Why is Russia gripped by panic buying?

As Russia finds itself caught in crushing inflation—one of the effects of US-led sanctions—the markets have become overwhelmed with shoppers buying in a panic, emptying grocery stores and shopping malls. 

The shoppers' panic is fuelled by global brands announcing their departure from the Russian market one after the other. The exodus has been prompted by the US-led sanctions over Russia's attacks on Ukraine, although many brands have said it is a temporary move.

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

"People are mainly investing in large items such as kitchens, appliances, flooring—something that requires a significant outlay," confirms Marina Fytova, deputy general director of global home improvement store Leroy Merlin.

Commodity prices will remain unstable for some time,  says Fytova, adding: "This is due to rising prices of materials, changes in the refinancing rate of the Central Bank and exchange rate." 

At Leroy Merlin, she said, more than 70 percent of the chain's sales are provided by goods made in Russia.

What makes things worse now are transportation and logistics companies, which have announced the suspension of deliveries to Russia. 

"The containers that managed to get to the territory of the Russian Federation will reach their destination, but there is a high probability that these will be the last instruments in the short term," says Alexei Fedorov, managing partner of 220 Volt, one of Russia's leading online hardware companies. 

Furniture in demand

On March 3, the Swedish retailer IKEA announced the temporary cessation of sales in stores in Russia and Belarus. The move caused a stir among thousands of Russians, who rushed to the IKEA warehouses to hoard furniture and other products.

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

"IKEA's possible withdrawal from the market (and so far, the stores have officially only taken a break until May) opens up an opportunity for domestic manufacturers and furniture retailers to at least increase their shares in the extremely competitive market with a capacity of over 300 billion rubles a year," writes Russia's business portal Fontanka.ru.

Apple's future woes

As for large and small home appliances, Russian consumers started buying them en masse from January onwards. The Russian newspaper Izvestia reported that the demand for washing machines has now increased fivefold. 

By the end of February and beginning of March, the shelves in electronic stores were empty even though the prices of large appliances had increased by five-10 thousand rubles.

"A lot of people are buying up large appliances: ovens, stoves, TVs for 400, 700 thousand," said an employee of the M.Video store, where the last remaining TV set was sold for a million rubles.

"The last iPhone is the one you are holding in your hands now," has become an online joke in Russia. 

Several local news reports suggested Apple is considering leaving the Russian market. 

But Anton Gorelkin, deputy head of the State Duma Committee on Information Policy, Information Technology, and Communications, recently put all speculations about Apple to rest. He said: "Obviously, they are under serious pressure, but I am deeply convinced that this is a temporary ban. Our market is big and interesting; Apple's revenue was more than 270 billion rubles last year."

The ruble depreciation has become one of the main reasons people have engaged in panic buying. "The current situation with the exchange rate pushes buyers to invest their remaining money in goods," says Alexei Fedorov, managing partner of 220 Volt Group. 

Russian economist Sergei Khestanov urged Russians not to buy domestic appliances and other goods in light of the country's economic crisis as well as US-led sanctions. The economist explained that to try and win on the rising inflation rate 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.

 "Many people foolishly bought unnecessary goods back then, and after that, they did not know what to do with them. It's difficult to resell them, appliances become obsolete, so it's a stupid idea," said Khestanov, an adviser on macroeconomics to the general director of Open Investments, associate professor at the Russian Presidential Academy of National Economy and Public Administration.

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

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