44% Russians switched to cheaper grocery brands

For the first time Consumer Confidence Index in Russia has fallen below global average and to its lowest record – 75 points, Nielsen reports. Within the BRIC[1] group − four most promising markets of the global economy − consumer climate in Russia is the most chilly, as the recent decline in national economy brought back to Russians memories of the crisis of 1998. But here is the advantage consumers from the mature markets don’t have: Russians surely know that to expect and how to live through the “gloom and doom”. Now they have tightened their belts in honest. Saving is now on the top list of the most popular ways to utilize spare cash. 44 percent claim to switch to cheaper grocery goods. One in three has cut down on telephone expenses. But already one in four plans to celebrate the beginning of better times by returning to old purchasing habits when economic situation improves. 

Nielsen’s Global Consumer Confidence Index is a twice-yearly online survey which tracks consumer confidence, major concerns and spending habits. The latest wave was conducted in March 19 − April 2, 2009 in 50 countries^[2] including Russia.

“It took only half a year for one of the most optimistic markets of the world to go the way from steady consumer confidence to extreme pessimism,” said Dwight Watson, Managing Director, The Nielsen Company, Russia.

“While the previous wave of Nielsen’s Global Consumer Confidence Survey − conducted in October 2008 amidst the financial crisis in mature markets − registered only a slight 2-point decline of consumer confidence in Russia, only half a year later the difference in consumer sentiment towards the economic situation in the country is huge. Consumer Confidence Index in Russia lost 29 points since October 2008, the lowest drop registered by Nielsen globally in the past few years,” he added.  

N.B.! In November 2008 and February 2009 Nielsen conducted additional studies to measure Consumer Confidence Index (CCI)  in Russia as part of the integrated research project ‘Russians Through Crisis’ which was initiated to rack the changes in consumer behaviour in Russia in the current economic situation. The CCI  trend on the graph below contains the results of these additional waves.

The negative changes in the national economy have impacted almost every business industry and every consumer group. According to Nielsen’s online consumer survey, 92% Russians think their country is in recession now (only half year ago in September-October 2008 only 49% were of the same opinion). At the same time one in three of them (29%) believe that we shall see “the light on the other end of the tunnel” and the country will be out of recession within the next 12 months. Interestingly, the share of optimistic “realists” has changed inconsiderably since October 2008 when 31% supported the idea.  

«While only half a year ago Work/Life balance was among the major consumer concerns globally and in Russia, there is no room for sentiments like that today when unemployment becomes more than a real threat to stability of the family income and confidence in future. Job Security is the major concern for 23% of Russian respondents,“ said Dwight Watson.

In this situation of slow down both in B2B and B2C sectors and continued reduction in personnel, no wonder 84% Russians consider their job prospects on the market   and bad or not so good.  Only half a year ago twice less respondents (44%) were among the pessimists.  

Now more Russians feel poorer and have to revisit their purchasing habits, as the economy is sinking deeper into recession and weakened Rubble is make the cost of leaving more expensive. In October 2008 60% of Russian respondents considered the state of their personal finance as good, and 7% − as excellent. Now half of Russians (52%) says the state of their personal finance as bad or not so good. No wonder, only 27% of Russian participants of Nielsen’s Survey consider the present moment as good time to buy things they want or need.

Results of the Global Consumer Confidence Index Survey continue the trends and support consumer insights revealed by another Nielsen’s Survey − the tracking study ‘Russians Through Crisis’ initiated by Nielsen Russia in November 2008.

It is important to mention that the most significant drop in consumer confidence in Russia was registered in November 2008, when according Consumer Confidence Index measured within the framework of ‘Russians Through Crisis’ study dropped by 16 points. At the time the Index was to the large extent influenced by the growth of consumer pessimism in regard to job prospects on the local market and the state of personal finances. And as the results of the next wave in February 2009 showed it is in February when Russians started tightening belts in honest.

«The findings of Nielsen’s Global Consumer Confidence Index Survey in March 2009 show that the negative trend continues and more Russians are switching their purchasing behaviour to “saving” mode. But it is very likely that the sharp drop is behind and we are at the beginning of the plateau of stagnation after which we shall see positive changes on the Russian consumer market. By the time we shall witness considerable changes in consumer market landscape and consumer behaviour,” said Dwight Watson. 

According to Nielsen’s Global Online Survey, the most popular belt-tightening strategies in Russia are to cut down on out-of-home entertainment, to buy less clothes, cut down on major household items and upgrade of technological devices. Consumer reported they had planned to economize at the expense areas of spending as early as in October 2008, and the number of new respondents who joined the trend has changed not much since that time. The exception is spending on clothes. If in October 2008 42% of Russians respondents claimed to cut down on clothes, in March 2009 − 65%.  

«The most considerable changes are seen in such spending areas like telephone expenses and purchase of grocery products which were not much impacted by the worsening economic conditions half a year ago. This in an important indicator that the market is on the verge of the next stage of crisis development,” said Dwight Watson.    

According to Nielsen’s Survey, now 44% of Russian consumers claim to have switched to cheaper grocery goods − twice as much as in October 2008 (20%). If at the beginning of the global crisis one in ten Russians started to cut down on telephone expenses, now 33% consider this a suitable measure to reduce living expenses. On the contrary, only 10% of respondents are looking for better deals on home loaning, insurance and credit cards, while half a year ago − 24%.  

Hopeful news for restaurants and other out-of-home entertainment businesses. Nielsen’s study shows that the number of consumers reporting to have cut down on this expense item has not changed much − from 56% in October 2008 up to 65% in March 2009. It looks like no further considerable outflow of customers which was seen in the past months should be awaited in case the economic situation remains stable.  

Seven percent of Russians say they do have spare cash left after they have covered their essential living expenses which is lower that on the global average (13%). But the trend is not optimistic. Only half a year ago only two percent complained about it.

Those who still have spare cash prefer to spend them on clothes, technology and home improvements. But now the number of those who can afford it has decreased. According to respondents’ answers the essential outflow is seen in such expense items like holidays/vacation, clothes and technology. 

For the fist time for the past several years, savings is on the top list of the most popular ways to utilize spare money in Russia. Though the share of those who make savings has not changed much (44% in October 2008 vs. 43% in March 2009), it is third on the list of the prevailing strategies to utilize spare cash now, − but only due to the considerable outflow in other items.

«At times when the local labour market was the markets of a candidate, the salaries were growing, and banks could offer good crediting conditions, Russians were happy to use every opportunity to buy what they wanted or needed. It is very likely that today newly found pragmatism and sensible approach will replace the trend ‘to live here and now’. For how long?» − commented Olga Belova, Consumer Research Director, Nielsen Russia.  

According to Nielsen’s Survey, while 77% Russians have plans to retain the new purchasing habits acquired in tight times, 23% consumers cannot wait to switch off belt-tightening mode and return to old habits after the economic conditions improve.

According to respondents’ answers, Russian consumers are the least happy they have to stint themselves in clothes, vacations, and economize on telephone expenses and grocery goods. While 44% report to have switched to cheaper grocery goods, only 14% claim to continue with this habit. 32% Russians say they have cut down on vacation/holidays, − only seven percent plan to go on. 65% of Russian participants of Nielsen’s Survey started spending lee on clothes. Only 13% intend to continue doing so.

 

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