RESEARCH FINDINGS (SUPPORTING DOCUMENTS/DETAILS OF EMERGING TREND[S] OF
THE IDENTIFIED COUNTRY MARKET)
References: http://www.portal.euromonitor.com/portal/analysis/tab
TOP FIVE CONSUMER TRENDS
Consumers remain optimistic about their financial futures
In recent years Latvian consumers have come back from several challenges. As noted in a recent article in the Financial Times, “The Baltic state of Latvia endured a harsh recession following the global financial crisis, with 25% pay cuts in the public sector and an exodus of young workers to friendlier economic climates. However, tough austerity measures meant its economy was one of the first in Europe to bounce back”. Consumer confidence wavered slightly in late 2013 due to uncertainty about transition to the Euro. But the changeover in early 2014 worked relatively well, with little immediate price or inflation rises and, as a result, optimism returned. According to a recent study of consumers and households by the Swedbank Institute of Private Finance, 37% of Latvians believe that there were no significant changes to their family budgets in 2014; 30% believe that their financial situations improved; and 30% believed their financial situations got worse. Compared to 2013 results, Latvians were clearly more optimistic.
At the same time, the same study identified consumers’ primary concerns over the coming short term. These included rising electricity costs (cited by 72% of respondents), rising food costs (57% of respondents) and rising housing costs (48% of respondents). According to Swedbank’s Evija Kropa, “The food and housing costs are at the top of priorities in household budgets, accounting for the most important part of the budget. Consequently, any changes in these costs have a direct and instant impact, which is a concern to most households. On the other hand, being braced for the increased cost of electricity show high awareness of the expected liberalization of the electric energy market for households from 1 January 2015”.
Regardless of these concerns, most Latvian consumers appear to be going forward with relative confidence that the situation will at the very least stay the same rather than get worse. “The percentage of households that expect negative changes [in 2015] in their financial situation (28%) is equal to the percentage that are either convinced that the future situation will improve (28%) or do not see any major changes in the pipeline (28%). Overall, the expectations regarding the financial situation...is slightly more upbeat than that in December 2013, when 27% of households expected positive changes, whereas 31% – expected negative changes”.
Consumers increasingly turning to online shopping sites
According to the Digital Agenda for Europe, 32% of Latvian consumers ordered goods online in 2013, up from 20% in 2011. Among the most popular products ordered were airline tickets and other transport-related products, tickets for concerts and sporting events, clothing, consumer electronics and cosmetics.
Latvian consumers tend to shop on cross-border sites as often as they shop on domestic online sites. For the most part, consumers go to foreign sites due to their wider product ranges, better prices and to find products not available on domestic sites. According to the Digital Agenda for Europe, 14.5% of Latvians purchased products and services from foreign online sites in 2013, up from just 7.5% in 2011. Amazon and eBay are particularly popular due to their flexible return policies.
Growing demand for locally produced food products
Driven by recent ‘buy local’ promotional campaigns, consumers are increasingly shopping for and buying food products sourced from Latvia. In 2014 the Chamber of Trade and Industry (LRTK) said it would launch a ‘Buy Latvian’ campaign with Latvian Prime Minister Laimdota Straujuma serving as patroness. LRTK Chairman Janis Endzinš said “When we buy a product at the store that isn’t made in Latvia, we could very well be putting a relative, friend or former classmate out of work”.
According to a survey by DNB Bank in 2014, 40% of consumers said they pay attention to whether the food products they buy come from Latvia. A separate survey conducted by local retail chain Elvi revealed that more than one-half of respondents agreed that Latvians should support domestic food producers by purchasing their products. A survey by price comparison website Gudriem.lv revealed that 16% of consumers said they would choose local products over imported items even when the prices for local goods were higher. Of course, beyond the desire to be patriotic one of the significant factors driving demand for local products has been the declining prices brought about by some Latvian food exports, particularly dairy products, recently being banned by Russian authorities.
Consumers’ use of financial cards expected to continue to grow
Cash continues to be the dominant form of payment in Latvia but in recent years there has been a rise in the number of financial cards in circulation and the value of transactions using financial cards. Growth is expected to continue at a steady rate in the coming years in large part due to an improved payment infrastructure that allows using cards to be easy and convenient. In addition, rising disposable incomes, a stable job market and relatively steady consumer confidence are expected to boost consumers’ attractions to cards.
The great number of financial cards in circulation and consumers’ comfort in using them is also expected to boost other sectors. For example, internet retailing is expected to benefit from more cards being found in more consumers’ wallets in coming years. Between 2013 and 2016, the value of internet retailing is projected to increase by 24% (in real terms) to reach LVL128 per household in 2016. In addition, the greater number of cards is expected to facilitate greater international leisure travel.
Young Adults
Those aged 18 to 29 years-old accounted for 17% of total population in 2013. The size of this group is declining as a result of negative demographic trends of the 90s and continuing emigration.

According to the Central Statistical Bureau (CSB), the majority of secondary school graduates (17- and 18-year-olds) continue their education in institutions of higher education (61% in 2013) and vocational education (6% in 2013). Most students begin their higher education studies immediately after graduating from secondary school, according to the Ministry of Education and Science (MES).
The number of students in higher education has been decreasing over recent years due to negative demographic trends, increasing tuition fees and declining availability of state-sponsored tuition. In addition, there has been an increased interest in Latvians attending higher education institutions abroad.
Forty-seven percent of 20- to 24-year- olds and 76% of 25- to 29-year-olds were employed in 2013, according to the CSB. While many young adults are getting their careers started, a good number are also establishing families. The average age of women having a first child reached 26.2 years in 2013, up from 25.2 years in 2005.
Those aged 20 to 29 years-old have been the group most frequently leaving Latvia over recent years as emigrants search for better job opportunities and incomes. According to the CSB, 15,000 Latvians aged 20 to 29 years left the country during 2012-2013. Furthermore, according to a survey by Swedbank, in 2013 nearly 40% of the high school students in their final year of studies said they were considering investigating getting a job abroad.
As they are in studies or in the early days of their jobs, young adults typically have lower incomes than their older counterparts. Not surprisingly, young adults tend to be very price- conscious and always look for discounts and opportunities to save when buying necessities such as food and clothing. As young adults get older and their incomes rise, spending tends to rise. Indeed, young professionals aged 25 to 34 years had the highest income per household according to the CSB.
Young adults are the most frequent online shoppers
According to Digital Agenda for Europe (DAE), 44% of 16- to 24-year- olds and 55% of 25- to 34-year-olds ordered goods and services online in 2013. In particular, cross-border online shopping has increased significantly since 2011 and continues to grow, with 19% of 16- to 24-year- olds and 28% of 25- to 34-year olds already purchasing online goods and services from sellers in other EU countries. A survey conducted by Swedbank revealed that online shoppers aged 16- to 25-year-olds primarily purchased clothing, footwear, sportswear, cosmetics, consumer electronics and concert tickets in 2014.
In addition, those aged 16 to 24 years-old are the leading age group participating in social networking sites, according to the DAE. According to a separate survey conducted in 2012 by digital communication agency CLICK and H+K Research, those aged 18 to 29 years are the most active followers of brands and companies on social network sites.
Middle Youth
The number of Latvians aged 30 to 44 years has continued to decline in recent years, reaching 408,000 (or 20% of the total population) in 2013. Low birth rates in prior decades combined with high emigration rates are the main reasons for the decline.
Middle youth enjoy the highest level of employment activity. According to the Central Statistical Bureau (CSB), employment among those aged 30 to 44 years has recovered since the economic downturn and the employment rate reached nearly 80% in 2013. This includes a large proportion of women who have traditionally constituted a large element of the Latvian workforce.
Those in their 30s tend to live in their own households and separately from parents. They have often established a family and have small children, a situation that has a significant impact on household spending patterns. Many home owners also have mortgage loans and must budget for monthly payments.
According to the Digital Agenda for Europe (DAE), 72% of those aged 35 to 44 years used the internet regularly in 2013 with 44% saying they ordered goods and services online in 2013, up from 24% in 2011. Due to the state of Latvian internet retailing, online cross-border shopping is popular, with 22% of this group shopping abroad in 2013, up from 10% in 2011. At the same time, according to the survey, only 4% said they shopped online via mobile phones in 2012.
Growing number of Middle Youth diverting income into voluntary pension plans
Many members of this age cohort are financially savvy and have little trust in retiring on state-provided pensions. In turn, the number contributing to private pension plans is increasing, reaching 220,480 (more than one-fifth of economically active population of Latvia) by the end of 2013, up from 198,260 at the end of 2011. According to Swedbank, the average age of Latvians participating in such pension plans was 44 years-old (42 years-old for dynamic plans). On average €22 was contributed monthly by plan participants in 2013.
Household Profiles
Between 2000 and 2013, the number of households increased by nearly 8%, reaching 867,000 in 2013. Reflecting Latvians’ changing social attitudes, both the number of single-family households and the number of households consisting of couples without children increased by nearly 18%. In contrast, over the same period the number of households consisting of couples with children declined by 4%. In short, young men and women decided to marry later in their lives and, in turn, live alone for longer periods and those who did get married increasingly decided to wait later to have children. In addition, longer life expectancies meant that there were a growing number of widows and widowers living alone.
Young couples usually prefer to live separately from their parents, often renting while saving to buy their own dwelling. Indeed, according to recent data from the Central Statistical Bureau (CSB), those living in single-person households are more likely to rent and less likely to own their home.
Pets have traditionally been kept in Latvia. Many own and care for cats and dogs as well as birds, rodents and fish. According to the Latvian Canine Federation, the most popular dog breeds in 2014 were German Shepherd and Labrador among large dogs and Yorkshire Terrier, Jack Russell Terrier, Spitz, Chihuahua and Papillons among small dogs.
Running Costs
Expenditure related to housing and running costs is the second-largest spending item for households (followed by spending for food and drink) and it has seen significant growth in recent years. In particular, between 2000 and 2013 per household spending on electricity, gas and other fuels increased by 104% (in real terms), reaching €1,134 in 2013. Further increases in the cost of electricity are expected in 2015 when the electricity market is deregulated. The increases (some have estimated increases of nearly 30% for the average household) are expected to put considerable pressure on many household budgets and cause distress to many home owners, especially since (according to the CSB) nearly 24% of Latvian households were unable to sufficiently warm their homes in 2013 due to lack of funds.
Increasing electricity and heating bills are expected to drive increased demand for energy-efficient appliances. Some other households, particularly low-income households, are expected to limit heating and water usage. The issue will be most pressing for single-parent households, households with pensioners and households with other vulnerable and low-income people.
Consumers spending more on home improvements
Consumer spending on home repairs, hardware and DIY goods has increased in recent years. Martins Artins, head of the Latvian Association of Construction Materials Retailers and Chairman of hardware and DIY retailer Tirdzniecibas Nams Kursi recently said to business news website db.lv, "This year [2013], of course, is better than the previous ones. People finally have a greater order both in their minds and wallets”. According to retailers, consumers are now increasingly choosing to balance price and value rather than just buy the cheapest goods available.
While 11% of Latvians saved to fund home improvements in 2013 (according to Swedbank), home improvement loans continue to be the most popular type of consumer loans. Citadele bank confirmed that 32% of the consumer loans the bank issued in 2013 were for home improvements. Further, another survey conducted by Citadele bank and Omnicom Media Group Snapshots revealed that 52% of Latvian adults said they would consider taking out a loan for home renovation in 2014.
Young consumers save more compared to older consumers
A recent survey by the Swedbank Institute of Private Finances revealed that 82% of young Latvians aged 15 to 19 years-old said that they saved money regularly. In contrast, when looking at savings habits across all age groups, the survey revealed that 37% of consumers overall said they saved. While most young consumers said they saved to ensure a safety cushion during hard times, they also said they saved to make purchases. Among the items young Latvians said they saved for most often were clothing (especially popular among young female consumers), consumer electronics, mobile phones and entertainment. According to the survey, 84% of young Latvians said they saved in cash while 36% said they had their own bank accounts.
However, as young Latvians get older they tend to save less. The report noted “As [young consumers’] age increases, the importance of saving seems to diminish, namely, among 16 year-olds 85% make savings, while in the 19 year-old age group the percentage drops to 77%”. Swedbank’s Adriana Kaulina said “Savings revolve around two core factors – the amount you can afford to set aside and the awareness of how important it is to make savings. The older they get, the more needs and interests they develop, and as the youths enter the adult life, usually their financial capacity cannot keep up with the needs”.
GROOMING AND FASHION
Perceptions of Beauty
While both women and men have traditionally taken great interest in their personal appearances, beauty regimens have nevertheless evolved significantly over the last two decades, stimulated in part by the media and international cosmetic brands. Indeed, the attitudes of most Latvians towards beauty tend to be shaped by exposure to local and international celebrities, media and fashion magazines. The ‘ideal’—a fit, slender person with healthy shiny hair, smooth skin and a beautiful smile—is often unattainable but the pressure to meet perceptions of beauty can be very strong, especially among younger consumers. A natural, well-groomed look is usually preferred. An abundance of enhancements such as fake eyelashes, fake hair and cosmetic surgery is often considered ‘over the top.’
Female Grooming
In the same way that the impact of the economic downturn prompted many female consumers to cut their spending on hair, body and skin care products, the improving economy has now convinced them to renew their spending. In addition, many women are slowly returning to beauty shops and hair stylists and resuming services recently considered luxuries. As a vestige of the economic downturn, consumers still hunt for discounts and promotions when shopping for beauty care services and, according to estimates from price comparison website Gudriem.lv, total consumer expenditure on beauty services via group purchasing and coupon websites reached LVL870,000 in 2013 based on 67,500 coupons sold.
A survey published by Domina shopping mall in 2012 revealed that 60% of Latvian adult women spend around a half an hour on skin care and make-up in the morning before going to work. Toothpaste, shampoos, shower gels, deodorants, depilatory products and hair care products are considered essentials. Most women use cosmetics. According to the Domina survey, the typical cosmetics bag contains mascara, lipstick or lip gloss, eye liner and powder and similar products. Anti-ageing skin care products are also very popular.
There is a very limited demand for cosmetic surgery and only a limited number of doctors offer procedures in Latvia. A survey conducted by L’Oréal in 2013 revealed that only 5% of women in Latvia said they would consider cosmetic surgery to improve their appearance at some point in their lives. Laser treatments, chemical peelings and injections are considered to be more acceptable alternatives. Among those who do opt for cosmetic surgery, the most popular procedures are breast shaping and augmentation, facelifts, soft tissue filler injections, tummy tucks, liposuction and nose and ear surgery.
There is strong demand for sun creams during summer months. According to a recent survey by pharmacy chain Gimenes aptieka, most consumers are aware of the health implications of too much exposure to the sun and they purchase and use sun creams in response. Sixty percent of respondents said they use sun creams when sunbathing and 12% said they use sun creams occasionally when outside. Only 4% of respondents said they never use sun creams.
Latvia has a rich spa tradition. The leading spas are based primarily in Riga and Jurmala and there are others located in leading upmarket hotels throughout the country. The most common treatments provided in spa salons include various types of head, feet and body massages, aromatherapy, baths and saunas, skin cleansing, peelings, masks and wrappings, cryotherapy, lip contour correction, manicures, pedicures and hair treatments.
Fashion Trends
For many consumers, attitudes to fashion are increasingly shaped by regional and international celebrities, media, fashion magazines and fashion brands. Regardless, it is clear that most consumers are rather conservative in their fashion preferences. Indeed, the traditional, elegant, well-groomed look is still popular among most women. A recent survey by Domina shopping centre revealed that female consumers most frequently named fashion journalist Maija Silova, singers Linda Leen and Marija Naumova and actress Agnese Zeltina as their beauty and fashion icons.Latvia’s mild and humid climate often dictates clothing preferences and creates the need for several sets of clothing and footwear. Warm coats or parkas, warm boots, hats, sweaters, scarves and gloves are necessary to survive the cold and snowy winters, when temperatures can drop as low as -20c to 30oC. Lighter coats, lighter spring/ autumn boots and related items are needed to feel comfortable during the rainy spring and autumn months. In summer months, Latvians dress to stay cool and comfortable.
Generally, men dress casually when not at work, wearing jeans, trousers, shorts, shirts, sweaters, polo shirts and T-shirts. Women usually choose jeans, casual trousers, skirts, shorts, blouses, tops, T-shirts, sweaters, dresses, casual shoes and basic accessories. Formal and ‘smart casual’ are the predominant styles of business attire. Financial and business service providers typically maintain strict and formal dress codes for public-facing staff. Men are expected to wear suits, ties and dark formal shoes while women also wear suits. In offices where the dress code is more flexible, business casual for women may include jackets, blouses, skirts or trousers, light sweaters and closed-toe shoes. On special occasions and celebrations such as weddings, Latvians tend to wear more formal evening clothing.
Younger Latvians are typically ‘fashion forward’, enthusiastically following new trends and using clothing, footwear and accessories to make fashion statements. Many wear inexpensive but fashionable clothing which can be discarded quickly when it goes out of style. Inspiration for a fashionable look is often derived from peers as well as from fashion magazines, films and TV shows.
Latvians do not usually wear a great deal of jewellery. The most common types worn by women are rings (including wedding rings), earrings, neck chains, bracelets and brooches. Men sometimes wear rings (including wedding rings) and, less often, neck chains. Neck chains with religious symbols and astrological signs are fairly popular. Fine jewellery is available but it is less popular. Younger consumers prefer to buy less expensive costume jewellery, since it can be easily discarded when next fashion trend arrives.
Main Household Shop
The price of food has continued to increase in recent years and, exacerbated by the recent change to the euro, prices are now the highest in the Baltic region. By February 2014, according to a study by Swedbank, the price of a typical basket of food for a family of four in Latvia reached €332 per month, compared to €289 in Lithuania and €318 in Estonia. The same study revealed that among consumers in the Baltic States those in Latvia spend the largest proportion of their income, 27%, on groceries. In contrast, Lithuanians spend 24% of their income on groceries while Estonians spend 18%. Thus, despite recovering from the worst of the economic downturn many Latvian consumers continue to adhere to price-conscious shopping habits. Recent research by DNB bank revealed that 63% of Latvians said they still pay very close attention to prices while food shopping.
The same DNB survey revealed that factors food shoppers say they consider when choosing a store in which to shop for food include product quality and range. In addition, they consider convenience and proximity to their homes, factors that are particularly important to busy food shoppers looking to save time. Store location and, in turn, convenience are also very important to ‘top-up’ food shoppers.
In recent years traditional grocers have struggled as a result of the intense pressure put on them by modern grocery retailers who benefit from targeted marketing, effective distribution networks and store locations in prime areas. For the most part, small independent grocers now prosper only in rural areas where modern grocers have yet to expand.
Convenience stores are still the most popular food-shopping venues due to their great number, convenient locations and low prices. Discounters have also been traditionally popular but as disposable incomes have risen in recent years a growing number of consumers have switched to shopping at supermarkets and hypermarkets where the product ranges are broader and are considered better quality.
Shopping for Big-ticket Items
Consumers tend to invest at least some time in researching and comparing features and prices before purchasing big-ticket items such as home appliances, white goods, furniture and computers and consumers electronics. It is typical to check the product in store, search for a better price using a price comparison website and then buy the product in brick-and-mortar store or order it online. According to the Digital Agenda for Europe, more than 52% of Latvians used the internet to look for information about goods and services in 2013.
Regardless, consumers prefer to buy big-ticket items in specialist retailers where they can consult with sales staff. According to local retailers, most consumers still prefer to see and touch fridges, stoves, cookers and other big household goods before buying as these products are essential and used daily. Some of the larger supermarkets and hypermarkets have sections selling a limited range of basic big-ticket items such as consumer electronics and these are popular venues for low-income consumers. There are also a limited number of discount home appliance stores popular among price-conscious consumers. Second-hand items are not particularly popular, but they can be purchased through online sites such as ss.lv and reklama.lv, among others.
Consumers easily switch between the brands when buying big-ticket items as long as they are satisfied that price, features and durability meet their needs. The country of origin of the item can sometimes add or detract from the perceived quality of an item. For example, consumers consider products manufactured in Germany to be more reliable than products manufactured in China.
Personal Shopping
Consumers tend to prefer to shop for clothing, footwear and accessories in specialist stores, whether they are located in shopping malls or on the high street. Supermarkets and hypermarkets are increasingly stocking these items and they are popular among price-conscious shoppers. Consumers from around the country often come to shop for personal goods in Riga as the shops there tend to have the best selection.
The availability of many designer fashions is limited in Latvia and many consumers buy fashionable items when on holiday or when visiting family or friends abroad. Some others take advantage of local members-only online shopping clubs, such as membershop.lv and stilago.lv which specialise in designer clothing. Shopping via catalogues is not popular in Latvia. Second-hand clothing stores, which saw increased footfall during the economic downturn, remain one of the popular shopping destinations for low-income consumers.
Most consumers buy basic cosmetics and toiletries at supermarkets/ hypermarkets and more sophisticated items in specialty stores and brand stores, many of which are based in large shopping malls. Products sold directly, such as Oriflame and Avon, are also available. Online comparison sites and internet retailers have become increasingly popular among consumers shopping for cosmetics and toiletries.
Shopping Online
The value of internet retailing has continued to increase in recent years, growing at a rate of 74% between 2005 and 2013. This impressive growth reflected the relatively high level of internet accessibility and use by consumers throughout the country. Indeed, in 2013 more than 70% of households possessed broadband internet-enabled computers and 75% of Latvians were internet users. In addition, an increasing number of consumers accessed the internet via their mobile devices.
Recent surveys have revealed that those aged 25 to 34 years-old are the most active online shoppers, followed closely by consumers aged 16 to 24 and 35 to 44 years-old. In addition, the number of older consumers shopping online has grown significantly in recent years. Among the most popular items purchased online are flight/rail/coach reservations and tickets; tickets for sports events, concerts and the cinema; clothing; consumer electronics; and cosmetics. The recent expansion of affordable courier and delivery service networks and the introduction of self-service parcel terminals have helped boost demand for online shopping among Latvian consumers. Online food shopping remains a niche service.
Coupon websites have retained their popularity in the post-recession shopping environment. According to estimates by price comparison website Gudriem.lv, total expenditure via such websites reached €18 million in 2013 and spending is expected to continue to grow. While travel, beauty services and spa services have traditionally been popular categories on couple websites, new categories have recently emerged, including house and garden products, clothing and accessories and consumer electronics.
Latvians shop on both domestic and international retail websites. When shopping cross-border, consumers usually pay for their purchases with their credit cards or through payment services such as PayPal. When buying products on domestic internet retail sites, many consumers still prefer to order online and then pick up their orders at depots, paying there with cash or card.
Despite the relative comfort most consumers have in shopping online, there are still many consumers, mostly older consumers, who avoid internet retailers due to concerns about online security and data theft. Some others still wish to see and touch the products they are considering purchasing and talk to qualified sales staff before buying. According to a recent Eurobarometer survey, many also worried about not receiving ordered goods.
Growing demand for locally produced food products
Increasing incomes in combination with robust information campaigns have driven increased consumer demand for locally produced food products. This trend was boosted in 2014 when prices declined as a result of Russia banning Latvian dairy products. According to a survey by DNB bank, 40% of consumers said they now check to see if the food products they are considering buying come from Latvia. In addition, three-fourths of consumers said they check product labels when food shopping; nearly one-half said they look to see if products contain any food additives; and one-third said they check for natural ingredients. Ten percent said they check for trans fats, nutritional value, calories and salt content.
Consumers increasingly turn to international internet retailers
According to data from the Digital Agenda for Europe, 14.5% of Latvian consumers who shopped online in 2013 purchased products and services from internet retail sites based outside the country. Amazon and eBay are particularly popular. In part, the flexible return policies of international online retailers have driven interest, particularly among consumers who go online to buy clothing, footwear and accessories.
ENERGY
Latvia produces no oil or natural gas and is entirely dependent on imports. Until 2002, Latvia’s port, Ventspils, was Russia’s primary northern crude oil export terminal. Russia stopped deliveries following the completion of its own port of Primorsk. Ventspils has lost significant market share, and the future of the port is uncertain.
Latvia has fully opened its electricity retail market although links with neighbouring countries are fragmented. Latvia's gas market liberalisation and transmission system operator unbundling is to be completed by 2017.

References: http://www.portal.euromonitor.com/portal/analysis/tab