OREANDA-NEWS. June 21, 2013. Sberbank Investment Research is publishing its third survey of the pan-Russian consumer, the Sberbank CIB Ivanov Consumer Confidence Tracker, in our bi-monthly publication covering consumer spending, savings and confidence across the country.

In addition to the consumer confidence index, this regular, proprietary publication provides a set of leading indicators for the most important trends across the fast-growth consumer sectors in Russia, including retail, banking, telecoms, media, IT, real estate and transportation.

The third tracker shows no change in the consumer confidence index, with the overall score staying at –8% in May (after declining from –4% in January 2013 to –8% in March 2013). This corresponds with the stability in the macroeconomic indicators that most tightly drive consumer behavior: inflation and unemployment.

The main findings of our survey are shown below:

Only 20% of respondents think that it is a good time for big-ticket purchases, but a surprising 44% of people still plan to change their car within the next two years.

Some 10% of respondents’ companies are increasing headcount, while 50% are either laying people off or not replacing resignations with new hires. Some 37% of respondents are concerned about the risks of being fired.

The savings ratio (defined as the share of income saved monthly) is around 10.8% but higher for upper-income respondents. The same income dependence is true for relative accumulated savings.

The Ivanovs spend 40% of their income on food, 16% on utilities, 11% on clothing and 7% on servicing debt.

Respondents’ wage growth lags behind official statistics, staying virtually flat y-o-y (while State Statistics Service shows an 11.8% y-o-y increase in April).

Consumers are becoming more price-sensitive: 57% of respondents consider price attractiveness as a key factor in whether and where they make purchases, compared with 46% in January.

Despite a ban introduced in January 2013, some kiosks are still selling beer: 6% of our respondents are still buying beer in kiosks. However, this ratio was 15% a year ago, which clearly indicates a migration of customers from kiosks to modern retailers.

Our survey shows that 22% of respondents who used to buy beer in kiosks have switched to Magnit, 20% to X5 and 7% to Dixy Group stores (Dixy and Victoria). Among the non-public players, Auchan benefited the most, capturing 7% of customers.

We also investigated the Ivanovs’ motives behind and actual behavior in online shopping. Some 27% of respondents have never shopped online, mostly due to lack of trust. On top of that still, low internet penetration (55% nationally in 1Q13) should suggest additional upside for online retailing, as so does a potential increase in consumer wealth (the incomes of Ivanovs who have never shopped online was 30% below our respondent average).

Brand awareness plays a significant role in online retail of consumer electronics (82% of Ivanovs use it as a guideline), but it does not necessarily translate into customer choice, as price is also an important factor.

Over the past two months, the Ivanovs noticed the refreshed assortment in Pyaterochka stores, including: new product categories (noticed by 30%), the disappearance of certain categories (21%) and expanded choices for some goods (32%). Still, the Ivanovs saw no significant improvement in the quality of fresh products excluding dairy.

During our store visits, we noticed that the quality of fruits and vegetables is improving somewhat across the format, but we have not yet seen improvements in other categories. Furthermore, the decision to start selling bicycles in Pyaterochka stores, in our opinion, indicates a persisting focus on the back margin rather than attention to customer needs.

Stock-specific findings reinforce our positive stance on multiple Russian equities, including X5 Retail Group, Dixy Group, Mail.ru Group, MegaFon, MTS, LSR Group, Etalon Group and Aeroflot.

The survey is executed by market research agency Cint on behalf of Sberbank CIB1 and is conducted every two months under a methodology that closely mirrors that of the Russian State Statistics Service’s quarterly survey and EU confidence assessments. However, our survey is expanded to encompass a wider set of questions relevant to Russia’s middle-income consumers. The survey sample is 2,300 people, aged 18 to 65 and living in 164 Russian cities with a population of over 100,000 inhabitants. The tracking error is below 2%. The surname “Ivanov” was chosen to represent the most common Russian family name. The Ivanovs represent middle-class Russia.