The country’s economy is showing signs of recovery, but many consumers are still hesitant to spend. Here’s how companies can win in this evolving market.
In the past three years, declining oil prices and international sanctions have taken their toll on the Russian economy, plunging the country into financial crisis. Between 2014 and 2016, GDP fell by 1.5 percent per year on average, and private consumption by 7.1 percent.
Recently, there have been glimmers of recovery—driven in part by a modest rebound in oil prices, a growing agricultural sector, and increased trade with China—and growth is expected to be as high as 1.5 percent in 2017.
Still, consumer spending remains substantially below precrisis levels, and purchasing power has weakened due to the devaluation of the ruble.
Russian consumers have been adjusting to this new economic reality. They’ve become more selective and discerning in their purchases. In a recent consumer survey, a majority of respondents—57 percent—said they more often shop around to get the best deals. But they still buy their preferred brands, albeit in smaller quantities; only about 17 percent of Russian consumers said they have traded down to cheaper options. More than one-third said they have changed where they shop in order to buy their preferred brands at lower prices.1 1.The McKinsey Russia Consumer Sentiment Survey was conducted online in September 2016 and had 1,000 respondents.
Russia’s changing retail and consumer landscape brings new challenges but also new opportunities. The most successful companies will be those that can best make data-driven decisions, manage their customer relationships, and keep costs under control.