Politics “steal” Christmas – less money to spend on celebrations in Eastern Europe
With little time to go before the winter holidays, manufacturers and retailers are finalizing seasonal strategies, hoping to grow their share from consumers’ holiday budgets. Companies competing in the beauty and personal care, consumer electronics, toys and games and packaged food industries are among those most reliant on a holiday spike in sales.
Sun bathing or skiing on the eve of 2015?
Eastern Europeans’ festive season trips are diverse and include traditional beach destinations, exotic countries, skiing trips, Christmas markets and city breaks. The most popular beach destinations are usually visited as part of a packaged tour to Egypt, Turkey and the Canary Islands. Affluent travellers increasingly opt for exotic destinations, where Thailand tops the list, followed by Mexico, Vietnam and Maldives. Skiing in the Alps is another popular option, while celebrating New Year’s in Paris, London, Berlin or Rome has been popular for years as well.
Christmas markets are a recent trend growing in popularity, especially among older tourists. Austria, Belgium and a number of German cities are among the most popular destinations, and trips to multiple markets are relatively short and inexpensive, as they are not far from most Eastern Europe countries.
However, not all Eastern European countries will experience growth during the 2014 festive season. Russia’s tourism industry, which provides the largest number of tourists from the region, was significantly affected by a number of bankruptcies for local tour operators, leaving thousands of tourists stranded in 2014 and this resulted in a loss of trust among Russian consumers. Additionally, the devaluation of the Russian rubble in the last half year has diminished Russian tourists’ purchasing power abroad. These factors, combined with a weakening economic situation, will result in a sharp decline of festive season trips abroad.
Fragrances remain popular gifts
The 2013 holiday season saw gift combinations of fragrance and skin care items to be most popular with lower and middle income consumers. This trend is expected to continue in 2014 and is especially important for beauty specialist retailers and internet retailers offering holiday discounts for mass and premium products. Beauty specialist retail outlets also time the launch of new premium brand fragrances and related products around the holiday season. In 2013, Chanel, Givenchy, Giorgio Armani, Christian Dior and Calvin Klein fragrance houses were among the top sellers in Eastern Europe, while this year Hugo Boss, Kenzo, Versace, Nina Ricci, Gucci and Lancôme are expected to do well.
Internet allows selecting best priced toys for the children
Similar to last season, most of this year’s holiday budget for families is dedicated to presents for children. The internet allows consumers to compare quality and prices and read reviews on forums, blogs or social networks. Eastern European children’s gifts are dictated by global trends with increasing demand for products using technology, such as Vtech smartphones, Kidizoom cameras, Leap Frog Leap Pad tablets and hand-held consoles by Overmax.
Traditional big sellers should also perform well during the upcoming holiday season. For boys, a wide selection of construction sets from Lego, including MineCraft, Technic, City and Star Wars, will be in high demand. Hasbro’s Transformers, Nerf Blasters and Mattel’s Hot Wheels are also likely to see strong sales. For girls, Barbie, Monster High and My Little Pony will be the most popular, with good performance expected from Lego Friends, Equestria Girls and Furby. The Xbox One console will lead in video game sales, due to its recent launch in September 2014 in most Eastern European countries.
Groceries remain stable part of expenditure during Christmas holiday
Producers of groceries look at the festive season as a promising period to boost their sales, as Eastern European consumers are ready to open their wallets to treats overlooked throughout the year due to political and economic uncertainty prevailing in 2014. Seasonal chocolate, limited editions of craft beer, decorated ginger cookies and pastries are just a handful of traditional indulgence items producers will use to lure consumers to treat family members, friends and themselves. Fish, mayonnaise, dairy and bakery products are the main ingredients contributing to the Christmas Eve table, thus retailers are ready to keep extra shelf space for these products to meet the demand right before Christmas. Last but not least, OTC digestives see seasonality in sales as well, correlating with the overindulgence during the festive season.
Pessimistic trends in Russia and Ukraine
Russia and the Ukraine generate 52% of Eastern Europe’s consumer expenditure. As orthodox countries, Christmas is celebrated after New Year and according to local tradition, gifts are exchanged on New Year’s Eve. The long bank holiday, lasting eight days in 2015, contributes to growing consumers’ expenditure during this time.
Despite Russians’ and Ukrainians’ genuine love toward winter holidays, this year’s expectations in terms of spending are more pessimistic compared to previous years. The tense political situation between the countries caused an economic slowdown in both with declining disposable income and currency fluctuations and consumers have become more rational in terms of their spending. Moreover, due to the sanctions in Russia, the variety of food products on the New Year’s dinner table will be fewer or more expensive. Similarly, Ukrainians are starting to save on food and drinks by choosing cheaper products and switching from imported products due to the devaluation of local currency drastically increasing price in domestic alternatives.
At the same time, in November electronics and appliances retailers in Ukraine observed increasing interest in the purchase of domestic appliances and consumer electronics. This is an example of positive sales dynamics related to an increasing willingness of Ukrainian consumers to invest in durable products in the light of local currency devaluation. Thus, Ukrainians are choosing both to indulge themselves with such purchases, taking into account upcoming celebrations, as well as invest in durable goods to lessen the devaluation effect.
However, taking into account the importance of New Year’s celebration as a tradition, Russians and Ukrainians will not refuse celebrating New Year. Instead, they would rather decrease their expenditure on the traditional grocery basket.
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