The Drivers of Market Expansion
Channel loyalty triumphs over broadening repertoire
Unlike the zero sum nature of switching, when Malaysian shoppers increase or decrease the magnitude of their spending, as well as adding or dropping channels from their repertoire, this can have an incremental or decremental impact on the market. This helps us identify the sources of market change – whether that change is growth or decline – in order to understand adjustments in behaviour.
The three biggest channels are mini markets, supermarkets and hypermarkets, and these are still winning most of the increased spending in the market. This shows that in addition to switching, shoppers who already purchase within these channels are comfortable enough to allocate more of their FMCG budget to these channels. With frequency decreasing, the ability to convince shoppers to spend more within a channel cannot be overlooked. A channel that can achieve this will have a better chance of improving loyalty.
On the other hand, shoppers only added two new channels to their repertoire of shopping destinations: mini markets and hardware stores. The impact of being added is not as great as the rewards that come from increased purchasing. This is because shoppers have most likely been exposed to all possible channels in the market, meaning that headroom for penetration growth is limited, especially for channels that experienced exponential growth prior to this year. Instead, the opposite is happening: other channels have suffered from being dropped, even those that are growing overall, such as supermarkets.
With shoppers becoming more loyal to their channels of choice, and less adventurous with the channels in which they purchase FMCG, it is imperative that brands understand their role in helping channels to gain loyalty. If they focus on the wrong channels, it could put them at risk of being dropped from the repertoire and missing out on opportunities to grow from increased spending.
