SberCIB Ivanov Consumer Confidence Tracker. July 2021 - More Optimistic but still Cautious

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 public retailers. The main conclusions from our most recent survey are as follows:> Consumer confidence improved to -17% in 2Q21 from -19% in 1Q21. The fieldwork for this survey took place mainly over June, when Covid cases were on the rise but were not critical, new restrictions had not yet been announced, inflation remained high and the ruble was strengthening and was less volatile. On the back of this, consumer confidence edged up to -17%, recovering to the average seen in 2015-20. A Q-o-Q improvement was seen across all of the index's individual components. Gradual improvement is typical for a period when there are no major economic negatives. > Economic concerns declined in 2Q21, although the overall picture stayed broadly unchanged Q-o-Q. Health still topped the list of worries, while concerns about economic growth and the exchange rate were down by 3 pp and 2 pp Q-o-Q, respectively. The share of respondents worried about inflation increased 2 pp y-o-y to 48% amid a still-high CPI in 2Q21. The share of those concerned about unemployment dropped to 45% from 50% in 1Q21 and 56% in 2Q20, while the respondents' unemployment rate declined Q-o-Q to 12%, returning to pre-Covid levels. The business confidence index remained at 14% in 2Q21 (close to a historic high). Business confidence improved for large and medium-sized companies but declined for small businesses. > Our survey indicated an increase in the average monthly wage from R38.7k in 1Q21 to R40.0k in 2Q21, in line with seasonal trends. On a y-o-y basis, wages were up 41% versus the depressed levels of 2Q20, when part of the population was switched to work regimes involving lower pay. > Ivanovs' attitudes toward savings improved last quarter. In absolute terms, average savings per person rose 5% Q-o-Q to R54k. The savings ratio increased from 7.2% to 7.5%. The share of those who consider the current economic conditions unfavorable for saving remained unchanged Q-o-Q at 39% but was significantly down y-o-y (from 52% in 2Q20). We attribute this to seasonality and to a general improvement in sentiment.> Food spending was up as a percentage of income, reaching 37.7% versus 37.4% in 1Q21, due to elevated inflation. It remained lower than a year ago (38.8%), though incomes were depressed back then. Discretionary spending was up slightly y-o-y, but still well below the pre-lockdown level. > The Ivanovs' propensity to save on groceries and food trading-down increased only slightly Q-o-Q. The share of those who tried to save on discretionary categories eased Q-o-Q and y-o-y. > The frequency of store visits per week edged up to 3.0 from 2.9 in 1Q21, with two stores visited per shopping trip. The number of food retail chains at which the Ivanovs bought groceries dropped slightly Q-o-Q, with non-chain retailers experiencing traffic outflow. This should be reflected in the retail chains' LFL sales via a LFL traffic recovery and a declining LFL ticket. > The share of promotion hunters, those who visit stores solely for promotions, in the large food retail chains' customer bases increased by 2 pp Q-o-Q to 45% (slightly up y-o-y). But promotional offers from retailers were down Q-o-Q, albeit higher than in 2Q20, when the industry saw record low promotional offerings.> Prices were cited as an important factor behind store selection by 66% of respondents, flat Q-o-Q. Product quality was important for 65% (down 1 pp Q-o-Q), versus the pre-lockdown level of 71%. Assortment increased as an important criterion for store selection. > Pyaterochka remained the primary store for the highest share of Ivanovs (26%, versus 25% in 1Q21 and 2Q20). By contrast, Magnit experienced a drop to 22% from 25% in 1Q21, when the chain almost reached a par with Pyaterochka. As the share of Pyaterochka customers has grown while the share of the rest of the market has decreased, we assume that Pyaterochka is capturing new customers from medium-sized retailers. The share of Ivanovs who shop at Magnit at least occasionally declined 2 pp to 48% in 2Q21, while the share of those who visit Pyaterochka (59%) and Lenta (22%) remained flat.> Some 30% of respondents said they are eligible for additional social payments in August and September as part of a package announced by the government (including a one-off "back-to-school" payment of R10k per schoolchild). The most popular categories to spend these payments on are apparel (mentioned by 69% of respondents) and food (51%).> The share of Ivanovs who shopped online in the past six months remained above 60% but has not grown since 2019, signaling that the total number of unique e-shoppers is not growing in Russia. However, we are seeing the Ivanovs purchasing more and more categories online. The most popular categories among Ivanovs who shopped online over past six months were clothing, apparel (57% of e-shoppers, up 7 pp y-o-y), food products including ready-to-eat meals (47%, up 14 pp) and household appliances and electronics (39%, down 1 pp y-o-y). > Unsurprisingly, food products were most frequently purchased via the internet (1.7 times per week), followed by children's goods (1.2 times per month), medicines (once per month) and pet products (once per month).> In 2Q21, e-grocery adoption remained sticky at 23% of the respondents, meaning the market is growing via more active usage rather than via an expanding customer base. The 1-2 hour delivery option is the most popular among Ivanovs (cited by 63% of e-shoppers). Next day delivery and ultra-fast delivery are equal in popularity (at 30% for both). Lower income groups tend to make bulk food purchases online less frequently. We connect this with the overly high average ticket in bulk purchase orders, which equates to about 50% of these people's typical monthly food bill.> On average, online shoppers order from 2.1 e-grocery stores, which is close to the level for a typical offline customer (2.3 chains), according to our survey. The ratio is sticky for offline shoppers but growing for online, which could suggest mounting competition in the e-grocery space. > Among our special areas of focus in this edition were taxi services, food delivery, and online education. The first, hit the hardest by lockdown measures a year ago, seems to have recovered, as some 70% of Ivanovs took a taxi ride in 1H21 (up 6 pp y-o-y), while the popularity of online taxi aggregators is still growing (43% of Ivanovs used them in 1H21, up 5 pp y-o-y). Yandex.Taxi and Uber maintained their popularity (the apps combined had around 89% of Ivanovs who used taxi apps, about flat y-o-y) despite growing competition from Citymobil (the Citymobil and VK Taxi apps combined showed a 7 pp y-o-y increase in usage to 28%, the biggest gain among apps). We also noted that Ivanovs became more price sensitive to taxi tariffs, as some 56% of those who order taxis through a mobile app said they compare prices before ordering (up 6 pp from December 2020 ), which we think was due to a rise in instances of surge pricing in 1Q21. In online delivery, the share of Ivanovs who ordered food from restaurants increased 4 pp y-o-y to 42%. However, in Moscow there was a slight shift toward placing direct orders through restaurants' apps and sites (47% of Ivanovs who ordered food online did so, up 11 pp y-o-y). We attribute this growth to a scaling back of promotions and discounts among aggregators, since the Moscow market may have become developed enough that aggregators can start spending less on customer acquisition. In Russia overall, the apps Delivery Club, ZakaZaka and VK Eats combined were used by 55% of Ivanovs who ordered online (down 3 pp y-o-y), while Yandex.Eats and Yandex Go were used by 36% (down 2 pp y-o-y). Finally, online courses were taken by more than a third of Ivanovs in 1H21, while 67% of them took courses online (22% of all Ivanovs). Meanwhile, some 43% of Ivanovs studying online said they tried the format for the first time due to the quarantine measures. The key channels for studying online were specialized education platforms (53% of Ivanovs who took online trainings used them) and social networks (38%). Yandex.Praktikum was the most popular online education platform in June 2021, providing courses to 25% of Ivanovs studying online versus 27% for Skillbox, GeekBrains and SkillFactory platforms combined (all three are associated with MRG).