Russians adapting consumption habits to new reality

Russians adapting consumption habits to new reality

Amid a drop in real disposable income, Russians are rethinking their shopping patterns and choosing cheaper goods. Companies are also adapting to changes ensuring the reliability of their supply chains and developing online sales and delivery.

In Russia, discounters like Fix Price are thriving, as consumers are seeking value amid falling disposable incomes, reports bneIntelliNews adding that similar trend is seen worldwide. While brick-and-mortar retailers are facing difficulties due to lower foot traffic, stores operating in the low-value segment have seen an increase in their sales brought by bargain-hunting consumers.

Russia’s largest discounter by turnover Fix Price showed an increase of 20,6% in like-for-like sales in the third quarter of 2020. According to the company’s statement, it was the fifteenth consecutive quarter of double-digit growth. “In the third quarter of 2020, we continued to see [...] higher demand and consumption of goods at more affordable prices,” said Fix Price CEO Dmitry Kirsanov. He added that his company was able to quickly adapt to the new conditions. “We introduced a new range of high-demand products, secured uninterrupted supplies of goods and most importantly ensured the safety of our customers and employees.” The average ticket size grew by 15,9%, while like-for-like traffic growth marginally slowed to 4,1% in July-September 2020 compared to 4,9% in the third quarter of the previous year. The retailer recently opened its first stores in Uzbekistan in addition to a vast network of over 3,900 stores in Russia, Belarus and Kazakhstan.

The coronacrisis has hit Russian real wages. In the last quarter of 2019, they began to grow after contracting for six years in a row thanks to increased spending on the country’s 12 national projects. Then, by the end of the first quarter of 2019, the economy faced a collapse in oil prices and the start of the COVID-19 pandemic, so real wages resumed contracting. However, they unexpectedly increased by 2,3% year on year in July, and analysts expect consumer demand to gather strength in the rest of this year if uncertainty abates.

Fix Price recently opened its first stores in Uzbekistan in addition to a vast network of over 3,900 stores in Russia, Belarus and Kazakhstan. Photo: EBelova

Meanwhile, according to a recent study by Boston Consulting Group and Romir research company, Russians quickly adapt to changes and rebuild their consumption habits. Experts have identified five stages of changes in Russians’ consumption habits during the pandemic. While during the first stage (in January-March) the disease seemed to be an external problem, the second stage (in March-May), when non-working days were introduced, brought increased demand. Stores couldn’t replenish their stocks, but they began to increase the capacity of online sales and delivery services. During the stabilisation period (May-June), consumers adapted to new shopping patterns, and businesses — to the new reality.

After the quarantine was lifted, Russia moved to a recovery stage (June-September), when people tried to catch up and make purchases in all major categories as well as actively visit cafes and restaurants. At the current fifth stage, Russians are avoiding unnecessary travel and partially switching to remote work, while companies are trying to digitalise supply and delivery.

By Anna Litvina