Sberbank CIB Ivanov Consumer Confidence Tracker. July 2020 - A Return to Normalcy

We continue to track the Ivanovs' savings and spending patterns, as well as their perceptions, to get an idea of how entire sectors and individual companies are performing and might perform in the future. We also look at competition among Russia's public food retailers. This is our regular survey, which was conducted in the usual way in the last month of the quarter (over June 1-20, when the lockdown started easing). So where we refer to 2Q20, we mean this regular quarterly survey. This is different from the special unscheduled Ivanov report that we published in May (which was largely dedicated to how behavior changed during the lockdown and as Covid-19 was spreading actively). That one is referred to as the May '20 report. Here are the main conclusions from our most recent survey:> The field work for this survey took place over June 1-20, which captured the end of the lockdown and reopening of the economy. We therefore see the findings as a reflection of the new reality, as both businesses and households have now had time to adjust to the changed environment.> The overall consumer confidence index came in at -31% in 2Q20, up slightly from May's reading of -36%, but still well below the 2Q19 figure of -21%. The forward-looking indicators saw a visible improvement from the May levels, while the trailing indicators were little changed. > Health emerged as the biggest concern (for 64% of respondents), with 10% saying a friend or relative had been diagnosed with Covid-19 or pneumonia as of May. The second biggest issue was unemployment, which eased from the May level but was still cited by 56%. The unemployment rate among our respondents stood at 19%, while underemployment was 38% in June (up from 22% in 1Q20). The business confidence index moved into negative territory, to -6% from 5% in the 1Q20 survey. Inflation worries declined y-o-y to 45%. Ruble depreciation was much less of an issue than during previous episodes of FX market volatility. > Year-to-date, average savings per person fell 13% to 70k in 2Q20, as reduced incomes during the lockdown did not cover regular expenditures, plus Ivanovs were also making one-off big-ticket purchases in April, as they sought to avoid the impact of ruble depreciation. On a positive note, there was no major decline in savings between May and June. The share of respondents without savings jumped from 36% in 4Q19 to 43% in May and 41% in 2Q20, though this is still in line with the average for 2018-19.> Despite increased price sensitivity, food purchasing metrics improved. The share of Ivanovs trying to save on food fell 3 pp Q-o-Q to 65% (and versus 66% in May), while in net terms the trading down index eased by 1 pp Q-o-Q to -34%. This was accompanied by a slight increase in the popularity of shopping at stores that typically offer lower prices. Meanwhile, promotional items remained the most popular strategy for saving money on food, though they saw a 5 pp Q-o-Q decline in popularity to 56%, versus 61% in 1Q19 and 59% in May. In 2Q20, the Ivanovs spent an average of 38.8% of their income on food, up from 37.8% in 2Q19. > The average number of chains at which respondents shopped for groceries rose from 1.9 in May to 2.1 in 2Q20, still below the 2.2 seen in 1Q20 and the 2018-19 average of 2.3. Hypermarkets increased in popularity, while non-chain retailers continued to see traffic outflow. The number of shopping trips per week stood at 2.9 in 2Q20, up from 2.6 in May but still notably below the 3.0 registered in 2Q19. This should bring the LFL dynamics closer to normal, easing the decline in traffic and slowing the ticket growth. > The share of respondents naming Pyaterochka as their primary food shopping destination was unchanged Q-o-Q at 26% in 2Q20. Magnit's share retreated to 21% after bouncing to 23% in 1Q20 and 24% in May. This might be due to the fact that Magnit is the closest shop for many people, and once the lockdown was eased, consumers began to shop elsewhere.> Magnit's traffic conversion and Ivanovs' perception of its food and store quality are improving. The share of Magnit visitors with a loyalty card doubled YTD to 79% in the latest survey, and we calculate that this contributes 3-4% to the company's revenues. We therefore attribute the lower number of shoppers at Magnit to two factors: customers returning from their dachas in rural areas (where Magnit has more of a presence) to the city and the suspension of rollout. Hypermarkets (including Lenta) saw an uptick in the number of unique customers, but we cannot be certain that there was direct outflow from Magnit to hypermarkets. > The average number of items per ticket dropped from a three-year high of 7.0 in May to 6.6 in 2Q20, in line with the 1Q20 level. The number of promo items remained at the same level, which means the share of promos slightly increased but remained below the 1Q20 level. We consider the flat number of promo items to be positive, as it indicates that customers have not become fixated on promos despite declining incomes and no longer being limited to shopping at the closest store (as was the case during the lockdown). The popularity of promos has been ebbing and reached its lowest level since 2H16. The share of those seeking out promotions to save money retreated to 56% from 59% in May and 61% before the lockdown. This is definitely a positive development, especially in the context of increased shopping mobility.> Some 45% of the population is eligible for social payments (payments for children were the most widely mentioned form of payment).> Respondents anticipate a 4% increase in food spending in 2H20 and are considering cutting other expenditures should their incomes remain weak.> Among our special focus in this edition, the taxi segment suffered the most from the lockdown: 34% of those who ordered a taxi in the past six months started doing so less often. Some 64% of Ivanovs used taxis in 1H20, which we believe already reflects the negative impact of the lockdown, as this marked a 5 pp decline from the December 2019 level. Online taxi aggregators maintained popularity, with 38% of Ivanovs using them in 1H20 (broadly flat since our December 2019 survey). In Moscow, 70% of Ivanovs ordered taxis online in 1H20 (flat since December 2019), 94% of whom were using either Yandex.Taxi and/or Uber (broadly flat over the period). Citymobil saw a 6 pp pickup in use over the period to 30% in Moscow. Outside of Moscow, 85% of Ivanovs who used taxi apps in 1H20 said they used Yandex.Taxi, down 3 pp from the December 2019 survey; Citymobil users increased by 6 pp to 18% of taxi app users. > Takeaway delivery took the second largest hit after the taxi segment in terms of the number of people who started to use it less frequently (30%), although this was offset by the number of those who started to do so more frequently (27%) and by an increased frequency of ordering, driven mostly by 25-34 year-olds. Interestingly, online grocery delivery was a beneficiary, as 39% of those who ordered it in the past six months did so more frequently. Around 38% ordered food from restaurants online in 1H20, down 2 pp from our December 2019 survey, which we attribute to the effect of the lockdown. Both Delivery Club (combined with ZakaZaka) and Yandex.Eats saw a pickup in users, according to our June 2020 survey - up 12 pp (to 59% of those Ivanovs who ordered food online in 1H20) and 6 pp (to 38%), which was supported by the growing popularity of aggregators, as the share of those who order directly from a restaurant fell 10 pp to 42% over the period. > Unsurprisingly, online shopping found more traction during the lockdown, as 27% of those who shopped online in the past six months started doing so more frequently, while for 55% this has not changed. Overall, online shopping penetration among Ivanovs was broadly flat at 68% of Ivanovs shopping online in 1H20. Cross-border online retailers lost more popularity, as the share of Ivanovs shopping online in 1H20 who used AliExpress and Joom dropped 9 pp to 50% and 6 pp to 10%, respectively, compared to our March 2019 survey. The top domestic e-commerce players, Ozon and Wildberries, gained 6 pp to 38% and 14 pp to 36% over the same period, respectively. Yandex.Market's Beru is gaining traction: it was used by 8% of online shoppers as of June 2020 (versus 4% in our March 2019 survey) and is among the top 10 online shopping destinations for the Ivanovs.