The period from 2004 to 2015 was characterized by per capita income growth, stable or decreasing prices, low interest rates, and high consumer confidence in a better future. This led to increased commercial and marketing activities and created the perfect mix of more available money and a greater desire to consume. These factors resulted in consumption cycles or booms, which are explained below:
Cycle 1 Upgrading to the basics the fridge and cupboard with more items (first years): Mass consumer companies started targeting the lower-income segments by offering attractive propositions through packaging, sales points, brands, and prices. Additionally, the middle class experienced significant growth and had increased purchasing power.
Cycle 2 The Home Upgrade, A Better Home Experience: Once the basics were taken care of, there was a focus on durable goods such as household appliances and interior elements. Possessing these items became a condition of success and status, often valued more than intangible concepts like education, security, and available time. Companies in this sector also adopted strategies similar to those of mass consumption, such as selling on credit or installment plans. For example, the disposable nature of televisions today is notable.
Cycle 3 Personal Upgrades: With the fridge, cupboard, and home in order, individuals began focusing on themselves rather than the collective. Products and brands that helped define personal identity and improve the quality of life became more relevant. Investments were made in personal technology and services like cell phones, tablets, cars, motorcycles, etc.
Cycle 4 New experiences for the mind, body and sometimes the soul: The interest in the previous goods begins to diminish, as this consumer no longer needs more toiletries or the house needs remodeling or new decoration, already has 1 or 2 cars/motorcycles in the house (purchases made during the last 5 years). Now, experiences take relevance, to travel, to know, to feel, to have things that make life easier.
Cycle #5 Conscious Consumption, & Free Gratification (2016-2017)In the last quarter of 2016, a slowdown in household consumption began to become evident, which may be showing that we are entering a new cycle in the consumption of Colombians.
Last year increased the levels of consumer uncertainty: high inflation, inventories of products at "cheap" dollar depleted, interest rates rising and the exchange rate around 3000 pesos, plus unexpected political events became the new reality and 2017 also started with more taxes. This may explain why there is a slowdown in sales of consumer products and durable goods.
This is accompanied by a stagnation of innovation levels in the benefits offered by products and services, which are increasingly marginal and do not have a substantial impact on the quality and lifestyle of people (a cell phone with a better camera, a TV with a silver screen, less harmful food).
Today, entertainment and gratification systems are migrating strongly towards digital platforms, which are generally free or very inexpensive.
Consumption seems to be consciously constrained, buyers are saving-waiting, their ability to buy may be the same but their willingness to do so is less. Consumers need more and better reasons to purchase and renew the products-services they have and are taking advantage of what the digital world has to offer as the environment becomes clearer.
It is challenging to estimate how long this cycle will last since the impact of the digital ecosystem and the socio-economic-political landscape on ordinary people cannot be predicted with certainty.
RAFAEL LOPEZ LLAMAS.