New Year 2016 Spending Survey – Russia...New Year 2016 Spending Survey – Russia 5 Key survey...

New Year 2016 Spending Survey – RussiaDolce Vita

7 December 2015

2

Deloitte presents the 18th annual survey of consumer behaviour ahead of the New Year and Christmas holiday season.

New Year 2016 Spending Survey – Russia 3

Contents

Key survey observations 4

Economy and wealth 7

Russians’ New Year budget structure 13

Consumer behaviour 23

Omni-channel retailing 31

Research methodology 41

Contacts 42

4

Key survey observations

Percentage of Russians who plan to purchase gifts online reduced from 26% to 23%.

More Russians (43%) use smartphones for shopping.

The remaining 57% of Russians plan to use smartphones for shopping in the future.

Compared to Europeans, Russians give more attention to forums and blogs (63% vs. 55%).

During the previous holiday season, 8% of gifts ordered online by Russians were not delivered on time (compared to 14% last year). Only 28% of those faced with such delay will refuse to shop online this year, in contrast to 64% of the Europeans.

The average Russian’s planned holiday budget amounts to RUB 15,500, which is 7% lower than last year’s actual spending (RUB 16,700).

Meanwhile, Russians’ actual spending in the last holiday season (RUB 16,700) happened to be 11% higher than originally planned.

Russians plan to cut back on socialising – its share in the holiday budget will shrink from 15% in 2012–2014 to 10% this year.

One in three Russians delays big spendings.


Key survey observations

This year’s shopping season in Russia is expected to start earlier than last year: 31% of gifts will be purchased before 15 December (compared to 26% last year); during the last week of December, 30% of gifts will be bought (compared to 36% last year).

Customers’ expectations of interactions with store assistants mainly include knowledge about products (61%), a welcoming attitude (51%), and informing about discounts and offers (46%).

Discounts and promotions influence 23% of Russians’ holiday purchases and 37% of Europeans’ purchases.

The percentage of Russians who believe that the economy is in recession has increased from 30% to 54%. The current percentage is similar to France (46%) and South Africa (54%).

However, next year Russians expect the economy to return to the level of 2012–2013 (19% expect growth, 33% — recession) and to demonstrate the same dynamic currently seen in Europe.

For the second year in a row, Russians perceived a deterioration in their purchasing power. The percentage of those who feel that their purchasing power improved has fallen from 22% to 12%; of those who felt they can spend less – increased from 38% to 57%.

Russians expect their 2016 spending power to be reduced by 16%. Meanwhile, every other Russian’s current year purchasing power turned out to be lower than his/her original expectation.

This year, the same as last year, money is far ahead of all of the most desired gifts (men: 48%, women: 55%).

Traditionally, the second most desired gift for men is a smartphone (33%), and for women – travel (48%). However, they are most likely to receive chocolates (34%) and cosmetics (33%).

The chance to receive money as a gift (20%) is the highest in the last several years, although it is still lower than to receive chocolates or cosmetics.

Russians will purchase 41% less of second-hand goods as gifts, but will more often buy gifts that are less expensive (+24%), on sale (+15%), and at cheaper stores (+29%).

At the same time, Russians are likely to focus on useful gifts (24%) more so than Europeans (17%).

6

Source: Economist Intelligence Unit Source: Economist Intelligence Unit

Russian growth, % European growth, %

Russian sales, USD bn

Russian share in Europe, %

The Russian retail market is under pressure, but still remains one of the largest in Europe

Russian retail: rouble sales continue to grow

Size of the retail market (USD bn) Size of the Russian retail market

40%

30%

20%

10%

0%

-10%

-20%

-30%

-40%

800

600

400

200

0-

2009

20092008

-11%

-35%

2011

2011

2013

2013

2015F

2015F

2017F

2017F

2010

2010

2012

2012

2014F

2014

2016F

2016F

2018F

2018F

-16%

• Due to rouble devaluation, the Russian retail market is expected to significantly shrink in 2015 in hard currency terms by approximately 35%. As a result, forecasts indicate that in 2015 the Russian retail market will account for 13.6% of the whole European market (in 2014 this figure was 15%) and will give up the European leadership to Germany and France;

• The economists expect that 2016 will be challenging for the Russian retail market, which will stay at the 2015 level in U.S. dollar terms;

• In 2017–2018, the market is expected to resume growth, but 2018 retail sales in Russia are forecasted only to hit 2010 levels.

• Despite economic instability, retail sales increased in rouble terms in 2014 (+7%) and will continue to grow throughout 2015–2018. The annual growth rates are expected to reach 9% by 2017-2018 and the retail market is forecasted to double by 2018, as compared to 2009;

• However, actual and forecasted growth rates in rouble terms are behind the rate of inflation in Russia.

Russian sales, RUB tr (right axis)

Russian sales, USD bn (left axis)

40

35

30

25

20

15

10

5

0

800

700

600

500

400

300

200

100

0

+7

+4 +6


Economy and wealth Consumer perceptionsand purchasing power

8

The current perception of the Russian economy is the most pessimistic of all the surveyed years Europeans are more optimistic

Russian economy – level of pessimism

• The percentage of Russians who believe that the economy is in recession has increased from 30% to 54%;

• This represents the most pessimistic perception of the economy throughout the entire period in which the survey was conducted. Even during a volatile period in 2009, the percentage of Russians who believed that the economy was in recession was lower, at 51%;

• The recession is being felt the most by the youth aged 18 to 24 (59% of the youth) while last year, instability was observed more by people aged 45 to 54 (40%);

• However, next year Russians expect the economy to return to the level of 2012–2013 and to demonstrate the same dynamic currently seen in Europe.

Russia

36%

54%

7%

3%Europe

37%

6%

19%

37%

Growth Stability Recession I don’t know

% – Percentage of those perceiving a recession / expecting a deterioration

60%

50%

40%

30%

20%

10%

0%

200920082007 2011 2013 2015 2016F2010 2012 2014

20%

26%

51% 50%

36%33%

37%

30%

54%

33%

Current perception of the economy


Russians are cautiously optimistic when looking ahead They do not expect an economic miracle

• The percentage of Russians who expect economic growth next year was reduced by only 3%, down to 19%;

• Slovenia, having debuted in the survey, expressed the highest optimism in Europe where five countries expect growth of the economy next year (last year only two countries were optimistic);

• The Greeks are more pessimistic about the current and future economic situation.

Russia Europe

20%14%

33% 31%

19% 26%

29% 28%

Current state (2015) Expected state (2016)

Europe UK France Portugal Spain Italy Greece Germany Belgium Netherlands Denmark Poland Russia Slovenia South africa

Percentages in the chart above have been calculated as the difference between the percentage of respondents who expect economic growth and the percentage of respondents who anticipate the recession.

Growth Stability Recession I don’t know

Expectations from the economy in 2016

10

Women and the elderly are more cautious when looking ahead

For a second year in a row, Russians suffer from the deterioration of their purchasing power The purchasing power of Europeans also continues to fall

• Traditionally, women estimate future growth prospects more cautiously than men: 35% of women and just 30% of men expect a recession in 2016.

• This year, the number of Russians who feel that their purchasing power improved has fallen almost twofold from 22% to 12%. Meanwhile, the number of Russians who have perceived a deterioration in their purchasing power increased from 38% to 57%.

• Similarly to last year, young Russians (ages 18-24) is the group that has suffered least from economic instability. However, for the first time in the last several years their overall purchasing power was reduced.

Purchasing power dynamicsExpectations from the economy in 2016

You have less to spend You have more to spend

Russia:

Russia

Average 18-24 25-34 35-44 45-54 55-64

2015

2014

Male Men

Female

Women

55-64

18-24

Europeans

19%

19%

23%29%

29%

30%33%

33%

30%

20%

20% 20%

27%

34%

18% 18%

29%31%

22% 20%

31%30%

19% 18% 17%

27%32%31%

37%

24%

14%

17% 15%

28%35%

22%

Growth Stability

Growth Stability

Recession I don’t know

Recession I don’t know

• Expectations by age also exhibit a consistent pattern over time: the elderly are the most pessimistic looking ahead, with 37% expecting a recession in 2016.


Russians’ purchasing power peaked in 2011 Meanwhile, they are usually overly optimistic about next year’s purchasing power forecast

• Every other Russian was incorrect in his/her last year’s purchasing power forecast. Overall, Russians include an element of optimism in their expectations. Last year’s look-ahead purchasing power index for 2015 was 5% positive, but the actual index turned out to be 46% negative.

• Europeans overestimated their capabilities last year as well; however, only one in seven was incorrect in their forecast. Europeans expected their purchasing power to be reduced by 7%, but the actual reduction was stronger reaching 22%.

• Russians expect their 2016 spending power to be reduced by 16%, but how precise will such a forecast prove to be?

Expected and actual purchasing power dynamics

Russians' expected purchasing power

Europeans' expected purchasing power

Russians' current purchasing power

Europeans' current purchasing power

60%

50%

40%

30%

20%

10%

0%

-10%

-20%

-30%

-40%

-50%

-60%

2009 2011 2013 20152010 2012 2014

12

There is a reason for why women are traditionally more conservative in estimating future purchasing power

• Throughout the last several years, women’s spending habits proved to be more prudent than men’s.

• This has affected expectations – women anticipate less of a contribution to their wallets than men.

• In addition, their expectations are closer to reality than the men’s.

80%

60%

40%

20%

0%

-20%

-40%

-60%

2011 2013 20152012 2014

Women's expected purchasing power

Men's expected purchasing power

Men's current purchasing power

Women's current purchasing power

Expected and actual purchasing power dynamics


Russians’ New Year budgetstructure Gifts people want vs. gifts people receive

14

Growth above 1%

Denmark €617 +5,21%

The Netherlands €245 +1,50%

Growth up to 1%

UK €884 +0,68%

France €577 +0,23%

Spain €560 +0,20%

Germany €423 +0,87%

Down to -5%

Belgium €715 -2,23%

Italy €400 -3,08%

Slovenia €320 -1,11%

Poland €302 -0,71%

-5% to -10%

Greece €402 -8,63%

South Africa €316 -9,93%

Portugal €315 -5,55%

Russia €217 -6,96%

Holiday budgets are expected to noticeably grow in Denmark and the Netherlands In other European countries, holiday spending will shrink or stay flat


The average Russian’s holiday budget isexpected to be 7% lower than last year’s spending

Holiday spending of an average Russian in euros

Holiday budget structure in euros

• While the average European’s holiday budget is almost the same as last year’s, the average Russian’s planned budget in roubles decreased by 7% compared to last year’s actual spending.

• The planned budget in euros was reduced by almost 30% (from EUR 308 to EUR 217), but grew in roubles from RUB 15,100 to RUB 15,500 in 2015.

• Remarkably, Russians’ actual rouble spending in the last holiday season (RUB 16,700) happened to be higher than originally planned, as disclosed in September 2014.

• The most significant cut in Russians’ budgets is in socialising(-34%) –its share in the holiday budget will shrink from 15% in 2012–2014 to 10% this year;

• Meanwhile, Russians are not prepared to reduce their budget for food and gifts. The expected budget for these categories is almost the same as last year’s.

600

500

400

300

200

100

0

20092008 2011 20132010 2012 2014 2015

Actual spendingPlanned budget

Russ

ia:

Europe

2014actual

2015budget

0 100 200 300 400 500 600

Gifts

102

105

276

95

172

34

65

Food Socializing

93 22

16

As always, most Russians prefer money as a gift

The most desired Christmas gifts:

• This year, the same as last year, money is far ahead of all of the most desired gifts;• The top 3 men’s most desired gifts have not changed, thus men are stationary;• Women appear to demonstrate more variation in their preferences. While they do not want to

deny themselves travel (second place), cosmetics and perfumes came in third place this year (last year jewelry was in third place).

Men

Women

Smartphone 33%

Travel 48%

Money 48%

Money 55%

Laptop/PC 30%

Perfumes/ cosmetics39%


Russians tend to be more down-to-earth in their wishes as chocolates replace the spa treatment in terms of the most desired gifts rating

Most desired gifts in Russia

Most desired gifts in European countries (first place)

• Chocolates made the Russians’ top ten list (from 27th to 7th place) as well as tickets to events (from 12th to 8th place). Meanwhile, gift vouchers fell from 7th to 10th place in the ranking;

• A spa treatment and clothes made the top ten list last year (8th and 10th places, respectively), but this year they could not maintain their positions and fell down the table again;

• Money has steadily displaced books as the most desired gift in Europe. Last year, in 7 out of 10 European countries where this survey is regularly conducted, books were the number one gift; this year, in 6 out of 10 countries, most respondents expect to receive money in cash.

Ranking and share in 2015 Ranking and share in 2014

Money (cash) 1 52% 1 51%

Travel 2 35% 2 41%

Smartphone 3 30% 3 35%

Tablets 4 29% 5 32%

Jewellery/watch 5 28% 4 33%

Laptop/PC Computer 6 26% 6 28%

Chocolates 7 25% 27 15%

Theatre/concert tickets 8 25% 12 20%

Cosmetics/Perfumes 9 25% 9 23%

Gift vouchers 10 23% 7 25%

United Kingdom France Portugal Spain Italy Greece Germany Belgium Denmark Poland Russia Slovenia South Africa

2015

2014

18

Average

Men

Women

18-24

25-34

35-44

45-54

55-64

The rising popularity of chocolates is mainly driven by the elderly The youth are not interested in this gift category, which is the same as last year

Chocolates Tickets for theatre/concert

• Chocolates rose from 27th to 7th place in the Russian top 10 list. Overall, chocolates appeared to be a gift equally desired by both men and women;

• While young people under 25 fell out of this trend, the elderly (55 and over) rated chocolates as high as the second most desired gift;

• Tickets to events have also become more desirable for both men and women, although they have always been more in demand by women compared to men. Of all the age brackets, the elderly (55 and over) contributed the most to the popularity of tickets by rating them 4th compared to 15th last year.

Place in the most desired gift rating

2015 2014

27 127 8

9

8

11

5

7

2

11

11

7

7

9

12

12

4

28

23

33

23

20

43

11

17

13

13

11

16

17

15


Average

Men

Women

18-24

25-34

35-44

45-54

55-64

Place in the most desired gift rating

Men are losing interest in beauty care Women retain interest in gift vouchers

Beauty care and spa treatment Gift vouchers

• The overall falling popularity of beauty care (down to 8th from 11th place) was purely driven by the male part of the population. However, it became more desirable with the age group of 35-44, while significantly falling out of favor among young people under 25;

• Gift vouchers dropped from 7th to 10th place due to men; however, they became even more desirable by women. Of all the age brackets, the elderly (55-64) showed the fastest growing dynamic for promoting the vouchers (from 21st to 10th).

2015 год 2014 год

8 711 10

43

4

12

9

11

8

19

20

6

10

8

10

8

10

33

4

9

179

5

8

14

7

9

5

10

8

21

20

Perfume/cosmetics and chocolates are again the top choice for purchasing gifts

Most popular Christmas presents to be purchased in Russia

• Among the popular gifts that Russians will purchase, chocolates received the top rating, compared to last year’s 2nd place, displacing cosmetics and perfumes from 1st to 2nd. Money (3rd place) appeared on the top 3 for the first time since 2012;

• Beauty care climbed from 15th to 10th in the rating, which met the expectations at last (it is 11th in the most desired list);

• Teenagers will continue to mainly receive chocolates, games, and books. Meanwhile, chocolate is not ranked number one in any other European country;

• Tablets and smartphones rose from 10th and 13th to 6th and 7th respectively;

• E-books (not the devices) have entered the top-10 for the first time.



Cosmetics/perfumes 2 33% 1 33%

Money (cash) 3 20% 4 19%

Books 4 15% 3 19%

Gift vouchers 5 15% 5 15%

Food & Drink 6 14% 9 12%

Gift bundle 7 12% 6 14%

Gift cards 8 12% 10 12%

Cooking accessories (utensils, gadgets.)

9 12% 7 13%

Beauty care, massage, spa treatment

10 10% 15 9%



Games 2 12% 2 15%

Books 3 11% 3 14%

Money (cash) 4 8% 7 9%

Games, role pays, games and accessories.

5 7% 6 11%

Model construction toys (building, Lego, etc.)

6 7% 9 8%

Tablets 7 7% 10 8%

Smartphone 8 6% 13 7%

Arts and crafts, creative design 9 6% 5 11%

Electronic books 10 6% 16 6%

To adults To teenagers from 12 to 18


Every fifth Russian child will receive a trendy gift In Europe, only one in ten children will be so lucky

Percentage of Russians’ total gift budget Main criteria for choosing gifts for children under 12

26%

26%

22%

15%

10%

Yourself Your partner Your children Your friends' children Your friends (adults) Charity donations

• In 2015, the gifts for respondents’ own children will gain a share in the gift budget from 21% to 26%.

• When choosing gifts for children, 20% of Russians give priority to trendy gifts. Meanwhile, in Europe this percentage is only 10%.

• Traditionally, half of Russians focus on the educational features of a gift.

1%

Educative

Traditional

Green

Innovative

Trendy

22

The average gift certificate value matched the average cost of a gift

Average gift certificate value

Average certificate value – 2014 Average certificate value – 2015

Average gift cost• The average gift certificate value in Russia was reduced from RUB

1,500 to RUB 1,400. At the same time, this matched the average cost of a gift, while last year’s average certificate was 50% more expensive than the average gift.

36%

42%

13%

33%

25%20%

28%34%

14%

36%

20%

14% 14%

70€

60€

50€

40€

30€

20€

10€

0

Spain Italy Greece Germany Belgium Denmark Poland Russia Slovenia SouthUnited Kingdom

France Portugal Africa


Consumer behaviour Decision-making and timing of purchases

24

One in three Russians will buy gifts during the last week before New Year’s Eve

Fewer Russians will buy gifts at the last moment

Share of gift purchases by time intervals (Russia) Share of gift purchases by time intervals

• 66% of Russians are planning to do their holiday shopping during the second half of December.• Although Russians traditionally do their holiday shopping later than Europeans, this year’s shopping

season in Russia is expected to start earlier than last year: 31% of gifts will be purchased before 15 December (compared to 26% last year); during the last week of December, 30% of gifts will be bought (compared to 36% last year).

Before Nov November 1-15 Dec 16-24 Dec 25-31 Dec January 40%

35%

30%

25%

20%

15%

10%

5%

0%

Before November

November 1-15 December

15-24 December

25-31 December

In and after January

Russia 2015 Russia 2014 Europe


Only the Greeks purchase gifts later than the Russians

Slovenia

Greece

Poland

Spain

Russia

Denmark

Belgium

Italy

Portugal

Europe

The Netherlands

South africa

UK

France

Germany

Before December 1-15 December After 15 December

• This year, the Germans are expected to purchase gifts earlier than all others, (surpassing last year’s most punctual British).

• The Russians and the Greeks purchase gifts later than all other surveyed countries because they do not celebrate Catholic Christmas.

26

More responsible attitude towards consumption More purchases of items on sale, loyalty points usage, and rigorous online research

Less than last year About the same More than last year I don't know

Using credit provided by the retailer

Using specialised consumer credit loans provided by financial firms

Using loans from family

Using gift cards

Using your Christmas savings

I delay big spendings (like a car or kitchen furniture)

Paying with debit card or in cash

I enjoy purchasing in stores

Research online to find opinions, suggestions, recommendations, etc.

I want to spend less money on food

Research online more – to find better prices, coupons, deals, etc.

Manage your Christmas spending by preparing a budget

Buy more items "on sale"

Using loyalty points

In 2015, Russians started to demonstrate more responsibility regarding consumer behaviour. In particular:• One in three Russians delays big spendings, and uses accumulated loyalty points. To compare, in Europe only one in five

delays big spendings;

• Four out of ten Russians more frequently search online for better prices and buy more items on sale

Russia Europe


More responsible attitude towards consumption

I will offer gifts without taking into account the price

I will buy on impulse

I will buy second-hand products as gifts

I intend to give group gifts (persons agree to collect money in order to have a bigger budget for abetter gift and spend less individually)

I will buy for fewer people

I will buy products and gifts that are on sale

I will buy discount and retailers' private label products, and few branded products

I will manage my Christmas spending by preparing a budget

I will focus on useful gifts

I will buy less expensive gifts

I will shop at less expensive stores

• Russians continue to tighten their control over holiday spending by avoiding shopping impulsively and carefully assessing affordable gift prices. Moreover, they said they will purchase 41% less of second-hand goods as gifts, but will more often buy gifts that are less expensive, on sale, and at cheaper stores;

• Fifteen percent of the Russians will purchase gifts for fewer people. At the same time, they are likely to focus on useful gifts (24%) more so than Europeans (17%).

2014 2015

28

Promotions influence Europeans more so than Russians Social and economic sustainability is important to Russians, but only to the extent that it does not make the products more expensive

None

Between 1% and 25%

Between 26% and 50%

Between 51% and 75%

Over 75%

I don't know

I am mindful of information provided on the packaging

I am more likely to purchase products made either in my region or in my country

I avoid buying from producers that do not respect ecological sustainability

I avoid buying from producers that do not respect social sustainability

I do not buy from producers using child labour

I avoid buying products with a substantial carbon foot print

I avoid buying sustainable products because they are too expensive

I avoid buying from producers that do not respect economic sustainability

I do not buy from producers with bad working conditions in developping countries

Medium

Low

Not at all

High

Russia Europe

Russia Europe

What share of year-end spending will be influenced by promotions Factors influencing Russians’ purchasing decisions during holiday shopping

How influential are loyalty/reward programmes in the decision making process

• Discounts and promotions influence 23% of Russians’ holiday purchases and 37% of Europeans’ purchases.

• Considering that in recent years Russians’ consumer behavior is starting to mirror that of Europeans’, it may be assumed that eventually promotions will play a more significant role in consumer behaviour.

• Meanwhile, there is no such gap between Russians and Europeans in relation to the influence of loyalty programmes.

• More Russians (45% this year as compared to 38% last year) avoid buying sustainable products as gifts because they are too expensive. At the same time, the share of those who avoid purchasing products manufactured by producers that do not respect ecological sustainability, use child labour, or have bad working conditions, has decreased by 7%.

2014 2015


Housing

Essentials such as groceries and energy bills

Day to day spending

Clothing/footwear

Holidays

Health

Irregular spending

Entertainment/leisure

Digital/electronic spending

Taxes

Education

Financial services

Russians had cut back on entertainment and irregular spending

Overall, Russians feel that this year their expenses increased significantly from last year, especially on housing, essentials, and day-to-day spending. Thus, they are forced to cut back on entertainment and irregular spending.

Russians' spending in 2015 compared to 2014

0% 20% 40% 60% 80% 100%

More About the same Less I don't know

Prepared to cut back on

30

Russians are prepared to continue cutting on entertainment and focusing on essentials Europeans are least prepared to cut back on healthcare

Looking ahead, Russians are prepared to cut back on the same categories that had been cut this year, but not on essentials and housing. In contrast, the Europeans are not ready to cut back on healthcare.

Entertainment/leisure (eating-out, gym, cinema, etc.)

Irregular spending

Holidays

Clothing/footwear

Financial services (insurance, pensions)

Day to day spending (Lunch, travel, newspapers)

Digital/electronic spending (TV, broadband, mobile)

Education (school fees, private school, tutoring)

Health (doctor, health insurance)

Taxes (income taxes, property taxes…)

Housing (rent, mortgage)

Essentials such as groceries and energy bills

15%

18%

25%

35%

41%

43%

56%

57%

58%

60%

67%

72%

25%

19%

33%

30%

49%

37%

33%

59%

73%

50%

65%

69%

85%

82%

75%

65%

59%

57%

44%

43%

42%

40%

33%

28%

75%

81%

67%

70%

51%

63%

67%

41%

27%

50%

35%

31%

Russia Europe

Not prepared to cut back on Prepared to cut back on


Omni-channel retailing The Internet is an integral element of the shopping process

32

In Russia, the Internet is the number one source for comparing prices and doing other research on gifts

Source for searching gifts and comparing prices

TV Magazines Websites Shops Social networks Informal channels

Russia Europe

Toys

Leisure

Fashion

Sports

Home gifts

Box & cards

Food & drinks

Health & beauty

Green tech

High tech

Video Games

Movies (DVD/Blu Ray)

Music

Books

• The Internet is the main tool used for finding gifts and comparing prices of all product categories apart from food and drinks in Russia. These even include products in home gifts, fashion, and sports categories;

• At the same time, Russians go to stores less frequently than Europeans to find and compare music (20% vs. 36%), books (31% vs. 43%), movies, and video games (21% vs. 35%);

• Remarkably, women refer to social networks 30% more often than men while men rely on TV 1.5 times more frequently than women. Meanwhile, there is a parity between men and women in relation to word of mouth; however, women use it more frequently when searching for toys and high tech, while men refer to it when searching for fashion products, food, and video games.


The share of online gift purchases has fallen insignificantly, but the role of Internet in the shopping process continues to grow

Share of gifts to be purchased online To what extent do you use physical stores as a showroom and visit them to see and compare products only to buy them via Internet?

• The share of online purchases in Russia, which has shown steady growth reaching 26% last year, is now down to 23%. Out of all European countries, only the UK and the Netherlands demonstrated a reduction of this share. Overall throughout Europe, share of online purchases is stable at 37%.

• At the same time, even after the reduction, the share of online purchases in Russia still remains at par with some of the leading European countries such as Spain, Italy, and Belgium.

• Nevertheless, from year to year even more Russians use physical stores just as a showroom making the actual purchase online afterwards. In particular, in 2015, the share of Russians who at least sometimes behave like this increase from 76% to 81%.

2011 2012 2013 2014 2015

2014 2015

Europe Russia

Never

Sometimes

Often

Always

34

Mobile commerce is continuously developing In 2015, there are no Russians who are ignoring smartphones as a shopping channel

Share of purchases to be committed using a smartphone

• The percentage of Russians who already used a smartphone for shopping rose to 43% from 33% last year;

• At the same time, the number of those who plan to do so in the future reached 57%. Thus, there are no more Russians who have not used or are not planning to use a smartphone for shopping while there are still 12% of such Europeans;

• In conclusion, Russia continues to outpace Europe in the level of perception of using a smartphone as a shopping channel.

Already used a smartphone to purchase goods Will use in the future

Russia

Europe

2015

2014

2013

2012

2015

2014

2013

2012


Online stores, search engines, and comparison sites play a leading role when choosing and comparing products online

Russians tend to look over a few known online stores, rather than refer to a search engine or price aggregator

• Traditionally, Russians search and compare products online using online stores, search engines, comparison sites, and manufacturers’ websites;

• Compared to Europeans, Russians give more attention to forums and blogs (63% vs. 55%), but have less appreciation for newsletters (54% vs. 69%) and websites with coupons and offers (69% vs. 78%).

• If a product is not available in the familiar online store, he/she is most likely to first search for this product at another known online store (46%), while only 20% of Russians in a similar situation will immediately proceed to a search engine or a price aggregator. In Europe, these two options are more balanced: 40% vs. 30%, respectively.

Russia Europe

Russia Europe

If a product is not available in the online store one usually prefers to:Most used online sources for choosing and comparing products

Online shops (with one or more offline stores)

Search engines

Online shops (without offline stores)

Comparison sites

Websites of brands/suppliers

Websites with coupons and offers

Forums and blogs

Email newsletters and online leaflet I receive via email

Social media (Facebook, Twitter etc.)

Go to another online store

Go to another website (search engine, price comparison site, etc.)

Go to a physical store of a different retail chain

Go to a physical store of the same retail chain

Would not continue shopping for the product

36

When a product is not available in a branch store of a retail chain, Russians prefer going to another branch of the same chain, rather than searching in a branch store of a different chain

Specialty chains and hypermarkets beat traditional department stores

• If a product is not available in a familiar store branch, most Russians and Europeans will try to ask the sales staff about its availability in other store locations or go directly to another store location;

• At the same time, there are more Europeans (21%) than Russians (16%) who would visit the online store of the same retail chain in such a situation.

• The share of Russians’ planned gift purchases in specialty chains increased from 25% to 32%. Meanwhile, department stores are losing loyal customers (from 44% to 31%). This loss is most significant in the video games category (from 52% to 32%) of which 17% will be taken over by hypermarkets (up to 29% from 12%);

• In addition, Russians plan to shop more at hypermarket/supermarkets: 24% of respondents will do their shopping in stores of this kind compared to 18% last year.

Russia Europe

2015 2014 2013

If a product is not available in a branch store one prefers to: Retail formats used by Russians to purchase gifts

Go to another location of the same retail chain or ask a storesales assistant if another

location has the item

Go to another store of a different chain

Go to the same store's website

Go to another website (search engine, price comparison site, etc.)

Would not continue shopping for the product

Go to another store's website

Speciality chains

Traditional department stores

Hypermarkets/supermarkets

Traditional local shops

Luxury stores

Factory outlet stores


Good sales staff should greet customers with a welcoming attitude and answer questions about the products and offers

Customers’ expectations of interactions with store assistants mainly include knowledge about products (61%), a welcoming attitude (51%), and informing about discounts and offers (46%). In this regard, Russians and Europeans are alike.

Customers’ expectations of the store’s sales staff

Be knowledgeable about products

Greet me promptly with a welcoming attitude

Let me know about discounts/offers

Help me pay quickly

Assist me in finding gifts

Have the ability to match any other retailer's prices

Offer me the home delivery option

Assist me in shopping online

None of these

38

Areas in which retailers should invest in order to improve customers’ shopping experience

Russians continue to think that retailers should give first priority to lowering prices. Meanwhile, the second priority this year is to provide the advantages of physical stores to online stores, which pushed home delivery down to the fifth position.

Least popular responses Most popular responses

Self-packaging system Lower prices

Better gift packaging service Provide the advantages of physical stores to online stores

Mobile commerce Customer relationship

Decoration to improve ambiance Online store

Child care Home delivery


What do Russians appreciate in online and offline shopping

• Russians mainly value e-commerce for availability of consumer feedback, ease of searching for product information and price comparison. On the contrary, physical stores are mainly appreciated for the ease of product exchange or return, after-sale service, and competent advice at the store;

• Remarkably, offline shopping provides more pleasure and a nicer experience (58%) than online shopping (35%).

Possibility to know the consumers opinion on products

Prices can be compared easily

It's easy to search for and choose what I need

Products can be compared easily

Information on availability of products (in stock)

Price level

Home delivery

Broad assortment

Shopping when I want

Quality of product information

Shopping saves time

Pleasure while shopping (nice experience)

Delivery times of products (how fast do I receive the products at home)

I immediately get the products I purchased

Protection of my personal data (ID, adress, etc.)

Safety in respect to payment

Competent and professional advice

After sale services (repair)

Possibility to easily exchange or to return products

E-commerce Physical stores M-commerce Teleshopping

How well shopping channels respond to the following customers' needs

40

Timeliness of delivery of gifts ordered online last year (Russia) The impact of last year’s delayed deliveries on consumer behavior this year

Online delivery on New Year’s Eve became more reliable Even with the delayed deliveries Russians stay more loyal to e-commerce than Europeans

• During the previous holiday season, 8% of gifts ordered online by Russians were not delivered on time. This represents an improvement compared to 14% last year and is already comparable to the European experience (7%). Meanwhile, only 28% of Russians faced with such delays last year will refuse to shop online for gift this year. In contrast, 64% of the Europeans will treat such experience as a reason not to buy gifts online.

• At the same time, Russians became more tolerant of delivery delays whereas last year only 8% of respondents said that their negative experiences with deliveries would not affect their future behaviour in any way, this year 28% said the same.

I will buy online, but at an earlier stage

It will not affect my buying behaviour

I will not buy gifts online this year

I will buy in stores this year

I will buy online, but I will pick up the product in the physical store myself

On time Delayed

Russia Europe

2014 2015


This survey has been conducted since 1998Russia has been covered for nine years in a row

• The survey was conducted in 14 countries in Eastern and Western Europe as well as in South Africa during the last week of September and the first two weeks of October 2015.

• The respondents are 18 to 65 years old. Information was collected via the Internet with a structured questionnaire distributed to a sample of individuals selected from a controlled group;

• In order to adjust the Internet sample to the population of each country, we used ex-post statistical weighting based on gender and age in each country;

• The Russian sample includes 838 respondents and is more representative of the middle and upper social classes in large cities since the survey was carried out via the Internet.

Research methodology Details and approach

42

Contacts

Vladimir BiryukovPartnerMoscow, AuditHead of the Retail, Wholesale & Distribution Group in CIS+7 (495) 787 06 00, ext. [email protected]

Egor MetelkinPartnerMoscow, AuditHead of the Consumer Industrial Products Group in CIS+7 (495) 787 06 00, ext. [email protected]

Sergey TurushevSenior managerMoscow, AuditConsumer Industrial Products Group in CIS+7 (495) 787 06 00, ext. [email protected]

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