The recovery of the Spanish economy since the crisis is undeniable. GDP grew by 3.2 percent in 2016, the highest GDP increase since 2007, and employment levels have been positive for several quarters. Although this recovery is mainly based on increased spending by households, things will never be the same as in the past.
The consumption model has changed a lot since the crisis, and has left a series of behaviors and habits that, in general, are here to stay. The crisis has left a very fragmented market, with heterogeneous attitudes, universal digitization and, above all, put power in the hands of an increasingly demanding and informed consumer. Confidence in manufacturers’ brands has been badly damaged. It is true that preference for brands has risen since the deepest point of the crisis, but consumers have not returned to the levels of loyalty we saw pre-crisis.
As I said before, we find ourselves in a very fragmented market, but to simplify the analysis, we will identify two large groups that have become consolidated in the post-crisis period:
On the one hand, we have what some call "the bipolar consumer" because of their heterogeneous buying behavior. Consumers in this group have maintained or improved their jobs and their pre-crisis economic conditions. They benefit from falling Euribor rates (which lower their mortgage payments), lower gasoline prices and the fall or stabilization of the CPI, factors that have increased their disposable income. As a result, they have once again considered buying a house or buying a car, and are buying clothes more often. However, paradoxically, they remain cautious when consuming. They are careful with their leisure and travel spending, are unwilling to pay more for the same product, and will shop in the place where they can get the best prices and promotions. This bipolar behavior will not be transient. The consumer in this segment is now spending more money, but they won’t spend on just anything, only on things that adds value, brings pleasure, or improves their quality of life.
On the other hand, we have another new consumer profile that has been born in the post-crisis era: "the drowning consumer", who is overwhelmed by money worries. This group has been especially hard hit by the effects of the economic recession, especially in the form of unemployment, and many of them are still in a situation not all that different from the one they lived through during the crisis. Their disposable income has declined and, as a result, they have not only reduced their consumption, but have profoundly transformed their living and buying habits. Price is still one of the essential elements of their buying decision, so they compare prices to maximize savings on their purchases in a systematic way, and distrust the manufacturers’ brands. Private label goods are appealing to them, although many of these are no longer as cheap as they were, and the price gap between these and branded goods has shrunk.
But if there is something these two new segments have in common, it is the importance they place on new values, such as austerity, empathy and discernment. These new consumers are critical and demanding of brands; they believe companies need to invest some of their profits in social welfare, and they want brands to be transparent and offer information about the products and services they offer. In addition, they demand healthier products that are environmentally friendly, in containers that avoid wasting food and that are easier to acquire through new purchase channels.
But the biggest change in both segments comes from the growing obsession with optimizing the buying experience. Whether through the physical or digital distribution channel, the new consumer will make decisions based on experience, and the online channel is a great opportunity to optimize that. The percentage of purchases through electronic commerce in Spain is much lower than in other countries such as France or the United Kingdom. However, electronic commerce is bound to be a lever of growth for the next few years, by offering us more information, good prices, more convenience, more speed, and more and more security.
We cannot overlook one very established brand worldwide but one that is still emerging in Spain: Amazon, the international e-commerce giant. Amazon's value proposition seems specifically designed for these new consumer segments, which is why its growth rate since its arrival in Spain have been spectacular. Amazon recently took the lead in online sales in our country. Most of the brands and distributors of Spain are now redefining their strategies – or at least, they should be – in light of the growth of online shopping driven by the arrival of this e-commerce giant.
Opportunity or threat? It depends on how we play our cards.