to the Economic Commission for Latin America and the Caribbean (ECLAC) data, the region had already accumulated almost seven years of low growth, with an average of 0.4% between 2014 and 2019. The effects of COVID-19 will cause the worst performance since at least 1980, the first year in the IMF’s World Economic Outlook database, with an expected drop of -9.4%, as reported by the IMF in late June 2020.
Discounts are essential for essential products
Now more than ever, brands will need to prove they are good value for money. At a time when every cent counts, brands must deliver and communicate tangible benefits that make a product indispensable to shoppers.
In Mexico, Walmart-owned Bodega Aurrera rolled out “Los esenciales”, a special promotion, available from April through June 2020 that offered 125 personal care, household and cleaning products at the lowest market price.
Similarly, Grupo Éxito Colombia created a new category called “mercados básicos” to offer staples at cost price, including rice, lentils, coffee, sugar, chocolate, toilet paper, beans, peas, chicken broth, powder drinks and jelly.
Budgeting behaviors are driving BPC brands to increase discounts
Beauty and personal care brands were challenged to come up with better pricing options to get consumer attention. But considering that big discounts may not be financially sustainable if offered for a long time, brands were limiting the duration of these. Time-limited promotions can help brands communicate their true savings.
We’ve also seen brands explore family sizes, such as a 1-liter bottle to offer convenience and savings.
Cashback rewards can stand out for the tangible benefits they offer
In the current downturn environment, cashback deals are more attractive than delayed value promotions that offer discounts or coupons for future purchases. Moreover, when compared with traditional rewards that need to be redeemed, cashback programs require little effort from consumers, while giving them the flexibility to use the cash the way they want.
At a time of minimal spending, cashback deals can help brands show consumers that purchases can have tangible benefits and can result in cash in their bank accounts.
- Rappi Mexico has teamed up with Visa to offer 40% cash back for supermarket orders.
- In Brazil, cashback app Méliuz offers cash rewards that go to people’s bank accounts. In 2019, Méliuz’s ‘Cashback Day’ resulted in a 293% rise in the number of transactions and 346% in the amount handled in these transactions. This year, they offered up to 12.5% of cashback for purchases made through the platform.
- In Chile, Peru and Colombia, cashback apps are emerging to compete against credit cards’ cashback programs and digital wallets.
Teaming up to support at-risk groups with discounts and free shipping
Unilever Argentina has teamed up with Rappi to launch Club Beneficios, a free shipping delivery service that offers two boxes of essential products with a 22% discount.
One of the boxes offers 12 personal care and household products and the other contains 13 food staples. These boxes are aimed at seniors and hope to discourage them from leaving their homes for grocery shopping.
Makeup should be promoted with tact
At the beginning of the outbreak, BPC brands were forced to shift their focus from beauty to personal care. Faced with decreasing makeup use, some brands were promoting makeup as a powerful tool to boost confidence and self-care.
At a time when many people are feeling vulnerable, cosmetic brands need to find new ways to show consumers they have tools and products to help people heal, recover and be strong again. But they need to be aware of vulnerabilities and should move away from anything that may sound insensitive or opportunistic.
More than two in five Mexican consumers strongly agree that they feel pressure to always look their best.
Ahal Bio Cosmética found a thoughtful way to promote makeup. The Mexican brand is encouraging people to take care of their skin and wear light makeup, all while positioning makeup as a tool that can help differentiate work from leisure.
Streamlining sanitation
Hand sanitation has become key to remain protected. New formulas and packaging innovations are streamlining the hand sanitation process.
Antibacterial spray with no-rinse
Recamier Bacterion Antibacterial Cleaning Spray for hands claims to eliminate germs and bacteria without the need for water. It is enriched with aloe vera to moisturize the skin. (Colombia)
Antibacterial foam with vitamin E and aloe vera
Ampm Plus Red Fruits Antibacterial Foam features a formula with vitamin E and aloe vera. (Colombia)
Sanitizer with lavender essential oil
Green Doctor Hand Sanitizer with Lavender Essential Oil contains lavender essential oil and is said to kill 99.9% of germs and bacteria without drying out the hands. (Mexico)
What we think
Financial struggles post-pandemic will bring a greater focus on budget-friendly products and will put more value on products that offer safety and protection. In the post-COVID era, convenience will gravitate towards creating solutions that keep consumers safe and protected. Bargain-seeking will continue to be the norm, but that doesn’t mean consumers will abandon all premium aspirations and the distinct benefits these offer.
