Russians rush for shopping

Citation

(2007), "Russians rush for shopping", International Journal of Retail & Distribution Management, Vol. 35 No. 12. https://doi.org/10.1108/ijrdm.2007.08935lab.004

Russians rush for shopping

Russians rush for shopping

The Russian retail market can be described by two attributes: growing and promising. Russian customers have a growing amount of money to spend, so all retail sectors, from grocery to electronic appliances, are expected to develop.

Figure 2 Value of retail sales in Russia (RUB trillion), 2002-2010

In 2006, turnover of Russian retail trade amounted to RUB 8.6 trillion ($315.7million), which is 22 per cent more than in the previous year. In real terms, the value of retail trade grew by 13.2 per cent. In 2010, the value of the market may exceed RUB 21 trillion, according to “Retail in Russia 2007” a report published by PMR, a research and consulting company (Figure 2).

Lots of room for grocery development

The Russian retail sector is still underdeveloped in comparison with Western countries. Though supermarkets, hypermarkets and discount stores have sprouted up all over Russia, their market share is significantly lower than that of the most advanced retail markets. According to PMR, organised retail networks control only 12 per cent of Russian retail sales.

Where do Russians get their food, then? The majority of them buy from small, independent shops as well as in open-air markets. Luckily for network retailers, however, the emerging middle class is looking for better comfort, quality and safety when shopping. Consequently, companies operating supermarkets, hypermarkets and discount stores are developing faster than the whole grocery market and increasing their value share. In 2007, the organised retail network share will grow to 15.6 per cent, anticipates Marcin Szaleniec, Author of the report and Retail Analyst at PMR.

Russian companies are experimenting with various store formats. For example, Sedmoy Kontinent, a successful Operator of supermarkets, delicatessen supermarkets and convenience stores, is also developing a hypermarket chain. Similarly, Tander, owner of the largest discount store chain in Russia has decided to start opening hypermarkets. It is also highly probable that foreign hypermarket segment players, such as Wal-Mart and Carrefour, plan to enter the market in the near future. Auchan and the Metro Group with its Real brand are already there.

Figure 3 Organised retail networks,independent stores, and open-air markets share of the Russian grocery retail market, 2005-2007

Interestingly, the Russian grocery sector is not dominated by foreign companies, unlike the other local markets in Central Europe. Despite the fact that the abovementioned Metro Group and Auchan, as well as Rewe and Spar, have prospered in Russia, the market leadership belongs to the local player, X5 Retail Holding (Figure 3).

Non-food: different sectors, different conditions

The situation and stage of development of non-food retail differs from sector to sector. On the one hand, there is a scattered clothing and footwear retail segment where organised retail, i.e. boutiques and shops, belonging to major Russian and foreign companies, controls only about 5 per cent of the market. On the other hand, there is the electronic appliances retail segment, where about half of the market belongs to four large retail chains.

As for the DIY retail sector, around three fourths of Russian sales in this arena takes place in specialised open-air markets. DIY retailers have only recently begun to establish themselves in Russia. Interestingly, foreign and Russian retail chains compete here on an equal footing, which is quite a different situation to that observed in other sectors. Starik Hottabych and Maxidom from Russia, the French Leroy Merlin, the Finnish K-Rauta and Britain's Castorama are the most prominent DIY chains in the country. Several smaller Russian companies are also trying to take a bite of the market (Figure 4).

The current composition of the Russian DIY market may, however, change significantly in a few years of even months. Pace of its development (around 30 per cent year-on-year in 2006) and still low penetration of organised retail, will attract more players to the sector, both foreign and local. Worthy of note is that Castorama entered Russia at the beginning of 2006. For example, this year, the Israel-based Home Center is to appear in the country. At the same time, the small St Petersburg chain Santa House Express intends to enter Moscow and later to expand its activities across Russia.

Figure 4 Composition of DIY retail sales in Russia (percentage), 2006

All in all, the Russian retail market is developing at a fast pace, and not only in terms of sales. In particular, companies present on the market, both Russian and foreign, are gaining more and more expertise. Simultaneously, the market share of the largest players in all sectors is growing, so future entrants will face more difficulties than those which already provide consumer goods to Russian customers, adds Marcin Szaleniec.

You are welcome to contact the authors of the report: Marcin Szaleniec, Retail Analyst, PMR Publications; Tel: /48 12/618 90 62; e-mail: marcin.szaleniec@pmrpublications.com

For further information, please contact: Marketing Department. Tel: +48 12/618 90 20; E-mail: marketing@pmrpublications.com; web site: www.pmrpublications.com

For further information, please contact: PMR Ltd, ul. Supniewskiego 9, 31-527 Kraków, Poland. Tel: /4812/618 90 00; fax: /4812/618 90 08; web site: www.pmrcorporate.com