Spreading Cheer and Spending Cash

Survey indicates that Ukrainians’ New Year’s holiday spending will increase from last year, despite crisis.

by Adrian Erlinger, The PBN Company, Washington, DC

It would seem logical that the past 12 months of gruesome financial conditions (13% GDP contraction and 13% inflation) would force Ukrainians to economize. But according to an annual survey of European holiday consumer trends released by Deloitte, a consultancy, the average Ukrainian plans to spend 2,500 hryvnias ($313) on New Year’s revelry — 300 hryvnias more than last year.

While two-thirds of Ukrainian citizens complain that the economic downturn has affected their personal financial situation, up from 50% last year, Ukrainians will spend an average of 1,250 hryvnias on gifts. Approximately 53% of Ukrainians will do their shopping during the holidays – when prices reach their peak. Still, the majority of Ukrainians remain budget conscious and 10% of those surveyed will complete a New Year’s budget for the first time. Cash, computers and cosmetics ranked high on the wish list, says Komsomolskaya Pravda v Ukraine. With 2010 as the Year of the Tiger, orders of feline statuettes are in roaring demand.

A side-effect of the recent swine flu pandemic, Ukrainians are increasingly relying on e-commerce this year to avoid crowded markets and malls, according to Zerkalo Nedeli. In Kyiv alone there are 60 online stores in operation specializing in handmade toys, folk art, ceramics and other gifts – a twelve-fold increase since 2006. 80% of online orders are made by people under 40, and the non-affluent customer is now more likely to click a mouse instead rather than brave the malls.

Delovaya Stolitsa reports that the crisis has led corporate customers, now unwilling to overpay for pricey spreads, to significantly scale back New Year festivities at Kyiv restaurants. In turn, the prospect of empty rooms has forced dining and entertainment establishments to massively reduce prices by two-fold from 2007 levels. Financial institutions still remain the most reliable customers for restaurant parties. Despite this, the standard corporate party has shrunk in half and now rarely exceeds 100 people. With food inflation soaring this year 20-30%, there is little in the budget for pop stars and other kinds of entertainment.

But for most Ukrainians, the holiday will be spent at home surrounded by family and friends at home. On average, 850 hryvnia will be spent on the old-fashioned sumptuous spreads complete with vodka, oranges and an evergreen tree – despite the fact that prices for these products from last year have increased 11%, 57% and at least 25%, respectively.

Sociologists and economists alike are peeking into such consumer behavior as a bellwether for what hopes to be a better year ahead. For the second year, Ukrainians are gathering around the New Year’s tree amidst an economic crisis. The year 2009 is certain to go down as the annus horribilis of the decade for many, and in a few weeks’ time holiday cheer will help Ukrainians forget a year marked by economic protraction, swine flu, and yet another cycle of elections.

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