The Eastern European Consumer
An excerpt of a talk held in the framework of the 50th Anniversary Congress of the Federation of German Market Researchers.
The year 1989 was crucial for the whole of Europe. It brought the Eastern Europeans the long-awaited freedom, not only in political but also in economic terms. After decades characterized by lack of goods and food stamps, the Eastern Europeans pounced on the newly built supermarkets and shopping malls. Their first contact with the capitalist culture was marked by uncritical enthusiasm. First consumer loans were taken and the money was spent frivolously. But after 25 years, the Eastern European markets have matured: most industries are well-established and consumers have become more particular. They have also started to form economic relationships with their Western European neighbors.
The first factor, which plays a role in the formation of consumer behavior, is purchasing power. It has developed rapidly in Eastern European countries in the past two decades and the rapid changes are hard to comprehend even for the Eastern Europeans. For example, in 1988 one had to spend 10 average monthly salaries to buy a TV set. 20 years later the Poles could afford almost 4 TVs for their average monthly salary.
The number of TV sets one could buy for an average monthly salary in 1988 and 2007 in Poland
The economic growth has been dramatic in all of Eastern Europe. But in 1989, the Eastern European countries were on a similar and very low economic level. During the first years of freedom, each Eastern European economy struggled with the devaluation of the national currency, inflation and rising unemployment. However, although the countries started from a similar level, after 25 years there are notable economic differences within the region.
The richest are the small countries, e.g. the Czech Republic, Slovakia and Estonia. Russia, the largest country in the world, is located in the middle of the ranking. The most visible difference within the region is between the two neighboring countries: Ukraine and Slovakia. In 2013, Slovakia had a per capita GDP 7 times as high as that of the Ukraine. The differences among the remaining countries are not as dramatic, but they still lead to differences in consumer behavior.
Gross Domestic Product per capita and population
A good indication of the economic situation of each country is the share of expenditures on food and non-alcoholic beverages in the monthly household budget, as shown in the chart below. It is noteworthy that the relatively affluent Russians spend nearly one-third of the monthly household budget on food, while other Eastern Europeans have to spend on average only one fifth of their household budget.
Share of expenditure on food and non-alcoholic beverages in the monthly household budget (values in %)
You’re probably wondering what happens to the rest of the budget. Spending on various areas of life, goods and services varies from country to country. Would you have thought that Russians are true fashion lovers?
Share of expenditure on clothes and accessories in the monthly household budget (values in %)
Russians can afford their passion for fashion, because they have the lowest housing costs within the region. This results from the Communist housing policy, which gave everyone the right to housing. After the collapse of the Soviet Union, citizens were given the possibility to buy the apartments in which they were living for a government-regulated (and low) price. This means that most Russians own their apartments. Considering also that energy costs are subsidized by the state, the result is that the Russian population spends a very small fraction of their total income on housing.
Share of expenditure on housing in the monthly household budget (values in %)
These are just a few examples of differences in the region, and they suggest that “one size fits all” strategy will not be optimal. Strategic use of marketing research will identify key cultural and economic variation and can become a foundation for successful marketing strategies.
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