Page 25 - RusRPTNov19

placing Russia behind only Turkey in the European rankings over the next 18 months.
However, traditional shopping will increasingly be competing against the burgeoning online retail that is literally growing at ten times the speed of the traditional economy. Russian e-commerce turnover reached RUB725bn ($11bn) in the first half of this year , up 26% from the same period a year earlier. Online retail currently accounts for 4.5% of the total retail turnover, but that is expected to double in the next four years.
Shopping in traditional malls has also been lifted by a surprise improvement in real incomes in September that has fed through to better retail turnover numbers, which has also been supported by the 21% pace of growth in consumer credits this year, according to the Central Bank of Russia (CBR).
Real incomes jumped in September, after declining for almost six years straight. Real income and real disposable income grew +3.3% y/y and +3.0% y/y respectively in September, after the 0.5% and -0.2% in 2Q19, according to VTB Capital.
However, despite the improvement, consumer demand remains sluggish. Incomes have increased, but the overall retail turnover continues to slow at the national level.
Retail turnover was up by just 0.8% y/y in August, which was a slowdown from the 1.1% expansion the month before. All in all, retail turnover expanded by only 1.5% over the first eight months of this year. If these numbers are adjusted for seasonal factors then economists at VTB Capital believe the retail sector, which has been driving what economic growth Russia has enjoyed in the last year, is actually close to zero at the moment for the whole of Russia.
“The steady little growth in y/y terms can mostly be attributed to retail sales in the food segment, which went from growth of +0.6% y/y in August to +0.4% y/y in September,” says Alexander Isakov, chief economist at VTB Capital.
The squeeze in incomes can also ironically drive people to spend more time in the malls as they invest more time into hunting for bargains and are more willing to walk further to get the best deals from different stores.
Almost two-thirds of Russian households only have enough money to buy food, clothes and other essential items, the state statistics agency Rosstat has found. The proportion was slightly down on last year, with the share of families saying they could not afford to buy durable goods such as a new computer or household appliance at 63.5% in the second quarter of 2019, down from 64.9% during the same period last year, the Moscow Times reported citing RBC.
“Among other factors that contributed to Shopping Index growth are the change in a shopping behaviour model that turned from a “saving” one to a “careful consumption” model, non-stop promotion of retailers and shopping centres, and cold summer of 2019 in Russia,” said Skorokhodov. “People got used to the economic situation and perceive it as normal. They visit shopping centres for leisure and entertainment but can’t resist if there is an attractive discount, sometimes spending more than planned.”
25 RUSSIA Country Report November 2019 www.intellinews.o