Seeking value for money has become a top priority

South African consumers are likely to remain under considerable financial strain for some time to come, despite the 350 basis points in interest rate cuts that have been implemented since June last year.

And this, believes Lezanne Human, CEO of eBucks, the country's leading rewards programme, will drive consumers to seek value wherever they can find it, including through their rewards currency.

While lower interest rates and falling inflation will eventually restore consumers' shattered confidence, Human is of the opinion that this will only happen gradually as income earners struggle to pay off accumulated debt and avoid taking on fresh debt or committing to too many major purchases.

Clear evidence of this is April's new vehicle sales figures from Naamsa which showed a record year-on-year decline of 43.1% to just 24,063 units.

With FNB's April House Price Index showing that house prices have fallen back to late 2006 levels, and average prices expected to decline by 9.5% in 2009 compared to 2008 levels, consumers are also feeling less wealthy as a large portion of their overall assets is tied up in their homes. This factor on its own is confidence-sapping and prompting them to think carefully before spending their hard-earned cash.

"Against this backdrop, many consumers found themselves besieged over the past year and utilised – and are still utilising – a variety of strategies to make ends meet and make their hard-earned cash go further until better times return," says Human.

"Over R1,3 billion worth of eBucks have been allocated, mostly from FNB, eBucks' major partner, making eBucks South Africa's strongest rewards currency. With such significant allocations, eBucks has found that consumers value their loyalty points even more highly during economic downturns than during boom times. This trend is just as evident in South Africa as it is in a recession-hit country like the UK where recent research on air miles showed 60% of respondents saying that they planned to take advantage of more loyalty schemes to help stretch their buying power."

While RMB's Financial Markets Research unit expects there to be something of a recovery in retail sales and household spending during the fourth quarter of 2009, it cautions that the recovery could be tempered by rising unemployment, job insecurity and the uncertain global economic environment.

RMB also warns that the full impact of the collapse in global trade on mining and manufactured exports may not yet have been felt by the South African economy.

"The bottom line is that while many things have improved over the past year – such as interest rates and the oil price - caution is still very much the name of the game for South African consumers," says Human.

Consumers using rewards programmes to "stretch" wallets and purses; trend towards essentials and away from luxury items

During the past festive season, eBucks members spent no less than R70 million through the programme, the highest ever over a festive season.

"FNB's customers clearly see eBucks as a powerful rewards currency that they can use to stretch their wallets and purses," she adds

"Significantly, we have noted a trend towards value with many of our members opting to use their rewards to purchase essentials rather than luxuries. There has also been a movement away from upmarket retailers to value retailers with food becoming an increasingly popular purchase item."

Human says that eBucks members who have not been as directly affected by the downturn as other consumers have been using their loyalty points to buy gifts for others or for splashing out on those little luxuries that are still desired – such as a trip to the spa – but can't really be justified in the monthly budget.

In addition, she points out, there has been a change in risk appetite with many members shifting their focus from eBucks auctions to the eBucks shop which offers more tangible guaranteed rewards.

For more information contact:

info@ebucks.com