Sberbank CIB Ivanov Consumer Confidence Tracker. May 2020 - Reserves Running Low

In this rapidly changing environment, we have decided to launch a special edition of the Ivanov survey focused on Covid-19 and the lockdown. We continue to track the Ivanovs' incomes, savings, but also identify changes in lifestyle and perceptions. We dedicated more time to the economy to see how sectors and individual companies are performing and might perform in the future. We also looked at competition among Russia's public food retailers. Here are the main conclusions from our most recent survey:> The field work for this survey took place over April 28-May 7. By that time, the lockdown had already been in effect for a month, most state initiatives had already been announced, but there was still no clarity on when the lockdown would be eased. The epidemic had not yet eased, while corporates had already taken measures to adapt to the new reality. > The overall consumer confidence index plunged from -16% in 1Q20 to -36% in May, thus setting several records: it was the lowest figure ever recorded by our survey and also the fastest pace of sentiment deterioration ever recorded. All of the index components massively deteriorated, with the largest move seen in the country wealth indicator for the last 12 months.> Unemployment keeps growing as the key concern, cited by an all-time-high 63% of respondents. The second biggest issue was health (not tracked previously), a concern for 59% of Ivanovs. Inflation worries grew Q-o-Q to 50%. However, ruble depreciation is much less of an issue than during previous episodes when the ruble has weakened. The unemployment rate among our respondents soared to 16%, while the underemployment rate skyrocketed to 38% in May (from 22% in 1Q20), while the business confidence index moved into negative territory, dropping to -9% from 5% in the 1Q20 survey. > Ten percent have friends or relatives who have been diagnosed with Covid-19 or pneumonia and 75% are following the isolation rules.> Fifty-six percent witnessed a decline in incomes. This includes 11% laid-off or furloughed. As a result, the average monthly compensation declined from R37k in 1Q20 to R26k in May. This is the biggest decline that we have ever recorded. Setting aside the 44% of respondents whose income remained stable, the figures for the remaining respondents are discouraging: 16% are now earning zero, while 40% have seen their pay cut (by 30% on average). > According to our survey, 22% of companies have already laid people off, another 30% may do so if the situation does not normalize in the next two months. Sixty percent of employees will be able to return to their previous incomes, 15% see a likelihood of having to look for a new job, 16% may be forced to change professions.> The Ivanovs estimate that it will take 16 months for the economy to recover once the lockdown ends. Thirty-three percent of corporates are in urgent need of state support in the form of tax reductions. > Per capita savings declined from an average R98.5k in 1Q20 to R80.9k in May. This comes despite reduced household consumption, though some big ticket purchases were made in April with the aim of protecting savings from ruble depreciation. Furthermore, the share of respondents with no savings bounced to 43%. Although this is still better than the trough levels in 2017-18, the dynamics are discouraging. Another 19% of the population may join the "no-savings" group within a month if their incomes do not recover.> Twenty-seven percent are already having difficulties making ends meet, while another 24% can hold out for less than three months of quarantine. The situation is pretty similar across the entire country but a bit worse in Moscow. > Household expenditures are down 7% during the lockdown. Spending on healthcare, food and utilities is up, while all the rest has been cut. Expenditures on groceries are now 8% higher (we presume due to more people eating at home). But if the lockdown lasts for a long time, food spending should decline. > Consumers cut back on discretionary spending, but the food trading-down index eased from 39% to 35%. This coincides with less price monitoring and substantially less promo-hunting. The share of respondents visiting stores solely for promotions sank from 49% in 1Q20 to 38% in May. Meanwhile, just 25% noted a high level of promotions in May - the lowest figure on record and down from 48% in 1Q20. > The frequency of shopping is declining: the typical Ivanov now visits 4.3 stores per week. That represents a 25% decline from the 5.7 a year ago. Amid growing food expenditures, this boosted the average ticket from R1,107 in 1Q20 to R1,290 in May. The total number of items per ticket is growing, while the share of promo is going down. > Seventy percent now prefer big retail chains and 52% prefer one-stop shopping. Hence, big retailers are consolidating market share. The share of respondents naming Pyaterochka as their primary store rose from 25% in 1Q20 to 26% in May. Magnit managed to keep pace, increasing its share from 23% in 1Q20 to 24% in May. The share of food budgets spent at a shopper's primary store grew from 42% in 1Q20 to 47% in May.> We are pleased to see a sustainably high number of unique customers at Magnit. This may indicate that assortment changes have reached a large enough scale to affect perception. Meanwhile, Magnit appears to be capturing customers from medium-sized competitors, though not from Pyaterochka.> The share of Ivanovs primarily shopping at hard discounter Svetofor declined from 5% to 2%, while the share of those shopping there occasionally retreated from 14% to 8%. This is important, as there was a risk that the Ivanovs could have switched to discounters amid deteriorating incomes.> Online sales are booming: 24% regularly have groceries delivered. Respondents say they are now buying up to 5% of their food online. The share will remain elevated even after the lockdown, as customers will have gotten accustomed to it; 80% will stay with their current supplier. Among grocery specialists, Perekrestok (15%) is the leader, followed by Pyaterochka Express (10%) and Lavka.Express (9%). Big online retailers Delivery Club, Ozon.ru and Wildberries also appeared in the results. But orders from these operators included to a major extent non-food or readymade meals. Hence, on a comparable basis this channel is lower.