Increasing consumption

Despite the fact that the number of supermarkets dealing mostly in food products has gone up, the percentage of food product sales in retail business has decreased since the mid 1990s. On the basis of constant prices it can be said that during the years 1995 to 2000, the sales of consumer goods increased by 67%, whereas the sales of food products increased only by 26%.

The increase in the sales of consumer goods is seen most dramatically in the sales of motor vehicles, spare parts and fuels. The number of passenger cars has almost doubled in Estonia since 1990. Every third person out of the 1.4 million living in Estonia has their own car. Such a number of cars is mostly a result of the increase in the standard of living, but the growing popularity of bank loans and leasing possibilities has also played a role (the latter is due to easier loan procedures). New filling stations and car shops are also evidence of the ever-growing car market. Immediately after Estonia regained its independence, many second-hand cars were imported from western Europe. Now, however, it is more common to buy a new car.

Changes in consumption structure in 1995-2000

1995
2000
Share of groceries in purchases
45%
35%
Number of cars (thousands)
380
464
Number of travels abroad (thousands)
101
359

At the turn of the millennium, major Estonian banks gave a boost to general consumption by launching low-maintenance electronic hire-purchase cards (Ego, Magnet etc). The number of people using such cards grew rapidly. A year after the launch of these cards, banks estimated that the degree of risk associated with them (clients being unable to pay the instalments) was greater than expected. The Estonian economy relies heavily on a large volume of export and thus excessive loan-based domestic consumption could begin to stall economic growth as a whole. In connection with the economic decline in the world in 2002, the Bank of Estonia (the national bank) insisted that commercial banks tighten their loan policies.

The growing service sector and advertising aimed at promoting trade and services have brought along an avalanche of information characteristic of Western economies. Advertisements can be seen on bus-shelters, transport vehicles, posts and walls, not to mention in the electronic media and the print press. The volume of direct mail has increased every year and such publications keep flooding people’s mailboxes. Legal acts on advertising focus mainly on the ethical aspects of the content of advertising: alcoholic beverages, for example, may only be advertised late at night in order to prevent young people from seeing such advertisements. Other considerations (ensuring fair competition) resulted in banning commercial advertising from the state-financed national TV station (ETV).

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