invidis analysis 2015

Challenging year ahead for Digital Signage in Russia/CIS

- We have been contacted in recent weeks my many market players for our evaluation of the Russian / CIS digital signage and DooH market. It is not an easy task as politics and general economics strongly influence the digital signage development. von Florian Rotberg

Challenging Times for Digital Signage in 2015 (Photo: invidis)

Challenging Times for Digital Signage in 2015 (Photo: invidis)

One of the most turbulent years since two decades comes to a close. This “annus horriblis” has seen the value of the Ruble to more than half in a few months, economic sanctions of the USA and EU have severely hit an already weakened Russian economy. And digital signage is unfortunately not immune to these greater trends.

First hand we have to acknowledge global trends (according to economists forecast in a Reuters poll):

  • Russia will slide in recession.
  • Inflation will almost be double digit.
  • Russia’s economy (GDP) will shrink between 3,0-4,0%.
  • Ruble exchange rate will remain under pressure at 50-60 Rubles to the US Dollar after losing more than 40% against the USD in 2014.

What is the impact on digital signage? In such a difficult economic environment and uncertain political time dynamic information at the POS or POI are not the most pressing issue. As basically all components are imported cost for digital signage project has risen dramatically. CAPEX of digital signage has risen 30-40% in recent months mainly due to the exchange rates. Cost for locally produced and delivered project management, network operations and most important content will remain in line with inflation (approx. +10%). We expect prices for digital signage projects to rise about 30% compared to H1 2014. Entry Level digital signage solutions will most likely grow even more popular than they have been in the past.

We worry the most about demand. Demand for retail projects will drop significantly as consumer confidence drops and especially has cost for physical retail have risen substantially. Many leading shopping malls are foreign owned and charge USD-based rents. But Russia’s digital signage demand is significantly dependent on government contracts. These government contracts have been fueling digital signage projects in 2H 2014. If and how this will continue in 2015 is difficult to forecast. The third most important digital signage market after government (incl. transportation) and retail is banking. Retail banks have been hard hit by sanctions. So demand for customer flow management, digital signage and kiosk systems will be lower than in the past quarters.

It comes down to two scenarios:

  1. If the current (December 2014) situation continues we see a negative outlook also for digital signage. Especially with interest rates of 17% and higher basically killing all commercial lending.
  2. If the situation improves and sanctions are being lifted in H1 2015 we could see a flat development for digital signage in Russia. Taking into consideration that digital signage demand grows double digit in neighboring Europe.

Advertising markets are forecasted to contract in 2015. The impact for DooH will be even more noticeable as Digital out of Home has just beginning to gain traction and is mainly limited to indoor use (shopping malls, transportation).

But overall we strongly believe in midterm in the solid demand for digital signage in Russia. Nevertheless 2015 will be a challenging year.

DBCI Russia – our digital signage and DooH business climate index – provides first hand market data from the Russian digital signage market. See the latest results and news at invidis.com/dbci-russia/

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