Moscow News
http://www.mnweekly.ru/
November 6, 2008
Confident consumers
By Ed Bentley
Russian consumers are not making significant changes to their spending patterns, and this corresponds with consumer confidence readings, despite almost half the population fearing the economy is in recession.
Although the economy is not technically in recession (defined as two consecutive quarters of negative economic growth) because it is still growing, 49 percent of respondents to a survey in October answered that it was. Another survey in May, also conducted by Nielson, found that only 34 percent of respondents answered that there was a recession.
Consumer confidence in Russia is still significantly above the world average, and consumers have not yet changed their spending plans dramatically.
"Russian consumer market has been one the fastest growing for the past several years and it still is the one with the most stable level of consumer confidence", said Michalis Christou, Neilson's regional managing director for North-Eastern Europe.
"Consumers in Russia feel they are in recession but are personally still buoyant on their spending and expectations. The way they are allocating their spare cash remains virtually unchanged" he added.
One of the reasons many seem so likely to adjust their spending patterns is confidence in their personal finances and that the recession will not last more than 12 months. Remarkably, 42 percent of respondents thought this was a good time to buy the things they want and need, while 67 percent of Russians surveyed felt confident in the state of their personal finances over the next 12 months.
The second biggest worry, behind the economy, which 32 percent of global respondents said was their main concern, was food price inflation. However, only 1 in 5 Russians claimed they would switch to cheaper food brands to save money.
"Russian consumers are brand conscious and will initially look for alternative ways to get the brands they are used to buying cheaper before they make a change," Dwight Watson, managing director of Nielson Russia, told the Moscow News.
Russians are also unlikely to adopt more energy saving practices which are popular in North America and Europe to save money. This is largely down to subsidized energy prices but these are likely to hit world levels by 2011, increasing their importance for consumers Watson claims.
When "prices increase it could create more emphasis on saving - as consumers will try and reduce incremental spending and remember the ‘good old days,'" he said.
However, some industries could suffer in the short term as customers look to delay purchases of major purchases, such as household appliances and technological upgrades like PCs and mobile phones. The most popular method of saving money for Russians is cutting back on out-of-home entertainment, though this could create new opportunities.
"Staying in has become the new going out for a new breed of credit crunch consumers and while restaurants and bars may already be feeling the pinch, the "stay-in" trend is
providing new marketing opportunities for innovative at-home entertainment options as well as at-home food and beverage products," said Christou.
Outside Russia people are far less optimistic about the economy in the short term with 63 percent of respondents saying their economies are already in recession and more than half saying they won't be out of it in the next 12 months.