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The season to spend

The season to spend
Consulting form Deloitte says Russians will spend a little more on new years presents this year, than they did in 2009.

According to a survey of 1226 residents in Moscow, St. Petersburg, Novosibirsk, Nizhny Novgorod, Rostov-on-Don and Ekaterinburg, the company says the average spend will be higher, but Egor Metelkin, retail service Group Leader, says companies need to put in the work to get clients opening their wallets.

"The financial crisis has pushed retailers to invent modern ways to attract consumers in the struggle for every client during pre-New Year sales. Those who can offer the most interesting proposals or actions and maintain the momentum next year will win. Today is the right time to get feed back from consumers changing sentiments and try to change buying habits affected by the crisis.”

According to annual research fromCitibank, based on credit card spending by about half a million randomly selected Citibank’s clients during 2010, Russians will increase their spending by 42% in December, with the highest spending growth rate in toys and alcohol.

Every year, credit card statistics record the peak of consumer spending before the New Year and Christmas holidays. Cumulative spending growth per person in December 2010 will be 42% compared to the average monthly spending volume according to Mikhail Berner, Head of Consumer Lending at Citibank Russia

“This year, the growth rate is 10% higher than last year, which indicates the recovery of pre-crisis consumer spending growth dynamics after the slowdown that was triggered by the crisis at the end of 2008. In addition, cash withdrawals will account for 11.8% of the total volume of bank card transactions in December, which is the lowest share of cash withdrawals on record.”

For the first time, this year Citibank has tapped into data on the geography of spending. Unsurprisingly Moscow accounts for the largest share of pre-holiday spending nationwide in absolute terms, but Berner says the Christmas and New Year spending increase in Moscow is lower than in other regions, and even Saint Petersburg.Despite this he notes that the inhabitants of the Russian capital will spend more per person than elsewhere.

“The Spending growth rate forecast for the Northern capital, as well as other Russian cities with a population of over one million people is 46%, while the growth rate for Moscow is 36%. Every Muscovite will on average spend approximately 19,000 roubles in December, while in St. Petersburg the average volume of spend in December will amount to approximately 14,000 roubles.“

According to the Deloitte research each respondent intends to buy about 12 presents, and plans to spend on each of them 700 to 800 roubles. Egor Metelkin from Deloitte says total spending will come to about 16,700 roubles.

Presents and souvenirs will account half of all spending, approximately 8400 roubles, about 5300 roubles will be spend for food, and about 3000 roubles on entertainment”

In Russian regions New Year spending per person will come to about 10000 roubles. This year, women will be more prone to the “New Year rush” than men will. Berner says Women will boost their spending by 46% in December, while men will increase theirs by 39%. Family status does not affect interest in New Year purchases: both married and single people will increase their spending equally he says.

“Clothing stores will account for 11.7% of all expenses in December, and will make up the largest spending category. It will be followed by supermarkets and grocery stores (8.3%). Spending at supermarkets will grow by 64% while at clothing stores – by 53%.”

The share of spending on airline tickets has been declining over recent years and will account for just 5.5% of total spending.

“This is due to high demand and, hence, high prices for travel during the New Year and Christmas holidays, which forces Russians to pay for their tickets and travel arrangements well in advance.”

According to the Citibank forecast, toy stores will return to the position of the absolute growth leader, making it the most popular category of December purchases with a growth rate of 163%. The popularity of toys will top that of wine stores, which are expected to see a 143% increase in spending in December.

“Spending at sports goods stores will be up 87%, while demand for consumer electronics, jewelry, and watches will grow by 85%. Bookstores and computer stores will demonstrate sales revenue increase of 76%. Mobile phones will be 71% as compared with the average for the year. Cosmetic stores will once again make it to Top-5: analysts expect demand to grow by 115% in this category relative to average annual numbers.”

During the New Year season, spending on movie theatres will almost double (99% growth rate), while spending at entertainment centers will increase by 37%.

“Spending at restaurants will be up 42%, on par with the general spending growth. At the same time, fast food restaurants will record a growth rate of 77%. Lunches and dinners at restaurants located within shopping malls became an inevitable attribute of any shopping, especially the pre-holiday multi-hour shopping siestas.”

Mikhail Berner says that in Russia, just like in many countries worldwide, pre-holiday consumer spending is a critical indicator of consumer confidence.

“We hope that our consumer growth forecasts will largely come true, which would be the final proof that the crisis sentiments in the country have been replaced with expectations of stable growth. We believe that consumer sector development and growth of internal consumptions may become one of the engines for growth and diversifications of the entire Russian economy.”