Materialism and Debt Amongst Low Income Consumers in SA

8/3/2019 Materialism and Debt Amongst Low Income Consumers in SA

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South Aricans propensity or con-sumption and indebtedness re-ceives constant attention rom themedia, economists and monetary

authorities. A concern, or example, is theSouth Arican Reserve Bank measure-

ment that the ratio o indebtedness as aportion o household disposable incomerose by 44% between 1994 and 2008.

Increased domestic spending can bea positive stimulus or economic growth,but not when it happens at the cost o do-mestic savings. Although the South A-rican government has promoted policiesto encourage savings, the rate o domesticsavings has declined rom 9% o GDPin the 1960s to just more than 4% in the1990s, and to below 2% in 2005. With theconsistent growth in GDP and house-

hold income in recent years, the decreas-ing trend in savings implies an increase inconsumption as well as an increase in theuse o debt to und consumption.

wo actors play a role in the increas-ing reliance on debt to und consump-

tion: easier access to sources o credit, andchanges in consumer behaviour. A studyconducted in South Arica, or example,ound an increase in the use o debt bypeople in the lower-income brackets.Moreover, a study by the Human SciencesResearch Council ound that debt levelshave also been rising aster in the lower-income category than in other incomecategories. Ocial statistics and studieslike these suggest that low-income con-sumers show increasing materialistic ten-dencies. Monetary authorities have rea-

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Can materialism explain indebtednessamong low-income consumers in SouthArica? A study suggests the causes maybe more complex.

by Glenda Jacobs and Eon Smit

| CONSUMER ATTITUDES

Materialism anddebt

among low-incomeconsumers


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son to be concerned about the generalincreased desire to buy.

However, while the authorities view

consumption levels with unease, busi-nesses have shown a keen interest inthe growth in spending in low-incomemarkets. Tere are thereore also earsabout opportunistic orces that mayexploit consumerism trends in the low-income market driving up debt levels.

In order to contribute to this de-bate, a study done at the University oStellenbosch Business School (USB)sought to provide more insight intothe patterns o debt and materialism

among low-income consumers.

The notion o materialism

Many researchers worldwide havestudied materialism as a concept inconsumer behaviour. It is oten de-ned as the importance a consum-er attaches to possessions and hasalso been closely associated withconsumption, as well as with thepropensity o a person to borrowmoney or consumption. Creditgives individuals the advantageo immediate consumption whileonly paying in the uture. Buyingon credit is especially appealingto materialistic consumers, as thisallows them to satisy the desireto own possessions more quickly.

Whether one enjoys buyinggoods, owning them, or showingthem o to others all o these areexpressions o materialism. Tosewho are high on the materialismscale are seen as people who de-ne themselves by what they pos-sess. Tose at the low end o thescale tend to lead simpler lives un-cluttered by material possessions.

A database o low-income

consumers Te database o HomeChoice (Pty)Ltd, which has been conducting busi-ness in the low-income retail market

or more than 20 years, was used as asample rame or the USB study. Be-cause HomeChoice oers goods on

credit, it has accumulated a mass oinormation about its customers. Tedatabase with approximately 160 000active consumers was seen as a valuableresource or studying low-income con-sumers.

Moreover, HomeChoice sells homedcor and urnishing products, whichare non-essential household items. Tedecision to purchase such items is morelikely to be infuenced by materialismthan by necessity. Another important

aspect o this particular consumer baseis that customers have the option to buyon credit. Tereore the HomeChoiceconsumer base was suitable or explor-ing the propensity to incur debt orconsumption.

Choosing one customer base or astudy o this nature limits the extentto which ndings can be generalised astypical o all low-income consumers inSouth Arica. Nevertheless, the avail-ability o such a database presented a valuable opportunity to gain more in-

sight into the phenomenon under scru-tiny one that could not be ignoreddespite the limitations.

Measuring materialism andindebtednessGlobally, there has been a substantialocus on the study o materialism andespecially on measuring materialism byway o questionnaires. Te instrumentused in the USB study was one thathad been developed and adapted byseveral researchers over time: a short-ened nine-item version by Richins, asadapted later by Ponchio and Aranhain 2008. Each item is ranked on a scaleranging rom 1 (strongly disagree) to 5(strongly agree).

o measure the level o indebted-

ness, respondents had to provide thenumber o retail store accounts theyhold. o make it easier, they could tickagainst a list o stores that oer ac-counts to customers. Blank space wasadded to allow them to ll in accountsthat were not on the list.

Te nine-item scale ollows a value-based perspective o materialism, whichsees materialism as dened by three di-mensions: the centrality o acquisitionas a prime desire, the pursuit o happi-

ness brought by owning desired items,and the image o success that is refect-ed in the possession o desired items.

Te questionnaire is shown inGraphic A below:

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8 Happiness I t bothers me that I cant aord to buy all thethings I like

1 Success I admire people who own expensive homes,cars and clothes.

6 Success I like to own things that impress people

9 Success Some o the most important achievements inlie include acquiring material possessions

GRAPHIC A: THE MATERIALISM QUESTIONNAIRE

Item Dimension Description

2 Centrality I like spending money on many dierent things

4 Centrality Buying things gives me a lot o pleasure

7 Centrality I like a lot o luxury in my lie

3 Happiness My lie would be better i I owned many o the thingsI dont have

5 Happiness Id be happier i I could aord to buy more things


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Te questionnaire was slightly sim-plied, but kept in English, sinceHomeChoice requently conductsmailed market surveys among its cus-tomers in the English language. Beorethe questionnaire was sent out, howev-er, it was pretested with a group o typi-

cal HomeChoice customers. Tis stepensured that the questions were clearand easily understood by the targetgroup. Te questionnaire was printedin the HomeChoice Club magazine,which is mailed to HomeChoice cus-tomers on a bi-monthly basis.

Te survey generated 217 responsesrom people reporting an income belowR7 000 per month, which was the tar-geted maximum income level.

Results o the analyses

Materialism scores

Te rst part o the investigation o-cused on the materialism scale. Teanalysis started by calculating the aver-age scores per item as well as the to-

tal materialism score. Te ndings areshown in Graphic B. In interpretingthe scores, it must be kept in mind thatthe neutral score is three; scores abovethree refect relatively higher levels omaterialism on a particular item; andscores below three refect lower materi-alism levels. Similarly, or the total ma-terialism score, values above 27 showrelatively higher levels o materialism.

From the analysis it can be deducedthat the population sampled refectsmoderately high levels o materialism.

Tis is particularly evident in the totalmaterialism score o 29,93. Te threehighest scoring items were: Id be happier i I could aford to buy more things(3,94); Buying things gives me a lot o pleasure (3,75); and It bothers me that I cant aford to buy all the things I like(3,62). Te higher scoring items werein the happiness and the centrality di-mensions. Te three lowest scoringitems were all in the success dimension.Te scoring per dimension is illustratedin the next analysis.

Item Question Dimension Average

score

Rank

1 I admire people who own expensivehomes, cars and clothes

Success 3,06 7

2 I like spending money on many dier-ent things

Centrality 3,53 4

3 My lie would be better i I ownedmany o the things I dont have

Happiness 3,47 5

4 Buying things gives me a lot o plea-sure

Centrality 3,75 2

5 Id be happier i I could aord to buy

more things

Happiness 3,94 1

6 I like to own things that impress peo-ple

Success 2,47 9

7 I like a lot o luxury in my lie Centrality 3,12 6

8 It bothers me that I cant aord to buyall the things I like

Happiness 3,62 3

9 Some o the most important achieve-ments in lie include acquiring materialpossessions

Success 2,97 8

Total materialism score 29.93

GRAPHIC B: AVERAGE MATERIALISM SCORES

Green shows the top-ranked items; grey shows the lowest-ranked items.

based on theresults o this

sample, theover-50 agegroup is lessmaterialistic

than the

25-34 agegroup


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Graphic C shows the average scores othe total sample o 217 on the three di-

mensions o the materialism scale. Aseach dimension is measured by threeitems, the maximum possible score is15 per dimension. Te neutral scoreis nine. Te results indicate that theimage o success attached to owningpossessions is not as important as thehappiness brought by owning posses-sions and the enjoyment o the actiono buying. Tis result diers rom pre- vious studies done in Asia, in whichsuccess was the strongest dimension,

but it is similar to studies done in Rus-sia and Brazil. According to the results,the population sampled is more likelyto view possessions and purchases asnecessary or own well-being, but lesslikely to buy items to impress otherpeople.

GRAPHIC C: SCORES OF

MATERIALISM DIMENSIONS

Te data were subsequently analysedto see whether there are dierences be-tween age groups, gender, and incomelevels. Graphic D shows that there aredistinct dierences between age groupsand materialism scores. Especially theage group over 50 years shows relativelylower materialism tendencies. It was,

however, important to examine wheth-er these dierences resulted by chanceor whether they refected statisticallysignicant dierences. Further statis-tical tests revealed that the dierencebetween age groups 25-34 and over 50is statistically signicant. It can there-ore be stated that, based on the resultso this sample, the over-50 age groupis less materialistic than the 25-34 age

group. Te other dierences are notstatistically signicant, and one cannot

make a similar claim.

GRAPHIC D: COMPARISON

BY AGE GROUP

Green indicates statistical signifcance in the

dierence between categories.

Graphics E and F show the dierencesbetween materialism on the one handand gender and income levels respec-tively on the other. Te dierences arerelatively small, and none o them arestatistically signicant.

GRAPHIC E: COMPARISON

BY GENDER

GRAPHIC F: COMPARISON

BY INCOME LEVEL

Correlation between materialism andindebtedness

Te next part o the analysis was doneto test the relationship between thelevel o indebtedness on the one hand,and materialism and the demographic

Dimension Average

Success 8,49

Centrality 10,40

Happiness 11,03

Age Group N Average

Between 22and 24

10 27,50

Between 25and 34

69 31,70

Between 35and 49

91 30,53

Over 50 47 26,68

Gender N Average

Male 44 30,55

Female 173 29,77

Income level N Average

R500 to R2 000 86 29,31

R2 001 to R 3 000 39 30,51

R3 001 to R 4 000 40 30,63

R4 001 to R7 000 52 29,96


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Tis article is based on Glenda Jacksons research report titledMaterialism and indebtednesso low-income consumers: A survey based on South Aricas leading catalogue retailer or her

Masters in Development Finance, which she obtained rom the University o Stellenbosch

Business School (USB) in March 2010. Her study was supervised byProf Eon Smit.

An article by these two authors subsequently published in the South Arican Journal o Business

Management, 41(4), December 2010, under the title Materialism and indebtedness o low-in-

come consumers: Evidence rom South Aricas largest credit-granting catalogue retailer, received

the award or the best article rom student research at the USBs March 2011 award ceremony.


LEADERS LAB | CONSUMER ATTITUDES

variables on the other. Te level o in-

debtedness was measured by the num-ber o store accounts people held. It wasound that the range was between oneand eight accounts, but that the ma- jority o people held our accounts orewer. Te average was 2,74 accounts.

An analysis to determine the corre-lation between the number o accounts(level o indebtedness) and materialismas well as the measured demographicvariables is summarised in Graphic G(above).

Te analysis shows that there is verylittle relationship between materialismand the level o indebtedness. Indebt-edness is rather related to demographicactors such as income, gender and age.Although these relationships are small,they are statistically signicant.

Te relationship between the our

variables and indebtedness was urthertested by way o a regression analysis. Te resulting regression model wasrather weak, with a relatively smallcoecient o determination o only8,03%. Moreover, only the variablesage and gender showed a statisticallysignicant t in the regression modelbuilt to explain indebtedness. Materi-alism and income level did not play astatistically signicant role in the re-gression model.

A need or more researchWhat this study shows is that our un-derstanding o indebtedness amonglow-income consumers is rather lim-ited. Although the study pointed outthat low-income consumers show rela-

tively high materialism levels, material-

ism scores did not show a relationship with indebtedness scores in this par-ticular sample group. Te two variablesthat did show a signicant relationship with indebtedness, namely age groupand gender, did so in a rather sot way.ogether they could explain only 8% othe variability in the levels o indebted-ness o the respondents.

Since there is a growing interestamong policy-makers to increase eco-nomic participation by the lower-in-come levels in South Arica, and like-

wise among businesses to tap into thepotentially huge market at the base othe economic pyramid, a better under-standing o the social risk involved isnecessary. More research is required toensure that this market is approachedin an ethical and responsible way.

Variable tested against

indebtedness

Correlation

coefcient

p-value Comment

Materialism 0,08 0,2164 Very low correlation andstatistically insignifcant

Income level 0,13 0,049 Low correlation butstatistically signifcant

Gender 0,16 0,016 Low correlation butstatistically signifcant

Age group -0,19 0,005 Low negative correlation butstatistically signifcant

GRAPHIC G: TEST FOR CORRELATION

A p-value o 0,05 or less implies statistical signifcance

Glenda Jackson Eon Smit

Materialism and Debt Amongst Low Income Consumers in SA

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