Last week Sberbank CIB launched "Ivanov Consumer Confidence Tracker" with an aim to establish and track trends in confidence, spending patterns and savings habits among Russian consumers. The research focuses on consumption patterns of the Russian middle class, whom the report dubs The Ivanovs.
Key findings of the report include:
- While 2012 was challenging in terms of personal income and concerns over the direction of the Russian economy, most consumers are now more optimistic and expect an improvement in their personal situation in 2013
- While optimistic, the majority of consumers is still not yet confident enough to make major purchases. Most people are holding back from big-ticket purchases while waiting for further evidence of better economic growth.
Sberbank-CIB analysts have collected strong evidence of the growing economic power of the Russian middle class:
- Based on the OECD definitions, 55% of Russian households can be considered ‘middle class’ compared to 30% in Brazil, 21% in China and 11% in India. Wealthy households are also more numerous with 15% of Russian households boasting annual income above $50,000 compared to 5% in Brazil, 2% in China and 1% in India.
- On a forecast GDP per capita in Russia of just over $16,000 at the end of 2013, Sberbank-CIB estimates that it will take more than a decade for other emerging markets to reach this figure: 25 years for India, 20 years for China, 17 years for South Africa and 11 years for Brazil.
- Russia is the world’s fifth biggest consumer market, by spending volume and is set to overtake Germany as Europe’s biggest market and the world’s fourth largest consumer market by 2020.
- Since 2000 retail spending has grown at Compound Annual Growth Rate of 20% and, in 2012, totaled just under $700 bln. More than half of that total is non-food related.
We list below some of the report findings relevant to MTS. A full report is available for Sberbank-CIB clients only.
The Ivanovs display high brand loyalty to telecommunication providers. Only 6% of respondents want to switch to another mobile operator. The data suggest that churn rate in this social strata is not likely to increase significantly when mobile number portability is introduced in December 2013.
The report also presents evidence of very low debt leverage of the middle class as only 17% of respondents spend more than 20% of income on debt servicing, while 61% spend zero. This implies a strong potential for development of financial services among the middle class. The survey also looked into the ways consumers communicate with the banks and highlights "bank branches" as a primary way of contact with credit organizations. Mobile banking penetration is relatively low and is likely to grow in prominence going forward.