New Year & Christmas 2018 Spending Survey 11 December 2017
Contents Key survey observations 04 Economy and wealth 07 Russians New Year budget structure 12 Omni-channel retailing 17 Consumer behavior 23 Research methodology 27 Contacts 28 2
Deloitte presents the 20th annual global survey of consumer spending ahead of the Christmas and New Year holiday season. 3
Key survey observations Online shopping appeals to Russians mostly due to the easy access to product reviews, as well as convenience when searching for goods. Four out of five people in Russia are concerned about personal data security when shopping online. Similarly to last year, about one third of Russians who are planning to shop for gifts online intend to make such purchases via foreign marketplaces. 60% of Russians use bank cards as their preferred method of payment, which is in line with the European average. Meanwhile, Russians tend more often to use debit cards to pay for gifts, as opposed to Europeans, who mainly prefer credit cards. The average Russian s planned holiday budget is expected to reach RUB 17,600, which is 4% higher than last year s actual spending (RUB 17,000). Meanwhile, Russians actual spending during the last holiday season happened to be 1% higher than was originally planned (RUB 16,900). The average Russian s holiday budget structure is expected to remain unchanged: gifts (44%), food and drinks (45%), and entertainment (11%). The share of Russians who plan to benefit from Black Friday discounts and promotions has increased from 46% to 53%. Meanwhile, 10% of Russians remain unaware of the existence of Black Friday. 4
Key survey observations The share of Russians who believe that the economy is in a recession has decreased from 66% to 51%. This represents the most optimistic outlook on the economy in the last three years of the survey; however, it is still one of the most pessimistic perceptions in Europe. Next year, 16% of Russians expect the economy to grow, and 33% expect a recession. One in five Russians has no idea of what to expect from the economy, which is twice as high when compared with the European average. For the first time in four years, there is positive dynamics in the Russians purchasing power. The percentage of those who feel that their purchasing power improved has increased from 9% to 12%, and the percentage of those who felt they could spend less decreased from 53% to 44%. The main reason behind the increase in purchasing power is the growth in income (54%). In Europe this figure is two times lower. The percentage of Russians who expect their purchasing power to grow next year has also increased from 18% to 23%. Similarly to last year, money is by far the most desired gift (men: 65%, and women: 73%). Second place is occupied by tablet devices and computers for men (42%), and travel for women (53%). However, traditionally they are likely to receive chocolates (45%) and cosmetics (42%). In addition to discounts, customers anticipate improvements from retail stores in the following areas: opportunities for a quick exchange or return of goods (38%), distribution of information on available goods and discounts (36%). Most Russians will purchase gifts from specialized chains (29%), as well as hyper- and supermarkets (21%). Russians are more likely (18%) than Europeans (12%) to ask for pre-chosen gifts from their relatives and friends. This year Russians plan to purchase 33% of gifts before 15 December (compared to 28% last year), while 26% of gifts will be bought during the last week of December (compared to 28% last year). 5
Russian retail market regained growth in dollar terms Russian retail market: ruble sales continue to grow steadily Size of the retail market (USD bln) Size of the Russian retail market 800 40% 800 40 600 400 23% 30% 20% 700 600 +7% +7% +7% 35 30 200 6% 10% 500 25 0-0% 400 20-10% 300 15-20% 200 10-30% 100 5-40% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 0 Russian growth, % European growth, % Source: Economist Intelligence Unit Russian sales, USD bn Russian share in Europe, % Russian sales, USD bn (left axis) Russian sales, RUB tr (right axis) Source: Economist Intelligence Unit The Russian retail market is predicted to grow in dollar terms for the first time in recent years on the back of the ruble appreciation in 2017 and persistent growth in ruble terms preliminary estimates put the growth rate at 23%. According to early estimates, the Russian retail market will account for 12% of the whole European market due to a decline in the UK retail market following Brexit in 2016 and thanks to the Russian retail market s growth in 2017. This will put Russia ahead of the UK, in 3rd place after Germany and France. The market is expected to continue its growth in dollar terms in 2018 2020. However, this growth will be rather moderate, and 2020 retail sales in Russia are expected to only come close to 2011 levels. Retail sales in Russia continue their strong growth in ruble terms: ruble sales are forecast to increase by 7% in 2017 and continue to grow throughout 2018-2020. 6
Economy and wealth Consumer perceptions and purchasing power 7
Current view of the economic conditions in Russia: peak pessimism has passed Current perception of the economy Russia 2017 51% 5% 7% 36% The share of Russians who believe that the economy is in a recession has decreased from 66% to 51% during 2017. For the first time over the last three years, Russians became more optimistic about the current economic conditions. This holds out hope for further improvement of purchasing power in the future. The recession is being felt the most by Russians who were born between 1980 2000. 51% 36% 7% Average 6% 7% 52% 37% 4% Male 51% 36% 7% 6% Female This year, both men and women shared the same view on the economy: nearly half of them said that there is a recession in 2017. The number of elderly people who believe that Russia s economy is in a recession is down from the last year and amounts to 46% (69% in 2016). Russia 2016 6% 3% 36% 51% 33% 55% 33% 53% 43% 46% 25% 7% 6% 7% 5% 7% 7% 8% 3% 66% Average 18-34 35-54 55+ Growth Stability Recession I don t know Positive Neutral Negative I don t know 8
Russians are once again optimistic about the future Expectations of the economy in 2018 Improvement Stabilisation Deterioration 16% 16% Improvement 7% in 2016 29% 33% } } 33% Deterioration 51% in 2016 The share of Russians who expect economic growth in the next year has increased by more than twofold as compared to last year, up to 16%. The peak of the crisis sentiment in 2016 has been overcome and Russians are once again optimistic about their future. Russians expectations regarding the recession (33%) are close to the 2014 level (30%). Russian expectations regarding the recession are similar to the average expectations in the EU. Greece holds the most pessimistic view in the EU with 60% of respondents indicating a recession in 2018. Russian level of pessimism regarding the economy 70% 60% 50% 51% 50% 54% 66% 51% 40% 30% 20% 20% 26% 36% 33% 37% 30% 33% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F % Percentage of those perceiving a recession / expecting a deterioration 9
Purchasing power begins to recover Russia: Reasons for Russians increased spending 44% 2017 12% Growth in personal income 54% 1 53% 2016 9% Denial of economic instability 39% 1 43% Male 11% 45% Female 13% Promotional campaigns Improved stability of the economic situation 32% 25% 35% 18-34 20% Consumer reviews and rankings 19% 52% 35-54 8% 48% 55+ 6% Europe 36% 17% 2017 Emergence of product innovations Offers and advice Acceptable borrowing terms 16% 11% 6% 1 You have less to spend You have more to spend Other 4% 1 This year has seen an increase in the number of Russians who feel that their purchasing power has improved (from 9% to 12%), in addition to a decrease in the number of those who perceived a deterioration in their purchasing power from 53% to 44%. Young Russians (aged 18-34) demonstrate the most optimistic sentiment regarding their purchasing power: the share of those who believe that their purchasing power improved has increased from 13% in 2016 to 20% in 2017. Moreover, 23% of respondents expect their purchasing power to improve in the next year (18% in 2016). The share of Russians who believe that their purchasing power will deteriorate in the next year has fallen to 22% (28% in 2016). The main reason for the improvement in purchasing power is the growth in personal income (54%) which is nearly twice as high as in Europe (23%). Similarly to last year, one third of respondents noted that promotional campaigns encourage them to spend more. 10
Purchasing power begins to recover, % 80% 70% 60% 50% 40% 53% 44% 30% 26% 20% 10% 0% 27% 9% 12% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F You have more to spend You have less to spend After long period of time, in 2018 number of Russians who feel that their purchasing power will improve is reaching parity with those who perceived a deterioration in their purchasing power. 11
Russians New Year budget structure Presents people want, and presents people get 12
The average Russian s holiday budget is expected to be 4% higher than last year s spending Holiday spending of the average Russian in euros 600 500 The average Russian s planned holiday budget amounts to RUB 17,600 (EUR 262), which is 4% higher than last year s actual spending of RUB 17,000 (EUR 253). 400 300 200 245 253 250 262 Economic instability has taught Russians to balance their checkbooks over the holidays: actual spending in the last holiday season happened to be 1% higher than was originally planned (RUB 16,900). 100 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Planned budget Actual spending Holiday budget structure in euros Russia Budget 2017 Russia actual 2016 Europe Budget 2017 115 110 196 116 114 133 29 31 51 The average Russian s holiday budget structure is expected to remain unchanged: gifts (44%), food and drinks (45%), and entertainment (11%). Gifts account for 52% of Europeans budget which is 8% higher than that of Russians. 0 100 200 300 400 Gifts Food and beverages Entertainment Exchange rate used this year: 67.1 RUB/EUR Prior year: 67.6 RUB/EUR 13
Most Russians want to receive money as a gift Most desired gifts Men Women Money 69% Travel 41% Money 65% Money 73% Smartphone/mobile phone 37% Laptop/PC Computer 36% Laptop/PC Computer 42% 1 Travel 53% Cosmetics/perfumes 33% Chocolates 31% Smartphone/mobile phone 36% 1 Cosmetics/perfumes 49% Jewellery/watch 31% Event tickets 30% Travel 28% 1 Beauty care/massage/spa 43% 2 Books 29% 3 Tablets 29% 1 Books 26% 5 Chocolates 41% The top 10 most desired gifts remained almost the same, with only books gaining three positions and tablets moving down one position. Money traditionally ranks well ahead of all other most desired gifts. Men s gift preferences did not change much in 2017 with computers moving up one position and smartphones/ mobile phones and travel losing one position. Books are gaining popularity as a desired gift for men (up five positions). Beauty care, which advanced two positions in 2017, is gaining popularity as a desired gift for women. Likely in response to purchasing power improvements in 2017, women are spending more on cosmetics and beauty care services which they could not afford earlier. 14
Gift vouchers and books to be the top gift choices for purchase Most popular gifts Men Women Chocolates 45% Cosmetics/perfumes 42% Chocolates 36% Chocolates 52% Money (cash) 31% Gift vouchers 22% 2 Money (cash) 33% 1 Cosmetics/perfumes 51% Books 19% 2 Food and beverages 19% 2 Cosmetics/perfumes 32% 1 Money (cash) 29% Gift sets Cooking accessories 16% 16% 4 Smartphones/mobile phones 22% Gift vouchers 27% Event tickets 15% 1 Smartphones/mobile phones 15% 5 Books 18% 2 Food and beverages 21% 1 Chocolates, cosmetics and perfumes remain the most popular gift Russians buy for others. This year Russians will be more likely to set their sights on gift vouchers and gift sets when shopping for holiday presents. Books are also a much more likely option than last year (up from seventh to fifth place). This year men are much more likely to receive books as presents (two positions up from 2016). Men will also have a higher chance of getting money, which climbed up one position from last year to rank second in the list of the most popular gift choices for men. Russians patterns of selecting gifts for women are relatively stable: the top 5 most popular gifts Russians buy for women stay virtually unchanged year-in and year-out. Though travel is the most desired gift for women, they are most likely to receive something else (ranked 34 th ). 15
Construction kits and learning games or consoles and smartphones what will teenagers receive? Gift choices for teenagers (12 to 18 years of age) Gift choices for children under 12 years of age Chocolates Money (cash) Books Games 42% Construction kits 45% 23% Dolls 29% 21% 2 Learning toys 28% 21% Books for children 23% 2 Console Smartphones/mobile phones Construction kits Cosmetics/perfumes Tabletop games 15% 1 Baby goods (toys and clothes) 22% 2 13% 3 Games 21% 1 12% 4 Sports and leisure equipment 20% 2 12% 6 Learning games 20% 12% 7 Electronic toys 20% 1 Learning toys Clothes/shoes 11% 8 19% 6 In 2017, consoles, construction kits, games and toys are gaining popularity as gifts for teens, while clothes, event tickets and sports equipment are losing ground. Unlike men and women, teenagers are more likely to get money for Christmas. The top options for children under 12 years of age are various games and toys. Clothes and shoes have become a less popular gift choice for children in 2017, compared to toys and games. Increased shopping for gifts (toys) for children may have been encouraged by purchasing power improvements. 16
Omni-channel retailing The Internet is an integral part of the shopping process 17
The share of online gift purchases in Russia is growing steadily Where do people buy gifts? Share of gifts to be purchased online Where people search for/compare desired products? 22% 25% 35% 37% 29% 27% 26% 26% 26% 24% 20% 23% 25% 29% Search engines (Google, Yahoo) Website of stores with one or more physical stores Comparison sites (Pricing) Website of stores without physical stores Websites of brands/suppliers Websites with coupons and offers Email newsletters and online leaflet I receive via email Forums and blogs None of these 2011 2012 Europe 2013 2014 2015 2016 2017 Russia 0% 10% 20% 30% 40% 50% 60% Russia Europe Portion of expected online purchases via foreign marketplaces I will not buy from overseas marketplaces Less than 20% 20 50% 50 80% 80 100% 9% 15% 17% 28% 28% The share of online gift purchases in Russia is at approximately 29% and is likely to continue growing. However, Russia is still behind Europe where 37% of gifts are purchased online. Similarly to last year, about one third of Russians who are planning to shop for gifts online intend to make such purchases via foreign marketplaces. The most common and popular way to find desired gifts in Russia as well as in Europe in 2017 is through search engines with their contextual advertising, followed by online shops of offline retail chains. Compared to Europeans, Russians tend to be more thorough when buying gifts. People use special websites to compare prices. All of them 4% 18
If a product is not available in an online store, only 15% of Russians will go to the physical store of the same retail chain If a product is not available in an online store, Russians usually prefer to: Use a search engine or comparison site to find it elsewhere Go to a physical store of a different chain Go to a physical store of the same chain I never shop online I would look for a different product 0% 10% 20% 30% 40% 50% 60% 2017 2016 If a product is not available in a familiar online store, people are most likely to first search for this product using another website (search engine, price comparison, etc.) or visit another known online store (53%). The same as last year, second place goes to a physical store of a different retail chain. Only 15% will go to a physical store of the same retail chain. 19
Russians particularly like online stores because of the opportunity to know other people s opinions on products and the ease of finding and selecting products Offline stores Online stores 01 02 03 04 I immediately receive the products I purchase It is easy to exchange or return goods After sale services (repair) Good protection of my personal data 01 02 03 04 05 Safe payment services 05 I can get other consumers opinions on products It is easy to search for and choose what I need Broad assortment Acceptable prices I can compare prices easily Physical stores are still above the competition in terms of the ease of product exchange or return, after sale services and protection of personal data. Online shopping is particularly attractive for Russians because it provides easy access to other customers reviews and the possibility to find goods more quickly and easily than in a physical store. Four out of five people in Russia are concerned about personal data security when shopping online, which hinders the development of the Internet as a sales channel. 20
Areas in which retailers should invest to improve customers shopping experience Most popular responses Least popular responses Lower prices Quick return option Information on available products and discounts Home delivery Online store 72% 38% 36% 33% 32% Child care Being green Mobile commerce Self-packaging system 7% 6% 6% 4% In addition to price discounts, customers expect improvements in the following areas: quick exchange/return of goods (38%) and information about available goods and discounts (36%). Customers are not interested in offline stores being green, offering self-packing services or developing mobile shopping offerings. Moreover, one in three Russians believes that offline retailers need to develop online stores as well. 21
Specialty chains and hypermarkets beat traditional department stores Retail formats used to purchase gifts Speciality chains (selling toys, books, DIY, clothes) Hypermarkets/supermarkets Traditional department stores Traditional local shops (Magnit, Pyaterochka, Dixy, etc.) Factory outlet stores Luxury stores Respondents tend to buy gifts in specialty chains (29%). Traditional department stores have seen a rise in demand for gifts, having moved up one place to fourth in 2017. In contrast to Russians, Europeans are loyal to traditional local shops, which came in second for gift shopping after specialty chains. 0% 10% 15% 20% 25% 30% Russia 2017 Russia 2016 Europe 2017 22
Consumer behavior Decision making and timing of purchases 23
The shopping season in Russia has started earlier than last year The appeal of Black Friday for holiday shopping is growing, with more Russians believing they will benefit from the deals offered Share of gift purchases by time intervals To what extent are you going to leverage offers during Black Friday as part of your holiday shopping? Before November 2017 3% 2016 2% I will try to use the maximum of Black Friday opportunities relevant to my shopping needs 2017 27% 2016 23% November 1 15 December 16 24 December 25 31 December January 12% 18% 33% 26% 1% 8% 18% 39% 28% 1% I will consider some of the deals on offer to save my holiday budget I will avoid Black Friday shopping because I expect no significant discounts to normal prices I will avoid Black Friday shopping because the exact products I need are usually not on offer The Black Friday period is too early for my holiday shopping, I usually do it closer to the New Year 26% 15% 13% 9% 23% 17% 15% 10% * Black Friday 7% 5% I do not know what Black Friday means 10% 12% Although Russians traditionally do their holiday shopping later than Europeans, this year s shopping season in Russia will start earlier than last year s. The number of Russians planning to do their holiday shopping in December decreased from 84% in 2016 to 77% in 2017. At the same time, the share of respondents intending to buy their gifts before December increased to 15% in 2017 as compared to 10% in 2016. In 2017, more Russians are planning on Black Friday shopping, which is a repeating trend; 53% will use at least some of the opportunities that Black Friday offers (as compared to 46% in 2016). In 2017, the share of Russians who are not aware of Black Friday decreased to 10% from 12% in 2016. 28% of Russians (32% in 2016) do not believe they can benefit from Black Friday deals, as either the discounts are small/ artificial or irrelevant products are on sale. 24
What channels of information are used for getting ideas and advice on gifts? Physical stores 25% 22% Websites I was directly asked for it Word of mouth: friends/ neighbours/ family Social media (Facebook, Instagram, Twitter, etc.) TV Newspapers and magazines 9% 10% 6% 9% 5% 11% 14% 15% 18% 12% 23% 21% Russia Europe Russians as well as Europeans are most influenced by the Internet and in-store advertisements and promotions. Russians use word of mouth more actively than Europeans (18% versus 12%), asking their relatives and friends to buy them pre-selected gifts. Newspapers and magazines are traditionally much less popular in Russia for gift ideas than they are in Europe (5% and 11% respectively). 25
Russians prefer non-cash payments when shopping for gifts What payment methods are you planning to use for your in-store and online holiday shopping? Offline purchases Online purchases 7% 3% 14% 40% Debit card Cash Credit card Other (checks, etc.) 17% 51% Debit card Qiwi Wallet, Yandex.Money, etc. Credit card Other (checks, etc.) 39% 29% Over half of Russians (60%) prefer using bank cards for their holiday shopping, which is in line with the European average. Using debit cards is the most popular payment method both in traditional and online stores. In Russia, they are used by 44% of respondents versus 36% in Europe. On the other hand, more Europeans (24%) than Russians (14%) prefer shopping with a credit card. Despite their concerns over personal data safety, the majority of Russians (51%) prefer to pay for their online holiday purchases with a debit card. 26
Research methodology Details and approach The survey was conducted in nine countries in Eastern and Western Europe from 9 to 16 October 2017. The respondents are 18 to 65 years old. Information was collected via the Internet with a structured questionnaire distributed to a sample of individuals selected from a control group. This survey has been conducted since 1998. Russia has been covered for ten years in a row. In order to adjust the Internet sample to the population of each country, we used ex-post statistical weighting based on gender and age in each country. The Russian sample is more representative of the middle and upper social classes in large cities since the survey was carried out via the Internet. 27
Contacts Vladimir Biryukov Partner Moscow, Audit, Head of the Retail, Wholesale & Distribution Group in the CIS +7 (495) 787 06 00, ext. 1860 Sergey Turushev Director Moscow, Audit, Consumer & Industrial Products Group in the CIS +7 (495) 787 06 00, ext. 2350 Vasilyi Podobedov Senior Manager Moscow, Audit, Consumer & Industrial Products Group in the CIS +7 (495) 787 06 00, ext. 1622 Egor Metelkin Partner Moscow, Audit, Head of the Consumer & Industrial Products Group in the CIS +7 (495) 787 06 00, ext. 2320 vbiryukov@deloitte.ru sturushev@deloitte.ru vaspodobedov@deloitte.ru emetelkin@deloitte.ru 28
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