General Economic Conditions for the Consumer Market Development

In 2017, the country’s GDP showed a positive trend for the first time after 2014. This turn of the economy from negative to positive trend had a beneficial effect both on growth of real disposable income of the population and on growth of turnover, in physical volumes, in retail trade and public catering.
However, despite the growth of the main macroeconomic indicators, the socio-economic crisis in the country has not been overcome. In 2017, GRP and all of the above-mentioned socio-economic indicators failed to reach the level of 2014. Thus, 2017 will go down in history of Belarus both as the third year of the socio-economic crisis and as the year of the beginning of the economic recovery.

According to the government estimates, the GDP in 2018 will grow by 3.5% compared to the level of 2017, while the real disposable income – by 3.2%.
It is worth noting that increase of salaries in December, aimed to fulfill the government’s demands for an increase in the gross payroll by the end of 2017 to 1,000 rubles, had a positive effect on the growth rate of retail trade and public catering turnover in January 2018 (as compared to January 2017 – by 9.5 and by 10.6% respectively). In January 2018, nominal salaries deflated almost to the level of November (from 995.3 rubles in December 2017 to 859 rubles in January 2018), but an increase in consumer spending in January will have a significant positive impact on the growth rates of the above-mentioned sectors of economy throughout the year. Also, high rates of turnover in retail trade and public catering may be facilitated by the government’s task to reach the level of the gross payroll of 1000 rubles by the end of the first quarter of 2018.
Liberalization of business proclaimed by the government in 2017 may have a positive impact on the growth of all socio-economic indicators of the country. First of all, the Decree of the President of the Republic of Belarus No. 7 “On the Development of Entrepreneurship” dated 25/05/2017 (the main provisions of the Decree entered into force on 26/02/2018), the Presidential Decree No. 345 dated 22/09/2017 “On the Development of Trade, Public Catering and Consumer Services” and the Presidential Decree dated 09/10/2017 No. 364 “On Implementation of Craft Activities by Natural Persons”.
It is difficult to assess the effectiveness of new measures aimed at the development of entrepreneurship. In the beginning of 2018, the Ministry of Transport and Communications took control over private long-distance carriers, deciding to turn irregular passenger transportations into regular ones, thus significantly worsening the conditions of this category of carriers throughout the entire territory of Belarus.
Another important factor in increasing consumer spending in 2018 is an increase in the minimum wage in Belarus in January 1, 2018, from 265 to 305 rubles, i.е. by 15.1%.
The following may have a limiting effect on the growth of the Belarusian consumer market: the intention of banks to limit further consumer lending to the population through toughening the procedures of loan granting (stricter accounting as to the ratio of loan payments to incomes, the ratio of the volume of loans to real estate value).

Main Trends in the Consumer Market Development in 2017

The recovery growth of turnover of retail trade and public catering has begun. In 2017, the turnover of retail trade grew by 3.8% as compared to 2016, the turnover of public catering – by 2.3%. In 2015 and 2016, the turnover of retail trade and public catering had a negative growth rate. As a result, the retail trade turnover in 2017 amounted to 98.1% of the level of 2014, the turnover of public catering – 96.2%.

The growth of turnover of public catering failed to become nationwide in 2017. If the growth of retail trade turnover in 2017 covered all regions and Minsk, the process of restoring the turnover of public catering has not yet affected Mogilev and Vitebsk regions. Taking into account that the turnover of public catering in 2014 as compared to 2013 in Belarus had a positive dynamics only at the expense of Minsk and decreased in all other regions, then the decrease in the turnover of public catering in Mogilev and Vitebsk regions lasted four years (from 2014 to 2017 year), and in the remaining regions of the country – three years (from 2014 to 2016). As a result, the retail trade turnover of public catering in Vitebsk region in 2017 constituted 88.3% of the level of 2013, in Mogilev region – 85.6%, i.е. was significantly less than in other areas of Belarus.

In retail trade turnover, a share of food products remains high. This group of goods includes expenses for alcohol and tobacco products. Despite the growth in retail trade, the share of food commodities remained at the level of 2016 (50.6%), and taking into account the growth in the turnover of public catering, the share of food commodities in the total turnover of trade and public catering has even increased. The share of food products in retail trade turnover (or trade and public catering) is one of the most reliable indicators of the social standard of living. The better people live, the less they spend on food in percentage terms of total retail trade turnover. The lowest indicator of the share of food products in the retail turnover over the past 28 years was recorded in Belarus in 1990 – 44.9%. In developed countries, this share, as a rule, does not rise above 20–25%. A high proportion of food products in retail trade turnover is evidence of the low purchasing power of the country’s population, which has been stagnant over the past decades.

Private business, primarily small business, is being squeezed out of the consumer market. This tendency mainly characterizes individual entrepreneurs and natural persons. It contradicts the officially announced position of the state regarding liberalization of entrepreneurial activity and self-employment. Meanwhile, individual entrepreneurship in general and in the sphere of trade, in particular, means new jobs, an increase in the nation’s well-being, one of the ways of forming a middle class, a source of acquiring economic experience and a form of original capital accumulation. Without the safety cushion of individual entrepreneurship, it is difficult to expect the emergence of new micro- and small enterprises, i.e. new legal entities, and more significant economic entities. In 2017, 69.6% of retail trade turnover and 64.9% of catering turnover were registered in the private sector. In 2016, the figures were 70.0% and 66.0%, respectively. The maximum share of the private sector in the retail trade turnover in recent years was registered in 2012 (83.3%), in the turnover of public catering – in 2013 (71.6%). The removal of individual entrepreneurs and natural persons from the consumer market of the country explains the consistent increase in the share of retail turnover of trade organizations in the total volume of commercial activities. In 2017, trade organizations accounted for 87.7% of retail trade turnover, in 2010 – for 73.2%.

The significance of foreign organizations in the consumer market is steadily growing. This is an ambiguous trend. Foreign retail chains ensure investments in fixed capital, growth of retail space, introduction of innovations in the sphere of trade and public catering. However, they lead to the replacement of domestic players in the consumer market of the country by foreign ones, the concentration of revenue and profits from the sale of products, goods and services in the hands of foreign owners. In 2017, the share of foreign capital organizations in the retail trade turnover amounted to 21.6% (in 2016 – to 21.4%), in the retail trade turnover of public catering – to 9.9% (in 2016 – to 9.8%). In 2010, these shares accounted for only 4.9% – for retail trade and 6.1% – for public catering. In present-day Poland, a country integrated into the European Union, the share of foreign organizations in the retail trade turnover constitutes about 15%. An active foreign sector particularly affects small business entities. Although it is obvious that the presence in the consumer market of a large number of small businesses is a real opportunity to earn and have a decent standard of living for hundreds of thousands of citizens.

Chain retailing is strengthening and beginning to spread in the countryside. In 2017, the share in the retail trade turnover of the largest retail chains of Belarus – Euroopt, Korona, Almi (food retail), Mila, AMI (non-food retail) and others, has grown significantly. The number of Euroopt stores by the end of 2017 exceeded 500 (the largest retail chain in the country), Vesta increased to 75, Domashniy retail chain, opening the first store in Belarus in 2016, had more than 50 stores by the end of 2017. By the start of 2017, Euroopt retail chain exceeded the share of 20% in the turnover of food products in 16 administrative regions of the country, i.е. has reached the maximum level in accordance with the Law of the Republic of Belarus “On State Regulation of Trade and Public Catering in the Republic of Belarus”, which came into effect on July 22, 2014. On September 22, 2017, the Presidential Decree No. 345 “On the Development of Trade, Public Catering and Consumer Services” was adopted, which, in addition to setting preferences for individual entrepreneurs and all organizations working in rural areas and small urban settlements, canceled a 20-% quota on restriction of trading activities of large retail chains (subparagraph 1.5 of the Decree No. 345). As a result, a retail chain that has exceeded the quota established by law in a certain administrative area in the volume of retail trade turnover can expand its retail chain in rural settlements of the regions, in the territory of urban settlements with an average annual population of less than 10 thousand people, as well as outside settlements (subparagraph 1.2 of the Decree No. 345). It is still unclear, whether individual entrepreneurs and small businesses will take advantage of new opportunities, but large retail chains have certainly gained the upper hand. In particular, Euroopt and Korona retail chains have already announced their intent to create a chain of stores in the countryside, and Euroopt has included in its sphere of interest all rural settlements of the country with a population of more than 2 thousand people. If Belkoopsoyuz (Belarusian Republican Union of Consumer Societies) has already been represented in rural areas of Belarus, mainly by Rodny Kut chain of stores, now it has strong competitors that can easily replace not only the stores of Belkoopsoyuz in the market, but also the stores and other retail facilities of small trade organizations and individual entrepreneurs.

Domestic goods continue to be driven from the domestic consumer market. There are many reasons for this, related both to the quality and the price of products. Thus, even in the domestic consumer market, the prices of foreign producers are often lower than those of similar Belarusian products. Among the food products are flour and pasta, confectionery, condensed milk, oil and butter, canned fish and other goods. In 2017, the share of domestic goods in the retail turnover amounted to 64.4% (in 2016 – 65.9%). At the same time, the share of domestically produced food commodities accounted for 80.8% of the total food products turnover and 44.2% in the non-food products turnover. In 2010, domestic food products accounted for 83% of the total retail trade turnover, domestic non-food products – for 58.5%.

Interest of the Belarusians to purchase goods outside the country (shopping tourism) is retained. Due to high prices for many groups of food and non-food products in the domestic market, many Belarusian citizens prefer to shop outside the country, where prices are lower. The border regions of all bordering countries have become important centers of shopping tourism: Russia, Ukraine, Poland, Latvia, Lithuania. The largest shopping centers are Bialystok, Vilnius, Daugavpils, Smolensk, Chernigov, Rivne, Khmelnitsky.

The state continues to regulate retail prices for many types of goods. This is the current policy of the Ministry of Antimonopoly Regulation and Trade (MART), former Ministry of Trade (until September 8, 2016). Unfortunately, the activity of the MART on price regulation does not lead to their containment, but, on the contrary, to their growth. Thus, in autumn of 2017, as a result of state regulation of sugar prices in the consumer market, the minimum retail price was set at 1.5 rubles per 1 kg. This led to an increase in the price of Russian-made sugar in the domestic market by 25% or more. State regulation of sugar prices is an example of price regulation not in favor of Belarusian consumers, but in favor of sugar producers in Belarus.

The concentration of retail trade turnover and the turnover of public catering in the largest urban centers and administrative districts is increasing. Minsk, Gomel, Grodno, Brest, Vitebsk, Mogilev and Minsk region accounted for 57.5% of the total retail turnover of Belarus in 2017. At the same time, the population of the above-mentioned cities and Minsk region was less than 44.4% of the total population of Belarus as of January 1, 2018. The remaining 117 districts and 5 cities of regional subordination of the country have a lower turnover of retail trade than the 7 leaders. At the same time, the concentration of retail trade turnover in different regions is lower than that of public catering. The same seven leaders in 2017 accounted for 66.2% of the total retail turnover in public catering. Per capita sales volume in public catering sector in various regions is an additional indicator of the living standards there. Everybody buys food, while only the rich actively visit public catering facilities.

As for per capita consumer spending, the level of stratification of regions remains high. This is the result of high differences in living standards among the country regions. At the same time, there is a significant difference between the regions and the capital of Belarus, as well as its administrative regions. The average per capita consumer spending (total turnover of retail trade and public catering) in Minsk significantly exceeded average per capita consumer spending in all regions of the country and was 1.9 times higher than that in Mogilev region. In 2017, Minsk district and the city of Minsk together accounted for the largest consumer spending in the country (6727.3 rubles), exceeding per capita private consumption of the poorest Buda-Koshelevsky district (1954.1 rubles) by 3.4 times.

New forms of trade are becoming more important; innovations are introduced into retail trade and public catering. Operational statistics fail to provide information on this, but statistical data on the retail trade development in 2016 and data from other sources indicate that eTrading via online stores (E-commerce) is actively developing. In 2016, the number of online stores in the country reached 3834 – increasing by 3.2 times as compared to 2010. Internet stores for delivery of goods to consumers use postal organizations (mail-order sale) and develop direct delivery systems. For instance, more than 3 million requests were placed in the e-delivery system organized by Euroopt LLC through the chain of its online stores in 2017.

Please see more detailed information on the development of retail trade, public catering, ratings of the Belarusian regions according to per capita consumer spending and consumer market capacity in 2017 in section «Analytics» (