SberCIB Ivanov Consumer Confidence Tracker. October 2020 - Here Comes Generation Z

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. For this edition, we also looked at the shopping patterns and preferences among different generations and examined the implications of the coming of age of Generation Z. Here are the main conclusions from our most recent survey:> The share of Generation Z and beyond in the total workforce will increase by 50% in five years, double in 10 and triple in 15 years. Their share in consumption will be also rising, so new behavioral patterns will become increasingly visible. Generation Z is less hesitant to try new services and brands and switch to them. For companies, this may mean that it is easier to reach Generation Z and motivate them to share their discoveries about products and services with older generations. Generation Z has a more favorable view of taking on subscriptions (as opposed to the one-time payment model): 63% of them expressed a positive or neutral attitude to making monthly payments, compared with 47% for Millennials and 37% for Generation X. At the same time, Generation Z expressed more of a willingness to rent, whether it be housing, cars, sporting equipment or even tools. Demand for "shared" services may start to grow alongside the share of Generation Z in the population, prompting retail companies to roll out new models no longer predicated on ownership. > The field work for this survey took place over September 1-20, when the number of new Covid-19 cases was still low. The overall consumer confidence index rebounded to -21% in 3Q20 from -31% in 2Q20, returning closer to 1H19 levels. The pace of recovery surpassed our estimates. All components of the index registered an improvement, most notably for big purchase conditions and forward-looking indicators. We attribute the latter to a recovery in wages following the lockdown, a lower unemployment rate and the state social support payments for families with children in July and August. > Against the generally improving backdrop, Ivanovs' concerns seemed to ease a bit. Concerns about their own health and that of their relatives remained at the top of the list, cited by 61%, but this was down from the 64% seen in 2Q20. Unemployment worries, still the second biggest source of concern among Ivanovs, also eased, cited by 51%, down from 56% in 2Q20 and 63% in May. We attribute this to an improving unemployment rate among Ivanovs, while there was also a shift back to full-time work, which was reflected in a smaller share of part-time workers. Meanwhile, the net hiring index deteriorated to -48% from -40% in 2Q20 (we think a major round of hiring after the lockdown may have come to an end), while the business confidence index rose from -6% in 2Q20 to 11% in 3Q20.> Average savings per person reached 78k in 3Q20, up from R70k in 2Q20, and the savings ratio rose to 7.9% from 7.3% in 2Q20. The recovery took place as higher wages and one-off social payments coincided with still-depressed regular expenditures even after the lockdown was called off. The R8k increase in savings Q-o-Q was probably attributable to the second tranche of support for families with small children, which was paid out in July. Overall, the rebuilding of savings is a positive sign. The share of respondents without savings fell from 40% in 2Q20 to 37% in 3Q20, in line with the 4Q19 level.> In line with the decreased price sensitivity, trading-down on food continues to improve: the share of Ivanovs trying to save on food purchases decreased from 65% in 2Q20 to 62%, the lowest figure in the last six years. In net terms, the trading-up index reached -29%, rebounding strongly from the -34% recorded in 2Q20. The popularity of promo hunting slightly increased amid an increase in shopping trips but still remained notably below 2019 levels. At the same time, the share of promo items in the basket remained unchanged, which confirms that promotional activity among public retailers has been subdued. As for other strategies for saving money on groceries, their popularity broadly decreased, with a drastic decline in the share of respondents trying to buy less food in general (to 14%, down from 24% in 2Q20 and 23% in 3Q19). All of this suggests subsiding pressure on margins.> As the restrictions have eased, customers have started shopping around, buying less in bulk and making more frequent shopping trips. That was reflected in an increase in grocery shopping trips per week (to 2.94 in 3Q20, up from 2.88 in 2Q20 but still below 3.01 in 3Q19) and a higher number of stores visited per trip (from 1.68 in May and 1.96 in 2Q20 to 1.99, the highest level since 2H18). This should smooth out the LFL sales dynamics: the traffic decline should have stabilized in 3Q20, while LFL ticket growth should have decelerated.> The share of respondents naming Pyaterochka as their primary food shopping destination remained close to the 2Q20 and 3Q19 levels at 25%. The same indicator for Magnit also remained close to its previous level at 21%. The share of those who purchase most of their food at Lenta recovered 1 pp to 8%, still down from 9% a year earlier. With the increased number of shopping trips and stores visited per trip, the number of occasional customers is on the rise for all chains, most notably for Pyaterochka and Lenta. Among Ivanovs living near a particular retail chain, the share that visited X5 stores was at about the same level as in 2Q20 and slightly lower for Magnit. > According Sber Big Data, income growth soared to 20-30% in the low income group and 10-20% in the middle income group, driven by state social support. This pushed the breakdown of consumption back to 34% of total spending in August, flat y-o-y. Still, spending on tourism (down 25% y-o-y), beauty (down 11% y o y) and eating out (down 7%) has yet to return closer to pre-crisis levels. This also underpinned the accumulation in savings, according to our survey. Median spending on groceries has yet to recover, though a rising share of cashless payments might also have affected these trends. > Among those who purchase children's goods, 92% of Ivanovs shop at Detsky Mir (the leader across all children's goods categories), 60% at Wildberries, 55% at Dochki-Synochki and 48% at Ozon. The still-high share of respondents mentioning Dochki-Synochki as a shopping destination suggests potential for Detsky Mir to gain further market share at the expense of its competitor. Meanwhile, Wildberries is still ahead of Detsky Mir in terms of online sales in the children's goods category. The Ivanovs expect the long-term share of offline purchases to stay at around 56-67% (lower in toys, higher in the newborn category). This correlates with our forecast that 60% of the market will stay offline in the long run. > Almost half of respondents see cash and savings accounts as the best way to preserve their wealth. Some 16% prefer bank deposits, while real estate was mentioned as the best option by 17%. Only 6% of Ivanovs considered investing in financial instruments (e.g. stocks and bonds) as the best method of wealth preservation. > Mail.ru Group's two largest advertising assets, VKontakte (VK) and Odnoklassniki (OK), still seem to have decent positions among social networks. Despite VK's undisputed market leadership, its engagement continues to grow (17% positive delta between those who use it more often and those who use it less often), while OK's user engagement is about flat. However, competition among social networks is intensifying. YouTube and TikTok experienced excellent engagement growth (28% positive delta), followed by Instagram (20% delta). As a result, Instagram and YouTube are now second and third in terms of monthly reach, pushing OK into fourth (from second two years ago).> Betting, a special focus in this edition, has attracted more Ivanovs over the past year, raising its penetration to 17% (up 7 pp y-o-y). The popularity of online betting has not changed over the past year, but we believe there is still room for growth. QIWI's partner, Fonbet, experienced the largest pickup in popularity, to 47% of betting Ivanovs (up 16 pp y-o-y), despite already being the most popular legal bookmaker. However, those Ivanovs who place bets still seem to prefer unlicensed betting sites, as unlicensed bookmaker 1xbet remains the most popular betting site, used by 58% of Ivanovs who bet, up 5 pp y-o-y.