Sber CIB Ivanov Consumer Confidence Tracker. January 2022 - E-Commerce Gains Momentum

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 the public retailers. The main conclusions from the most recent survey are as follows:> The fieldwork took place from November 22 to December 10, when the number of new Covid-19 cases in Russia was close to a historic high, inflation was on the rise, the ruble was weakening and no extra social payments were in sight. The headline index declined (for the first time since 4Q20) from -16% in 3Q21 to -18% in 4Q21, though this marked an improvement versus 2020. All of the index components except for the 12-month trailing personal wealth index deteriorated in 4Q21 in Q-o-Q terms. Although the decline in the headline index took it close to the 2016-21 average and marked a y-o-y improvement, the Q-o-Q dynamics suggest that the social payments that boosted incomes in 3Q21 were an important contributor to consumer confidence. These payments have now ended and no additional payments are anticipated.> The Ivanovs' main concerns remained broadly unchanged in 4Q21. Health still topped the list, cited by 58% of respondents (down 2 pp Q-o-Q and down 6 pp y-o-y), followed by spiking inflation (54%, up 4 pp Q-o-Q and 5 pp y-o-y). Some 43% of Ivanovs cited corruption (down 5 pp Q-o-Q and down 2 pp y-o-y). Concerns over unemployment declined another 1 pp Q-o-Q to 42%, as unemployment levels reported among the Ivanovs almost returned to pre-Covid levels (11% in 4Q21, according to our survey). The percentage of respondents concerned about economic growth and the exchange rate fell to 29% and 17%, respectively. > Alongside the decline in worries about unemployment, the business confidence index rose 3 pp y-o-y to a new all-time high of 21% in 4Q21, as the share of respondents with a positive outlook on their employers' prospects reached its highest level since we launched our survey in 1H14.> The average monthly wage among our respondents rose 9% y-o-y to R43.0k, though the low base of 2020 should be taken into account here. Based on our survey, the highest y-o-y wage growth was seen among respondents who work in heavy industry, the taxi segment, transport and catering (up around 30%), agriculture (up 27%) and retail (up 22%). This is likely attributable to the low base from 2020 and wage hikes aimed at addressing labor shortages.> Some 46% of Russian companies faced a labor force shortage in 4Q21, with 15% of them looking to hire but unable to do so due to the conditions in the labor market. The highest share of unfilled vacancies was seen in the telecommunication and pharmacy segments.> Ivanovs' attitudes toward savings deteriorated last quarter, with the share of those considering the economic backdrop favorable for savings falling 4 pp Q-o-Q. Average savings per family member decreased 2% Q-o-Q to R53.8k, while the savings ratio stood flat at 7.8%. We believe this was attributable to lower nominal incomes amid the lack of social payments in 4Q21. > Food spending as a percentage of income rose from 36.3% in 4Q20 to 38.7% in 4Q21.This suggests that households were keeping the quality of food purchases intact amid rising inflation and declining incomes. Spending on the main discretionary categories slightly increased Q-o-Q as a percentage of income, continuing to recover toward pre-pandemic levels. > Respondents' price sensitivity was broadly unchanged Q-o-Q, while the trading-down index improved slightly (from -38% in 3Q21 to -37% in 4Q21) despite higher food inflation. This confirmed the findings from the preceding paragraph. The share of respondents who cited quality as an important factor behind store selection exceeded those who focus on prices. Given the persisting concerns over the pandemic, the share of Ivanovs who cited sanitary measures, overcrowding and lines as important factors in store selection was flat or up slightly.> The share of Ivanovs who were trying to save on discretionary categories remained virtually unchanged Q-o-Q. Notably, the share of Ivanovs buying more private-label items increased 17 pp y-o-y to 38% in 4Q21. Given that more than half of respondents were still visiting less expensive stores as a way to cut down on food expenses and that private labels are becoming more popular, the rollout by big chains of separate hard discounter formats (which typically carry more private-label items) seems reasonable.> The frequency of store visits per week eased to 2.9, reflecting the resumption of Covid restrictions and the rapid development of online grocery delivery. The number of stores visited per shopping trip also declined slightly in Q-o-Q terms to 2.0. The share of shoppers who visit stores solely for promotions increased 4 pp Q-o-Q to 45% for large food retail chains. However, this was in line with the 2Q21 level, suggesting that the relief in 3Q21 was due to the distribution of social payments. Despite persistent food inflation, people are not trading up, while increased promotion hunting and offerings are in line with typical seasonal trends. > Pyaterochka remained the primary store for 25% of respondents, flat y-o-y but down 2 pp Q-o-Q, while the figure for Magnit was down 1 pp Q-o-Q and up 1 pp y-o-y at 21%. The share of respondents naming Lenta as their primary store dropped 1 pp y-o-y to 7%, the same level as in 3Q21. > In this edition, we have taken a closer look at the rising popularity of private labels. Pyaterochka currently has the highest share of private label shoppers (74%), followed by Azbuka Vkusa (64%), Lenta (57%) and Perekrestok (57%). The share is lower for online retailers Yandex.Lavka (51%), Ozon (41%) and Utkonos (40%). This creates a challenge for the online players, as their profitability is more dependent on the success of their private labels. We also track brand "addiction": it is declining, as 42% said they don't care about food brands.> Based on Sber's big data analysis, median wage growth stayed flat at 8% Q-o-Q in 4Q21. Wage growth reached a record 21% y-o-y in April 2021 (April 2020 saw the first round of lockdowns in Russia and official "non-working" days). Median income growth was slightly different across income groups (4% in the lower income group and 7% in the middle and higher income groups).> We continue to track the e-grocery segment, which overtook open-air markets in terms of popularity nationwide during the quarter (this happened in Moscow in 1Q20). In 4Q21, 31% of respondents said they regularly use e-grocery services. These people spent 15% of their food budgets online, up from 14% in 3Q21. The wealthiest customers shop at X5's Vprok and VkusVill, while those with the lowest incomes use Samokat. Less than one third of respondents are willing to pay for grocery delivery.> Competition in the e-grocery segment is growing. The typical shopper purchases food in 2.5 online stores and 3.1 offline food stores. Price comparisons online are easier by far.> For this survey, we have also taken a closer look at customer loyalty in the e-grocery segment. It is fairly low. Some 52% of e-grocery shoppers said they become more loyal to a particular e-grocery store as they make more orders, while 48% said they had not developed loyalty to any particular services over time. These respondents instead check the basket each time at different online stores. This may mean that almost half of customer acquisition costs are not generating market share gains for particular players but instead driving the expansion of the e-grocery market in general (through higher adoption). It also implies that the entry barriers are much lower than in the traditional food retail segment. This bodes well for Magnit, which is developing its own online channel and is also selling through aggregators. The highest share of customer loyalty was seen among Pyaterochka Express and VkusVill shoppers, while the lowest was seen at Lenta and Utkonos.> ESG awareness among Ivanovs increased slightly in 4Q21. Only 5% said they knew what ESG means (up from 4% in 3Q21), while the share of Ivanovs who had heard about ESG increased to 25%. The share of Ivanovs who are prepared to pay a premium for goods and services that are less harmful for the environment increased from 19% in 3Q21 to 21% in 4Q21, the same level as in 2Q21.> The adoption of online grocery shopping among our respondents stabilized at 31% (flat Q-o-Q). X5 Group (Perekrestok, Pyaterochka and Okolo combined) and Sber (SberMarket including the white label solution for Metro C&C, SberMegaMarket) were the two most popular destinations for buying groceries online, each used by 39% of Ivanovs who shop for groceries online.> Our focus in this edition is on e-commerce, taxi, food delivery, edtech and smart speakers. According to our survey, 74% of Ivanovs shopped online in the previous six months (down 6 pp Q-o-Q), though the frequency of ordering online increased, with the share of those ordering more often net of those ordering less often rising 6 pp Q-o-Q to 37%. Ozon was the fastest growing online retailer, with the share of online shoppers who had shopped on the platform in the previous six months growing 6 pp Q-o-Q to 65%. In the taxi segment, adoption eased slightly to 73%, down 3 pp versus December 2020, when the pandemic was being felt more and taxis were viewed by many as a safer alternative to public transportation. We think there is still potential for taxi usage to increase, as 36% said they use taxis only several times per year. Yandex.Taxi and Uber maintained their popularity (the apps combined had around 88% of Ivanovs who use taxi apps, about flat y-o-y). In food delivery, the pickup in adoption that we observed a year ago seems to have been sustained, as around 45% of Ivanovs had ordered food delivery from restaurants in the previous six months (flat y-o-y). We note a significant pickup in Yandex.Eats and Yandex.Go users, which combined were used by 42% of Ivanovs who ordered online (up 6 pp versus June 2021). Delivery Club, ZakaZaka and VK Eats combined were used by 56% of respondents who ordered food online, flat versus June. Another special theme of this edition is online education. Some 25% of Ivanovs said they had taken courses online in the previous 12 months (up 3 pp versus June 2021), while 75% of them said they had paid for courses (up 10 pp from June). The VK-associated platforms Skillbox, GeekBrains and SkillFactory were used by a combined 31% of Ivanovs learning online (up 3 pp), making VK the top destination for studying online. Finally, voice assistants were used by 58% of Ivanovs, with 17% using them every day. Alice is the most popular voice assistant in Russia, as 86% of Ivanovs had heard of it and 30% had used it in the previous week.