Models of regulation of consumer behavior in the conditions of the sanctions regime

Bagreeva Elena Gennadievna ORCID: 0000-0003-1407-1574 Professor, Department of Legal Regulation of Economic Activities, Financial University under the Government of the Russian Federation 125167, Russia, Moscow, Leningradsky Ave., 49/2 bagreg@yandex.ru Other publications by this author

Shirochenskaya Irina Petrovna PhD in Economics Associate Professor, Department of Marketing, Russian University of Economics named after G.V. Plekhanov 115184, Russia, Moscow, 1st Novokuznetsk lane, 5-7, office 103 Shirotchenskaya.IP@rea.ru

Consumer behavior is a widely researched problem in marketing. The literature highlights both general consumer behavior issues and more narrowly focused ones ^[1]. Consumer behavior refers to activities aimed at obtaining, consuming and disposing of goods, including decision-making processes that precede and follow these actions ^{[2, 3]}.

As is known, the greatest influence on consumer behavior when choosing goods and services is exerted by price factors that directly affect the dynamics of demand in the market ^[4].

Nevertheless, in the presence of sanctions pressure, there is a change in the structure of the product offer on the market, which cannot but affect the change in consumer behavior ^[5]. Such changes in models and patterns of consumer behavior under the influence of economic sanctions are the subject of close study, both by marketers who provide economic justification for the ongoing processes, and by legal scholars who form a regulatory framework that allows regulating consumer behavior.

Analysis of data from open sources allowed us to identify and structure trends in consumer markets (fashion clothing) of countries under pressure from sanctions. In this article, we will consider the Russian Federation and the Islamic Republic of Iran as an example. In the Russian Federation , we can identify the following trends:

- reducing the consumption of premium products and following the savings strategy: according to the ROMIR research holding, since the beginning of 2022, Russian consumers have been demonstrating rational behavior: optimizing spending on food, everyday goods, transferring pre-selected goods to deferred demand, abandoning impulse purchases, switching to goods from domestic manufacturers.

- ambiguous attitude of Russian consumers to the high price of fashionable goods. On the one hand, the high price of fashionable goods is perceived by consumers as an indicator of high quality, originality of the model, brand, strengthens consumer expectation of a long service life of the model. On the other hand, consumers negatively perceive the increase in prices on the market, which is reflected in the indicators of the average receipt: in 2022, the average receipt for the purchase of premium fashion goods decreased to 14 thousand rubles. There are stable patterns in consumer behavior in the form of willingness to make a secondary purchase on a retail platform or rent luxury goods.

- formation of the consumer habit of buying fashionable goods, clothes, shoes, accessories through a variety of online channels: in online stores of companies, marketplaces, social networks. In 2021-2022, the number of online purchases of premium goods worth from 500 thousand to 1 million rubles increased sixfold in Russia, and the turnover of online stores selling goods in this price range increased 6.3 times during this period.

- demonstration of interest in the fashion products of Russian designers, the transition to Russian designer premium brands, due to the positive attitude of consumers to them.

- the use of parallel imports to purchase goods of premium Western brands through countries that are not subject to isolation and economic blockade.

- switching to counterfeit products (imitations and replicas) of well-known foreign brands.

The choice of the Islamic Republic of Iran as an object of analysis is due to the fact that this country has been most affected by long-term economic sanctions from the United States and NATO member countries. Over the past three decades, Iran's economy has been subject to various economic sanctions, including an oil embargo and other financial, banking and commercial sanctions. The sanctions had a strong impact on various economic indicators, affected the development of all sectors of the economy, harmed the entire population of the country, caused an economic crisis. Despite the US statements and short-term exclusions from the sanctions lists of food and VED, the sanctions led to an increase in absolute poverty of the population ^[6], disrupted the balance of the labor market ^{[7, 8]}. We can identify the following trends:

1) customer orientation, study of consumer needs by manufacturers and sellers, building long-term relationships with consumers.

2) the use of marketing tools and product differentiation;

3) the transition of consumers to purchase products of Iranian manufacturers (after the departure of international brands), as a result of the state's policy to support national production ^[9];

4) state support to increase the number of shops selling clothes of local manufacturers;

5) encouragement by the state of local fabric manufacturers to produce products of higher quality, under the influence of changes in demand ^[10];

6) a significant increase in shopping on social networks. The results of the study showed that the quality of information, the security of transactions, the reputation of the company and its location have a significant impact on consumer confidence and their willingness to buy clothes through social networks ^[11];

7) reducing the number of purchases of counterfeit products. According to studies conducted in Tehran, it has been shown that many consumers consider it ethical to buy counterfeit goods, since there are no strict laws and regulations in Iran to combat the production and supply of counterfeit products ^[12].

The analysis of the trends discussed above demonstrates that in the Russian Federation, unlike Iran, there is a lack of state support for initiatives to counter sanctions by market entities, as well as the use of parallel imports and the threat of increased acquisition of counterfeit products, which signals the need to regulate consumer behavior through regulatory and legal levers.

Consider the aspects that are subject to legal regulation:

1. consumer protection under sanctions ^[13];

2. stimulating demand for domestically produced goods;

3. stabilization of commodity prices;

4. advertising and competition under sanctions ^[14];

5. providing parallel imports as a way to meet consumer demand;

6. prohibitions on the export of certain goods.

In fact, those areas of marketing management of responsible consumer behavior that are directly related to the regulation of prices, demand, supply and protection of the rights of participants in the relationship are subject to regulation ^[15]. This allowed the authors to identify the main models of regulatory and legal regulation of responsible consumer behavior in the sanctioned economy (Table 1).

Table 1

Models of legal regulation of marketing management of responsible consumer behavior in the sanctions economy

Source: compiled by the authors based on the analysis of the domestic and foreign regulatory framework for marketing management of responsible consumer behavior in the sanctioned economy

As a rule, a country under sanctions uses a mixed model of legal regulation of marketing management of responsible consumer behavior in a sanctioned economy. This is especially true for countries that are in a full-scale sanctions regime aimed at multiple areas of the economy at once. A striking example is the Islamic Republic of Iran, the nature of whose sanctions regime has outstripped the relevance of the Iranian experience for Russia:

- The widest set of restrictions was also used against Iran.

- there are limited opportunities for Iranian oil exports, as well as imports of necessary industrial goods and equipment.

- as with Russia, sanctions were imposed on several political issues at once.

 At the same time, Iran is implementing its anti-sanctions policy quite effectively. For Russia, the most significant is the experience of applying restrictive measures against the Islamic Republic of Iran, as well as its experience in adapting and countering sanctions. As an example, we will give the formed model of economic relations of market entities, called the "economy of resistance": survival mechanisms, such as the creation of an instrument to support trade settlements INSTEX - (Instrument in Support of Trade Exchanges), conducting barter trade operations with many European countries, the use of national currencies in settlements, such as with China ^[16]. In addition, Iran has typological similarities with Russia, being a major exporter of oil and gas ^[17].

We will conduct a comparative analysis of the regulatory framework of the Russian Federation and the Islamic Republic of Iran and present it in Table 2.

Table 1

Comparative analysis of the regulatory framework of the Russian Federation and the Islamic Republic of Iran

Source: compiled by the authors based on the analysis of data from the official websites of the authorities of the analyzed countries, available studies, regulations and data available in the media.

The analysis carried out in the article allowed:

1. Identify and structure trends in consumer markets of countries under pressure from sanctions.

2. To identify the main models of legal regulation of marketing management of responsible consumer behavior in the sanctioned economy: a model focused on stimulating supply and demand; on sales promotion; on the development of competition.

3. Recommend:

- strengthen state support to market entities – producers and sellers of domestic products

- it is recommended to accelerate the development of local production

- replace the regulation of prices for socially significant commodity groups by regulating the validity of their changes.

- the introduction of such a support measure for the self-employed as tax holidays (until the end of 2023 with the possibility of extension), which will allow to some extent compensate for costs and maintain the level of income ;

- the introduction of a special deflator coefficient when determining the upper income limit for the self-employed in order to correct it upward, taking into account inflation.