Why is Russia in the grip of panic buying?


The value of the dollar is skyrocketing and groceries are disappearing from the shelves, but Russians are showing enormous purchasing power in the sanctions-hit Russian markets.

As Russia finds itself caught in crippling inflation – one of the effects of US sanctions – markets are overwhelmed by panic-buying shoppers, emptying grocery stores and malls.

Buyer panic is fueled by one global brand after another announcing their departure from the Russian market. The exodus was prompted by US sanctions over Russia’s attacks on Ukraine, though many brands said it was a temporary move.

The fall of the ruble and the closure of borders for European goods in Russia have led to an unprecedented demand for building materials, as well as construction and repair tools. According to Forbes, last week demand for certain categories has increase by more than 120% and the average bill for the various networks has increased by 27 to 70%.

“People mainly invest in large items such as kitchens, appliances, flooring, which require large outlays,” confirms Marina Fytova, deputy general manager of global home improvement store Leroy Merlin.

Commodity prices will remain volatile for some time, says Fytova, adding, “This is due to rising material prices, changes in the Central Bank refinancing rate and the exchange rate.”

At Leroy Merlin, she said, more than 70% of the chain’s sales come from Russian-made products.

What makes matters worse today are transport and logistics companies, which have announcement the suspension of deliveries to Russia.

“Containers that managed to get to the territory of the Russian Federation will reach their destination, but most likely they will be the last instruments in the short term,” said Alexei Fedorov, Managing Partner of 220 Volt, one of Russia’s leading online hardware companies.

Russians are buying in droves, withdrawing money from ATMs and hoarding as many products as possible. (AP)

Furniture in demand

On March 3, Swedish retailer IKEA announcement the temporary cessation of sales in stores in Russia and Belarus. This decision caused a stir among thousands of Russians, who rushed to IKEA warehouses to stock furniture and other products.

However, for some local furniture makers, IKEA’s halt in sales is a blessing in disguise.

“IKEA’s possible withdrawal from the market (and so far stores have only officially paused until May) opens up an opportunity for domestic manufacturers and furniture retailers to at least increase their share on the extremely competitive market with a capacity of more than 300 billion rubles per year”, writing The Russian business portal Fontanka.ru.

Apple’s future woes

As for large and small household appliances, Russian consumers began to buy them en masse from January. The Russian newspaper Izvestia reported that the demand for washing machines has now quintupled.

In late February and early March, the shelves of electronics stores were empty, although prices for major household appliances rose by 5-10 thousand rubles.

“A lot of people buy big appliances: ovens, stoves, TVs for 400, 700,000”, noted an employee of the M.Video store, where the last remaining TV was sold for a million rubles.

“The latest iPhone is the one you now hold in your hands,” has become an online joke in Russia.

Several local reports suggested Apple plans to exit the Russian market.

But Anton Gorelkin, deputy head of the State Duma’s committee on information policy, information technology and communications, recently shut down all speculation about Apple. He said: “Obviously they are under serious pressure, but I am deeply convinced that this is a temporary ban. Our market is large and interesting; Apple’s revenue exceeded 270 billion rubles Last year.”

The depreciation of the ruble has become one of the main reasons why people have started panic buying. “The current exchange rate situation is pushing buyers to invest their remaining money in goods,” says Alexei Fedorov, managing partner of 220 Volt Group.

Russian economist Sergei Khestanov urged Russians should not buy household appliances and other goods in light of the country’s economic crisis as well as sanctions imposed by the United States. The economist explained that trying to earn on the rising rate of inflation by buying unnecessary appliances makes no economic sense.

He recalled that there was a similar situation in 2014-2015, and many people also rushed to the stores.

“A lot of people were stupidly buying useless goods back then, and after that they didn’t know what to do with them. It’s hard to resell them, devices become obsolete, so it’s a stupid idea,” said Khestanov, Macroeconomics Advisor to the Managing Director of Open Investments, Associate Professor at the Russian Presidential Academy of National Economy and Public Administration.

However, Mikhail Belyaev, candidate of economics and financial analyst, is optimistic about the Russian ruble.

He noted that the ruble would gradually strengthen and eventually return to 75-76 rubles per dollar.

Source: World TRT


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