July 23, 2019
Volume 3 Issue 3
Online Oil Sales Lack Traction in Russia
MOSCOW – Inflation and declining consumer incomes would typically encourage online purchases of lubricants, where prices are normally cheaper. But a recent study found that online transactions still account for just 5 percent of lube sales in Russia, which is afflicted by those maladies.
Russia’s gross domestic product rebounded in 2017 and 2018, but when inflation is taken into account, per capita real income dropped for the fifth consecutive year in 2018.
GfK, a Moscow-based marketing consultancy, found that SAE 5W-40, 5W-30 and 10W-40 were the top-selling viscosity grades of passenger car motor oil, with a combined 91 percent of sales from Jan. 18 to March 18. The grades with the fastest-growing sales rates during that time were 5W-30, 0W30, 0W-20 and 5W-20, while domestic suppliers increased their shares of the SAE 5W-40 and 5W-30 segments.
GfK also found that passenger car motor oils that it described as flagship foreign brands are losing market share to foreign secondary suppliers and domestic companies. During the same three-month period, the foreign flagship branded share of 5W-40 sales decreased to 6.1 percent of the total, from 8.4 percent during the same period of 2018, while the share for secondary suppliers rose from 72.1 percent to 73.7 percent and domestic companies increased their share from 19.2 percent to 19.8 percent. Similarly, the foreign flagship share of 5W-30 sales fell from 20.9 percent to 14.5 percent, while the foreign non-flagship share increased from 74.2 percent of the total to 79.7 percent and local products increased their share from 5 percent to 5.6 percent
“Amid rising prices and stagnating [real] incomes, consumer demand is shifting from foreign flagship product lines to secondary foreign product lines and local brands,” Ayuka Mandzhieva consultant at GfK, automotive sector, told GBC’s CIS Base Oils and Lubricants conference held in here in May.
In its market study, GfK divided motor oil end consumer retail channels into two separate channels – offline and online sales.
In the first quarter of 2018, offline motor oil sales covered 95.2 percent of the total retail channels while online sales covered 4.8 percent of the retail.
Of the total offline motor oil sales, 73 percent of these came from auto part stores, 21.5 percent of the sales went through car dealership centers and 5.5 percent were offered in supermarkets.
“In Russia, a small but growing part of the motor oil sales are done online. The reason is that seven out of the 10 best-selling engine oils are cheaper online. One can find online much bigger sales at a price discount of 40 percent or more, while these discount sales are much less frequent in the supermarkets [and] are almost non-existent at auto part stores or car dealers,” Mandzhieva said.
The consultancy also found that more and more lubricant industry players – both manufacturers and retailers – are rushing to develop online sales. Online sales by official car dealers rose 4.4 percent year-on-year for the three months beginning Jan. 18, she said.
The consultancy also found that in hypermarkets with more price-sensitive consumers, the demand for synthetic oils is growing due to the increased availability of local 5W-30 products.
“However, the 10W-40 grade prevails, and local brands account for half of the sales in this segment. Also, hypermarkets focus on more popular brands and normally arrange price promotions during the seasonal peaks. It boosts sales dramatically,” Mandzhieva said.
GfK found that the market is recovering from the country’s previous troubled economic period – the years of economic recession and slowdown that began in 2014 – with growth in the share of low-end products. For example, Russian brands gained 0.3 percent market-wide, while foreign secondary oils gained 0.9 percent at the expense of the flagship foreign brands.
Sales of full synthetics gained 4.3 percent, while the share for semi-synthetics decreased by 3.3 percent. “On average, motor oil ruble prices went up by 7 percent, which is exhausting for the end user who is debt-ridden and picky,” Mandzhieva said.