Last week, Greece’s Prime Minister, Alexis Tsipras, said the “worst” of the country’s economic troubles were “clearly behind us”. Two years ago, IRI’s Panagiotis Boretos took to these pages to discuss how Greece’s economic crisis was affecting consumer behaviour. Boretos takes the temperature of the market again.
Two years ago, we looked at how the economic situation in Greece was affecting the behaviour of shoppers in the country. The Greek Prime Minister, Alexis Tsipras, had just announced a referendum to decide whether Greece should accept the bailout conditions set by the European Commission, the International Monetary Fund and the European Central Bank for the country’s debt crisis.
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While the economy had shrunk by 25% (since 2008) and there was 25% unemployment, people rejected the bailout conditions and elected to keep the Euro. However, there was a climate of uncertainty as concerned people started to queue outside banks and ATMs after they were told they could only withdraw up to EUR60 a day from cash machines and no money could be sent outside Greece.
We also saw evidence of unusual spending, with consumers stockpiling key products, like pasta and sugar and items that could be stored long-term like evaporated milk, in favour of fresh products. We also saw a significant uplift in the sale of certain essential personal care and household products, like incontinence pads and shower and bath products.
Two years ago, we were uncertain as to how the economy would look in the future and if and how shopper behaviour would continue to change. More importantly, there was the question as to how consumer behaviour might affect the pricing models and promotional activity of manufacturers and retailers.
Signs of recovery?
While the Greek economy continues to struggle, we are starting to see the first small signs of recovery, with GDP improving from a decline of 0.2% in 2015 (the low was -7.1% in 2011) to positive 0.9% in the second quarter of 2017. Unemployment has also been falling, down slightly to 23% in the first quarter of this year, and bookings are up for holidays to Greece, which is so important for the ongoing recovery of the Greek economy.
Significantly, the Retail Turnover Index was up to 2.2 in the first quarter of 2017, the first time it has been in growth since 2010.
However, IRI research shows Greek supermarket and hypermarket value sales fell by 6.5% in 2016 and are expected to shrink by an additional 2.3% this year.
Manufacturers have not only been hit by less money in shoppers’ pockets, driven by the impact of tax increases, lower wages and unemployment, but also by important changes in the Greek retail environment.
One of the most important developments last year was the high-profile bankruptcy of Greek retailer Marinopoulos in June 2016. While competitor Sklavenitis stepped in to save the supermarket chain earlier this year, the damage had already hit a large group of suppliers, many of which are on the point of bankruptcy, after Marinopoulos’ debts to them were cut off by 50%.
Bigger manufacturers have so far survived the collapse, but it will almost certainly have an impact on their sales figures, as many of their products were not available at the biggest retail chain in Greece for an extended period of time.
The absence of the major supermarket chain has also created a gap in the market that has been filled to some extent by the only organised discounter, Lidl, which may also have weighed – and continue to pressure – manufacturers’ profits.
Two years ago, manufacturers were trying to protect themselves, cancelling or reducing marketing activities, with some even resorting to giving staff mandatory annual leave to avoid wasting resources. Yet, it’s interesting to see promotional sales have grown in the last year to 22.3%, reversing a previous decline. Nevertheless, that figure needs to be put into the context of food prices in Greece being 4% higher than in other markets in Europe.
We have also seen a major promotional boost in alcohol in order to address the rising prices seen after tax hikes implemented as part of the austerity measures in Greece to increase public revenues. These changes were accompanied by increases in VAT, which rose from 21% to 23% in 2015, and then from 23% to 24% in June 2016.
Changing shopper habits
Greek shoppers today are much more concerned about not wasting food, like milk or yogurt, and reducing the number of similar items they buy, such as kitchen cleaners or bathroom products
That said, we are seeing the rise of the ‘professional shopper’ in Greece. These people actively look for promotions and offers and are prepared to shop around at different locations to find the right one. High levels of unemployment mean shoppers have more time on their hands and are prepared to shop around at different stores.
However, Greek consumers also tend to be loyal to a particular brand and do not switch easily, so would rather scout around for their favourite brand to be on offer.
IRI’s Greek shopper research from May and June this year found people visited around six different stores types in a week, including supermarkets, mini markets, discounters, online and street markets. It also shows the average expenditure per family per month is EUR317 but, because they are likely to visit a store around two to three times a week, the average shopping basket is about EUR25.
Manufacturers will need to adjust their pricing, promotional and marketing strategies to tap into these changing shopper habits. Rather than wasting money on promotions that do not drive sales, or on price points that turn the shopper off, they can evaluate optimum pricing models and promotional effectiveness using analytics.
If you take marketing, for example, our research shows more than a quarter (26%) of shoppers will look at retailers’ websites to research the best prices before they buy. Brands should be pushing more expenditure into online promotions and advertising, which will be more effective and help drive sales in-store. Similarly, local advertising and promotions might work better than national campaigns.
Tsipras is upbeat about the economic outlook for Greece but the consumer has had to adapt to a new financial reality and change their shopping habits accordingly. Now, manufacturers have to do the same.
