Mastercard Economics Institute’s 2023 economic outlook pinpoints omnichannel as a key enabler of the multi-speed global economy and business resiliency.
In releasing its outlook for the coming year, Mastercard Economics Institute identifies the fast-developing multispeed economy and the advantages held by omnichannel businesses.
In its definition, the outlook recognises the impact omnichannel experiences are having on growth and consumer spending behaviour.
It puts forward that a multispeed global economy will see the impact of inflation and rising interest rates being felt more keenly in some markets.
The outlook draws on various public and proprietary data sets, including models of economic estimation across the Eastern Europe, Middle East and Africa (EEMEA) region.
The report explores four themes that will continue to shape the global economic environment. These include high-interest rates and housing, trading down and shopping, prices and preferences and shocks and omnichannel.
The outlook predicts the slowing of the housing boom with the arrival of higher interest rates. The resulting price rises are set to squeeze budgets amid a cost of living crisis; shifting the way consumers spend broadly.
The outlook expects housing-related spending as a share of goods to fall 4.5 per cent over the course of 2023. This trend is specific to major developed countries, with spending expected to fall below pre-pandemic levels.
In South Africa, the housing-related share of spending decreased by one percentage point in 2022 versus 2019.
Likewise, in the Middle East, housing-related spending remained at the same levels for the UAE and KSA between 2019 and 2022 at 5.9 and 10.9 per cent respectively.
Broad spending and business resiliency
The outlook anticipates broad spending to remain resilient against inflation, with consumers opting for wallet-friendly brands and the best value.
For example, grocery shoppers made 31 per cent more trips to the store this year compared to 2019. Although this is partially due to food waste reduction, average spending sits roughly nine per cent lower than before.
As of September 2022, consumers in the UAE increased their grocery shopping trips by 28 per cent compared to September 2019. However, spending per visit has decreased by 21.4 per cent.
Likewise, restaurant spending frequency in the UAE was nearly a third higher in September 2022 than in September 2019, while the average ticket size was a fifth lower as even higher-income consumers rein in excess
The impact of inflation
As food and energy costs eat up a greater share of the consumer budget, lower-income households will feel an especially strong pinch.
From 2019 to 2022, the outlook saw discretionary spending by high-income households grow nearly twice as fast as lower-income households. However, much of this gap will diminish with the normalisation of inflation.
However, the outlook expects the easing of inflationary pressure this year, with the average inflation rate of developed economies falling from 7.1 per cent YOY in Q4 2022 to 3.1 per cent YOY in Q4 2023.
Markets in the Middle East and Africa are showing a larger gap between 2019 and 2022 in the discretionary spending of affluent and non-affluent households.
Gaps are most present in Morocco at 71 per cent, followed by Madagascar, Jordan, Senegal, Kenya and Zambia which has a 34 per cent gap.
In Qatar, however, the trend is different. From 2019 to 2022, discretionary spending for affluent cardholders grew 104.9 per cent. However, discretionary spending for non-affluent cardholders simultaneously grew 103.9 per cent; marking a mere difference of one percentage point.
The omnichannel key
Businesses with an omnichannel presence are likelier to withstand shocks by meeting the customer where they want to shop; according to the outlook.
Its analysis suggests that 2022 retail sector sales experienced a six percentage point lift due to the presence of multichannel options.
Small and large restaurants were saved from losing an additional third of sales during the height of lockdowns with their omnichannel presence. Similarly, small omnichannel clothing stores outperformed online-only and brick-and-mortar-only firms, growing 10 and 26 per cent faster, respectively.