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Luxury shopping in Moscow
Luxury shopping in Moscow
Nadezhda Petrova

MOSCOW — It’s not often that the government’s plan and the people’s plan match as well as they do right now. The government is projecting an increase in real incomes in the next couple of years, but it also anticipates a decrease in the amount that people will save.

And that is precisely what people seem to be doing. According to a recent survey, 78% percent of Russians save less than 10% of their income, and 31% — substantially more than last year — save nothing at all.

That means they are spending more money, which is good both for the economy and for the Ministry of Economic Development. One economist says that if people were more tight-fisted, the economy would be in much worse shape.

Spending at any cost

Most Russians do put at least some money aside. Given that 59% of people say they are worried about their finances after retirement, you would think that retirement savings would be the most popular reason to save. But that’s not the case. Surveys have shown that the most common reasons for saving are to bankroll a vacation or to buy a car.

“Just like our government, the people have a very short-term horizon for planning,” explains Marina Krasilnikova, head researcher on quality of life issues at the Levada-Center. “That’s why they don’t often make decisions that have a long-term effect. “There is a certain amount of mistrust of financial and societal institutions, which makes it even harder.” This is all despite the alarming changes being made to pension plans.

Part of what’s so interesting about this phenomenon is that surveys show Russians dislike shopping more than any other country. Yet they are shopping, buying and investing in the Russian economy.

Image-conscious

Russians are joined by residents of other BRIC countries (Brazil, Russia, India and China) in their preference for quality over quantity. They are more brand-conscious than Europeans are, and regard brand names as status symbols.

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In St. Petersburg — Photo: Tanya Bezrukih

“European consumers have an easier time switching to a non-brand-name product because those products are usually higher quality in Europe than they are in Russia,” explains Machei Pshibish, Nielsen director of consumer research for northeast Europe. “A rational European would reject the brand name if he could buy something of similar quality for less.” But he explains that in Russia, it’s not solely about quality. “Russians can’t afford to buy a nice apartment or car, so they buy brand-name clothes, expensive chocolate and smartphones.”

This extreme prestige that people associate with brand names stems from very low consumption levels during the Soviet Union, according to Aleksei Belyanin from the Higher School of Economics. “The desire for big names that is not necessarily based on quality is largely a result of the psychological trauma that people suffered during the Soviet years,” he says. “That’s how we got this ‘consumerist’ stereotype, and it is being passed on to the younger generation.”

The idea of prestige is closely related to a willingness to pay a premium for a particular good. Belyanin shared the results of his recent research: Respondents who said they agreed with the statement, “Cars are a symbol their owner’s status” often had more expensive cars than people who did not agree. Those people who thought that a certain car was a sign of status weren’t really paying for quality. Instead, they were paying for the brand name, which to them signifies status.

“There is certainly a value to brand names in the minds of people who can afford them,” Belyanin says. How much each person backs up those values with their spending depends on the person. For example, someone who spends a lot of time in his car might buy an expensive car but non-brand-name boots and umbrella. Each person decides how he or she is going to display status.

It could be that brand-consciousness is going out of style, though spending isn’t. According to a survey by the Boston Consulting Group, the number of people who are willing to spend more for luxuries and cars is decreasing every year. It seems that Russians are starting to understand that you don’t need to show your friends that you drive an expensive foreign car. More and more people are spending on their children or house — in other words, they are becoming more European.

In the end, the desire to buy cheaper goods does not necessarily mean that consumer spending will fall. “I think that Russians’ psychological type is one that doesn’t know how to save,” says Ivan Kotov, director of the Boston Consulting Group. “In all of the other countries, people feel a responsibility towards the next generation and try to save money. We spend it.”

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