After the pandemic, in 2022, Argentine consumers lived “Revenge of Life” according to consumer analyst Guillermo Oliveto. Refers to the oldest people’s propensity to consume in a habitat of absolute “emotion”, far from the logic that characterized consumers in other times of crisis. “For this reason, consumption ended up being much better than many believed. Why the psychological impact that an unprecedented phenomenon would have on behavior has been underestimated”, explains the director of the consulting firm W and author of the book “Amplified Humanity”.
However, this trend that Oliveto baptizes with the phrase “after so much hardship, well-being is priceless” will tend to expire around March or April, he warns. When the euphoria of the World Cup and the expectations of the holidays, among other “welfare bubbles”, dissipate. It will strike 12, as in the Cinderella fairy tale and then, the economic situation will dictate it “restriction as limit”, predicts the analyst breaking the silence of his spacious vintage office located in Palermo.
-How do you explain that “revenge of life” last year, amid salaries that have been adjusted nearly five points below inflation that has risen by 95%?
– What happens is that after so much discomfort due to the pandemic, people felt they should have some fun. I had to spend Society’s silent cry was “now I want to live, now I want to enjoy, now I go to restaurants, now I don’t care about anything. Revenge of life was a global phenomenon. especially among those who have had very long quarantines. How do you translate? in what we have just seen this summer, the full recitals, the boom in theater, cinema, etc. That was the disruptive factor greater propensity to consume. If you previously earned 100, spent 80 and saved 20; in 2022 people were earning 100 and spending 100 or 102 because they got into debt.
-Why has the propensity to consume increased in Argentina?
Because we came out with accelerating inflation that ends up at 95% annually and also because there has been a very violent loss of purchasing power in dollars. In 2017, an average salary was $1,700 (blue) and in 2022 it ended up being $520. So, clothes that used to be bought in Miami or Chile are now bought in Argentina. Or instead of buying a zero kilometer car, you buy a motorcycle.
The economy’s three big assets that are priced in dollars — cars, real estate, and foreign travel — are half or less what they once were. But people say: now what do I do? I buy what I can. Short-term consumption benefited from this: from domestic tourism, escaping, mass consumption which was positive by 2%, purchases in shopping centers increased by 40%, household appliances by 15%, 40% in hotels and restaurants, 5% in pharmacies. Beating 2020. the year of the pandemic was easy. But beating 2021 wasn’t that easy. Yet it happened.
-Why, if the context has been favorable to consumption, does social humor still not recover?
This paradox is taking place: there has been a good year of consumption without improving social mood. Which is weird. Consumption improves and people are angry. It has a correlation with the fact that people don’t have a good assessment of the government and 85% of the population want things to change. The mood doesn’t improve because this is consumption without plans. It is palliative consumption. from day to day To dull the pain we feel going through. I believe that those who don’t understand what happened in the pandemic don’t understand anything about what’s happening afterwards. There is no way to dissociate one thing from another.
The pandemic is over but its effects remain in people’s psyches and therefore change behavior. We saw this clearly in 2022. The historical pattern of “the more you consume, the happier people are” has been broken. Not currently. because people don’t consume what they want but what they can. It’s not the same. Maybe I can go to a restaurant, but I can’t change the car and sometimes not even the tyres.
It’s like you have an “annoying” consumer. You can see it in the consumer confidence indexes, in the government confidence. You see it in so many people who want there to be change. It is also seen in the exodus of young people, who look at their salary, divide it into dollars and wonder what they are doing. Today, much of Argentina has no plans. This will be under discussion in the short term.
-How do you see the trend in consumption during this year?
2023 is a special year, there are presidential elections. For those who say this quest for gratification will end, I tend to think it won’t, which is why we’re monitoring. If it’s circumstantial, it’s longer than expected and we’re evaluating whether it’s structural. The World Cup managed to lengthen the idea of putting one’s head elsewhere, then summer arrived and we saw that everything exploded because we needed to “get better”. But now, in March, it all ends.
In March, 12 players play and the Cinderella effect returns: people have to pay school fees, prepaid raises, taxes. etc. This is why I say that in this 2023 “drawing is business” (with 2022) is a game at high altitude, taking up the analogy of football. Because we have an economy with multiple weaknesses, apparently, at best, it can give you a little more. I think 2023 will be more like the second half of 2022 than the first, when the dollar was more stable, until the departure of Economy Minister Martin Guzman. Not because he was a genius, but because everything that was swept under the rug came out. I see a “difficult”, “working” year for everyone.
-Which elements can play in favor and which against?
A plus point is in election years, there is money on the street. Now, the likelihood of that money being less than other times and operating in an environment where anything can fly into the air at any moment is another matter. In focus groups, consumers talk about mini crises. They won’t surprise anyone… because people are already on the alert, sailing with inflation of 6% per month. A counter element is drought, which adds multiple uncertainties. All economists are looking at the weather. The last precedent of 2018, in the government of Mauricio Macri, was very hard. Another problem: Will there be the dollars for companies to produce what consumers want to buy? It would seem not… This plays against a recovery. So we’re seeing a year of very little growth…1 or 2%.
-Can that surplus of money on the street lead to an improvement in consumption in low-income sectors? How will the middle class react?
-I think it’s a palliative to alleviate an already very complex situation. I don’t think it solves much, but it can drive demand to some extent. On the other hand, if there was a big problem, it would lead to higher inflation. That is to say that the Government does not have an easy life. Therefore, I don’t think it will be a year of major changes. Unless there is something disruptive in the economy.
Society, especially the middle class, has three major priorities: school for children, health, completely re-evaluated after the pandemic, and technology (mobile phone and internet) because it is vintage and because it allows you to work and have fun. Everything else is negotiable, although I’ll try to keep as much as possible. Instead of going to the gym, I’ll work out in the park or look for a gym discount.
-How are the sales in supermarkets and local shops going this year?
Mass consumption can be plus one point or minus one, in that range, with volume similar to today’s. Something similar to 2022, which has given an increase of 2%. according to Scentia consultancy. It remains in the volume that is there today. It doesn’t change any reality. As for the cross-channel trend, I keep seeing supermarkets outselling department stores because price controls are encouraging a volume shift between channels. People are price conscious because of high inflation and when they start to feel the restriction more strongly, which is what is coming, the matter will turn much more sour. Because the pesos burn but you have to see how many pesos there are. And there are things you can’t buy.
-What would be the emotional consequences for people due to this restriction that is coming?
The problem is that the sensitivity will be maintained. People still feel they need to be rewarded but, with more restrictions than last year, what you can find are high levels of frustration or disappointment. It will be a “difficult” year for consumers. They will verify more than last year that wanting is not necessarily power.
Against this backdrop, welfare bubbles will continue and deepen, but will be more austere. There is a general feeling in society, in the business world, that this is no longer the case. Because we are running out of the world. We are degrading ourselves in many ways. Mass consumption, despite a growth of 2% last year, is 10% lower than in 2011 and the population has grown by more than one percentage point a year. If you do it per capita you are more than 20 points down in the consumption of basic products. The problem is structural.
Source: Clarin
