Retail in Russia

The main articles are:

• Russian economy
• Consumption in Russia

Consumer goods

Main article: FMCG market in Russia (consumer goods)

Digitalization of retail

Main Article: IT in Retail

Russia trade data breaches

Main article: Data leaks in Russia's trade

2023

Sales in hypermarkets for the year decreased by 6%

In October 2024, the results of a study by Sberbank were published, which showed a significant decrease in sales growth rates in Russian offline hypermarkets. For 2023, this figure decreased by 6%, while sales in online stores increased by 54%.

According to "Газета.ru," this trend is associated with a change in the structure of Russian households. According to the latest census, 42% of families in Russia consist of one person. This demographic feature affects consumer behavior, with loners less likely to cook at home and more likely to resort to online orders.

Sales in hypermarkets in Russia for the year decreased by 6%

In response to growing competition from online retailers, traditional retailers have begun to introduce new strategies to attract customers. Many hypermarkets open small cafes in their premises, where visitors can snack on groceries purchased from the store. Installing coffee machines has also become a popular way to attract customers and increase revenue.

In addition, offline stores are experimenting with new sales formats. Among them - the sale of goods in opaque packages, which creates a surprise effect for buyers, as well as holding promotions aimed at a children's audience. For example, some chains offer collectible toys when shopping for a certain amount.

Despite the efforts of traditional retailers, the online segment continues to show impressive growth. The rate of increase in sales of online stores was nine times higher than the indicators of offline points.

Sberbank experts note that the change in consumer habits is a long-term trend. Lonely people and small families are increasingly preferring ready-made food or orders via the Internet, which is due to the lack of motivation to cook large volumes of food for one or two people.^[1]

Opening of a record 35 department stores in Russia

In 2023, 35 new department stores opened in Russia - large-format multi-brand stores with goods in a single concept. This is a record figure since at least 2015, as stated in a study by the consulting company Core.XP, the results of which were published in early May 2024.

According to RBC, referring to the data of the report, in 2023, 15 new Stockmann department stores, nine Slava Concept, as well as TRND, which opened the top management of Trend Island, appeared in Russia. In addition, another Telegraph department store has been opened in Moscow (also developed by the Trend Island team). Among the regional facilities, a new Hi-Light department store was mentioned, which began work in the Greenwich shopping center in Yekaterinburg.

35 new department stores opened in Russia

At the end of 2023, as noted in the Core.XP study, 18 players developing department stores operated in Russia. The total area of ​ ​ such objects is 258.6 thousand square meters, of which 167.8 thousand are in shopping centers. The average area of ​ ​ one department store exceeds 2 thousand square meters. From 40 to 250 brands can be represented on the basis of one department store. In addition, such facilities may include recreation areas, food courts, coworking spaces and even lecture halls.

Experts attribute the sharp increase in the number of department stores to the formed geopolitical situation. Against the background of the departure of many foreign brands from Russia, the number of available retail space has increased. At the same time, there is an increase in consumer confidence in Russian brands, which contributes to their development.

Trend Island CEO Nikolai Konstantinov also says that for young, novice brands, creating their own retail network or even just entering the offline market is an expensive and difficult process. In this regard, the department store reduces the entry threshold, as well as provides operating and marketing support.^[2]

In Russia, they named the leading grocery retailers in sales of goods under their own brands

The largest retailer in 2023 in terms of sales of goods under its own brand was the Chizhik discounter from X5 Group. This was reported on March 28, 2024 by Vedomosti with reference to the rating of STM (own brands) of the research company Ntech.

In the rating, the Svetaevo brand (dairy gastronomy and ice cream are produced under it), sold in Chizhik, took second place, losing only to Vkusville. However, since only STM products are sold in Vkusville, in fact Chizhik ranks first among all other companies.

The largest retailer in 2023 in terms of sales of goods under its own brand was the Chizhik discounter

In third place is the Globus brand (meat, meat gastronomy and fish are produced under it), which is sold on the Globus network. Next in the ranking is the Fish House brand, sold in Pyaterochka stores of the X5 group. The fifth place was assigned to the Werner brand from Chizhik.

Also in the top ten were STM "Restoria Chef," "Generous Year," "Every Day," METRO Chef and "Ribbon."

The CFO of X5 Group Vladimir Salakhutdinov previously said that the group is actively developing STM in all formats. For example, by January 2024, the share of STM from sales "" Intersection reached 23%.

We have a very high recognition of brands, some of them acquire the properties of brands. For example, the "Green Line" is a healthy food product produced accordingly. And this is one of the leaders of perception. Therefore, we will develop them and seriously promote them, "Salakhutdinov added.

The total number of retail facilities of the 200 largest grocery chains in Russia in 2023 increased to 124,176 facilities. Their total area at the end of the year amounted to 37.86 million square meters. km, which is 7.6% more than in 2022. The share of the 10 largest chains in the growth of retail space amounted to 75.1%.^[3]

Retail growth in Moscow by 7% to 6.6 trillion rubles

In 2023, retail turnover in Moscow reached approximately 6.6 trillion rubles. This is 7.3% more in comparable prices, taking into account inflation compared to 2022. Such data were released on March 6, 2024 by the metropolitan government. Read more here.

Retail trade growth by 6.4% to 47.41 trillion rubles

The volume of retail trade in Russia in 2023 increased by 6.4% in comparable prices compared to 2022 and reached 47.41 trillion rubles. Such data in February 2024 was published by Rosstat.

According to the Prime agency, citing materials from the department, the turnover of retail trade in food products, including drinks, and tobacco products in 2023 increased by 3.3% compared to a year ago and reached 22.76 trillion rubles. The turnover of non-food retail increased by 9.5%, to 24.65 trillion rubles.

The volume of retail trade in Russia in 2023 increased by 6.4%

It also follows from the Rosstat report that the retail structure in 2023 was balanced between food products, including drinks and tobacco products, which accounted for 48% of the total, and non-food products, which amounted to 52%, which is slightly different from 2021, when the share of food products was 49.4%, and non-food products - 50.6%.

In 2023, retail trade turnover by 95.7% was formed by trading organizations and individual entrepreneurs working outside the market. The share of retail markets and fairs was 4.3% (in 2022 - 95.4% and 4.6%, respectively).

According to Rosstat, in December 2023, retail trade turnover amounted to 4.94 trillion rubles, which is 10.2% more than a year earlier. The volume of retail sales via the Internet in the last month of 2023 increased to 11.6% compared to 9.2% in December 2022.

The Ministry of Industry and Trade, commenting on the figures of Rosstat, noted that the retail turnover indicator is one of the most important indicators of the state of the Russian economy. Its growth always speaks not only of an increase in the profits of trading organizations, but also of an increase in tax revenues to budgets of all levels, said State Secretary - Deputy Minister of Industry and Trade Viktor Yevtukhov.^[4]

1% reduction in retail sales in the first 5 months

Retail sales in Russia showed an impressive growth of 9.2% YoY in May 2023, which is primarily due to the depth of failure in mid-2022 after the outbreak of the conflict in Ukraine. If we compare with 2021 - a drop of 1.4%, compared to 2019 - an increase of 4.5%, and by May 2014 a decrease of 4.5%.

In January-May 2023, retail sales decreased by 1% YoY, by 2021 - minus 2.2%, by 2019 - an increase of 2.9% and a significant decrease of 5.7% compared to 2014.

The recovery of retail demand began in December 2022 and with varying success continues until May 2023, the recovery trajectory is V-shaped, but so far as part of compensation for the failure of demand in 2022, which is clearly visible compared to 2021 and even more so from 2014.

That is why retrospective analysis is very important, since the comparison with 2022 gives too many perceptual distortions. Relatively weak demand for goods restrains commodity inflation, and inflation prospects largely depend on the measure of promotion of consumer demand and involvement in consumer excitement.

2022

Retail turnover decreased by 6.7% to RUB 42.5 trillion

Retail turnover in Russia in 2022 decreased by 6.7% compared to 2021 and amounted to 42.5 trillion rubles, Rosstat reported in February 2023.

In terms of annual sales, retail trade in 2022 is at the level of 2012 and 10-11% below the 2014 high.

The 2022 crisis was the strongest since 2015 and more devastating than the 2009 crisis in terms of the impact on retail turnover.

Sales collapsed at the strongest pace in 30 years, why?

• A decrease in the available nomenclature of goods due to sanctions after the outbreak of the conflict in Ukraine and limited replacement with analogues from neutral countries and for parallel imports. The most striking example is cars, where the collapse of sales in monetary terms amounted to 1.8-2 trillion rubles per year.

• Uneven price increases, which reduce purchasing power for some groups of goods (especially cars), trade has become unbalanced.

• The deficit of confidence regarding economic prospects and the uncertain political situation, which forces savings, is growing a tendency to save.

Shopping center traffic decreased by 24% compared to 2019 and by 1% compared to 2021.

The attendance of shopping centers in Russia in 2022 decreased by 24% compared to 2019 and by 1% compared to 2021.

Retail turnover decreased by 5.9% over 10 months to 34.7 trillion rubles

Retail turnover in Russia, according to Rosstat, continues to actively decline without signs of recovery. In October, minus 9.7%, in the first 10 months of 2022, the collapse by 5.9%, after the outbreak of the conflict in Ukraine, a decrease of 8%.

2022 may be one of the worst for the retail segment in 25 years with the potential to decline by 6.6-6.8% at the end of the year, the Spydell Finance channel expected. The worst year for retail in the history of modern Russia, not counting the devastating 1990s, is 2015, when turnover in real terms decreased by 9.9%, in 2009 the fall was by 5.3%, in 2020 a decrease of 3%.

The problem is that the comparison base is quite low. For example, since the Crimean Spring, retail trade turnover (over 8 years) has decreased by 9%, and since 2008 it has grown by a symbolic 13%.

Only 20 foreign retailers out of 360 left Russia completely against the background of the conflict in Ukraine

At the beginning of 2022, more than 360 foreign retailers were present in Russia.

At the end of February, 180 of them decided to suspend work in our country. Only 20 companies have completely left. Some, for example, rebranded, and someone sold their business to partners, but with buyback obligations.

Outlets of 152 foreign brands in November 2022 continue to operate in large Russian shopping centers.

Most of the remaining Russia in foreign retailers are USA 22.4%. The second and third places Italy are in (15.1%) and (France 10.5%). They are followed by Turkey Germany and (both have 9.9%).

2021

The number of foreign retailers in Russia for the year increased by 15%

During 2021, 15 new foreign retailers came to Russia, which is 15% more than in 2020. Such data at the end of January 2022 were released by Knight Frank analysts. According to their calculations, more than half of retail chains that have entered the Russian market specialize in the sale of perfumes, cosmetics, clothing, linen and shoes.

Almost 79% of new foreign retailers operate in the price segment above average and premium. The share of companies selling products at affordable prices has decreased to 21%, which is a record low in 10 years, Kommersant reports.

Experts believe that the popularity of the Russian market for international brands is due to the fact that Russians, unlike Western consumers, have higher loyalty to traditional shopping, and restrictive measures in the country during a pandemic are not so tough. Also during 2021, several players from the CIS countries entered the Russian market, for example, from Belarus and Kazakhstan, and this trend will continue in 2022.

In pre-pandemic (we are talking about the COVID-19 coronavirus pandemic) years, only fashion retailers entered the domestic market more than two dozen annually, expert Franshiza.ru Anna Rozhdestvenskaya noted. She believes that the activity of brands in the segment above average is caused by a decrease in tourist and business flow abroad. Wealthy consumers used to go shopping in Europe, but now they are forced to satisfy their needs domestically, and brands understand this.

real estateJLL Polina Zhilkina, director of the trade department, says that earlier foreign retailers mainly entered the Russian market through local partners, but by 2021 they increasingly showed their readiness to go out on their own. However, the interest of Western networks in entering the Russian market is still very cautious, she added at the end of January 2022.^[5]

Retailers in a pandemic: the rapid development of online services and self-service systems

During the pandemic, retailers faced the need to correctly prioritize digitalization. Their efforts were mainly aimed at developing online services for customers. However, they began to implement information technologies much faster in some other areas. TAdviser turned to large retailers and learned how the pandemic affected their digitalization. Read more here.

2020

The largest food retailers in Russia

Analytical agency Infoline in April 2021 published a rating of the largest food retailers in Russia. At the end of 2020, X5 Retail Group and Magnit remained the leaders, with revenue indicators of 1.97 trillion and 1.5 trillion rubles, respectively, an increase of 14.2% and 13.3%.

The three leaders included the combined company, including the Dixy, Krasnoe & White and Bristol networks. The turnover of this retailer in 2020 reached 950 billion rubles, which is 18.4% higher than a year ago.

In 2020, against the background of antique restrictions, a record growth in revenue dynamics among grocery retail chains was shown by "Traffic Light" and "VkusVill" - it turned out to be almost 40% more than a year ago.

"Traffic light" positions itself as a low price store. Analysts believe that the retailer managed to achieve such results against the background of a decrease in real incomes of the population. Vkusville, in turn, quickly adapted to the new realities of the market and entered the field of online trading, which became a growth driver for it.

Sales of companies from the top ten of the rating increased by 12.9%, to 6.1 trillion rubles at the end of 2020. The total number of stores exceeded 56,000, or 22 million square meters. m.

Experts note that the driver of market growth was the development of the e-commerce segment (an increase of 3.6 times), the retention of prices by federal and regional retailers despite increased inflation, as well as the investment activity of FMCG sellers.

The pandemic forced many to turn on the austerity regime of family budgets and buy products with essential goods exclusively from stores of large retailers capable of offering low prices and attractive promotions, the Infoline report says.

The Maria-Ra network dropped out of the top 10 Infoline rating: although the company increased revenue by 8.5%, it gave way to VkusVilla^[6]

13 foreign trading operators entered the market. 50% decline

The COVID-19 pandemic and the economic crisis have significantly reduced the activity of new international trading operators to enter Russia. In 2020, 13 trading operators entered the market - half the figure for 2019 (26 brands). The indicator became the worst since 2011, when 11 operators entered the market. The best year in the last ten years of measurements was 2014 - 68 brands.

Half of the new retailers that entered the Russian market are represented by the profile "clothes, shoes, underwear." The share of price segments was distributed almost equally: 54% - medium/below average, 46% - above average.

The French accessories brand Longchamp announced its departure from the Russian market in 2020. According to the general director of the company, the closure of stores is largely due to the consequences of the epidemic crisis. Inditex Holding also decided to close Lefties stores in Russia.

62% reduction in number of outlets

As of mid-July 2020, retail outlets in the Russian Federation were 62% less than at the beginning of the COVID-19 pandemic in March. The trade sector is affected by a reduction in effective demand and legislative restrictions.

The Ministry of Industry and Trade of the Russian Federation has submitted to the Government a Trade Development Strategy until 2025

The Ministry of Industry and Trade of the Russian Federation has submitted to the Government of the Russian Federation the Strategy for the Development of Trade until 2025, Prime reports in July.

The document provides for the development of all trade formats: street retail, fairs, markets. The agency plans to submit a draft law to the State Duma for the development of these types of retail. The ministry considers it necessary to provide state support to objects of both non-stationary and mobile trade.

Currently, the share of large network trade is about 35-40% of the Russian market. The rest of the segment is non-network trade: small formats of trade, market, fair trade, non-stationary facilities, convenience stores. Thanks to this multi-format, a competitive environment is supported.

Also, the Ministry of Industry and Trade of the Russian Federation intends to support consumer cooperation, the corresponding proposals were sent to the Government of the Russian Federation. The development of this retail format makes it possible for residents of the country living in villages, in small settlements, to purchase the necessary goods.

January turnover growth by 2.7%

According to Rosstat, in January 2020, the annual growth rate of retail trade turnover reached 2.7% (1.9% in December 2019) - this is the maximum since December 2018.

2018

Magnit is the largest chain in terms of the number of stores

At the end of 2018, Magnit turned out to be the largest supermarket chain in Russia in terms of the number of outlets.

Increased share of discounters in retail turnover

2017: Major retail chains

2015: Retail Sales Dynamics

2014: Top 10 food retailers in Russia

2011: E&Y's Russia Retail Overview

The 2011 Ernst & Young Retail Survey. The study examined various aspects of retail companies and summarized the opinions of respondents on the most pressing issues of today - such as the development of online retail, regional preferences of chains when expanding the geography of presence, forecasts of market growth.

Economic Overview

As the level of penetration of networks in the regions increases and the consolidation of the Russian market intensifies, it becomes more difficult for new players (both Russian and foreign) to reach it. According to some analysts, the Russian market is practically closed to new participants. Networks that have already entrenched in the market have quite strong positions and do not intend to allow new companies to enter their territory. In addition, the price of entering the market by acquiring other networks has increased significantly. At the same time, growth rates are slowing down,  and in general, the attractiveness of the Russian retail market is decreasing. Thus, according to A.T. Kearney, Russia dropped to 14th place (from the second in 2009 ) in the annual ranking of countries most attractive for investing in the retail sector.

The most significant indicator, due to which Russia lost its leading position in the ranking, was the indicator of the growth rate of the retail market, taking into account sales growth , as well as the amount and quality of retail space (the so-called "time factor"). With the increase in market saturation , the corresponding indicator also decreased (from 51 in 2009 to 31 in 2010), which is taken into account when compiling the rating. The likelihood of new players entering the Russian market has also decreased. Does not add attractiveness to Russia in the eyes of investors and a high level of corruption. In the ranking "Corruption Perception Index," compiled by the international non-governmental organization Transparency International, Russia is in 142nd place among 182 countries, which corresponds to a very high level of corruption.

To date, the most significant factor that has a positive impact on the attractiveness of the Russian market remains steadily increasing incomes of the population. True, this is somewhat overshadowed by the decline in the population itself , as well as the recent stagnation of real disposable income.

The following sources are used to prepare this section:

• Federal state Statistics Service (Rosstat),
•   EIU — Country Forecast, EIU IndustryWire — Forecast,
• A.T. Kearney Global Retail Development Index.

Despite the crisis in the economy, retail turnover increased in 2010 by 13% (to 16.5 billion rubles) compared to 2009. According to the results of nine months of 2011, the volume of retail trade continued to increase,  and by the end of September the increase was 16% compared to the same period last year.

Retail turnover

There were minor changes in the structure of retail turnover: the share of non-food turnover increased from 51.3% (for nine months of 2009) to 51.9% (for nine months of 2011). It should be noted that the growth of retail trade turnover occurred against the background of a record low inflation rate, which, according to preliminary data of Rosstat, is expected at the level of 6.1% in 2011. According to the results of nine months of 2011, deflation was recorded at the level of -2.7%. To a large extent, this was due to the fact that  in 2011 a large harvest was harvested, due to which prices for many categories of food products were reduced. In addition, oddly enough, the decline in inflation in 2011  was influenced to a certain extent by the 2010 drought, which inflated agricultural prices. As a result , prices for certain types of products decreased in 2011. According to the forecasts of the Ministry of Economic Development of the Russian Federation, retail trade turnover is expected to grow at 5.5% in 2012. 

Sales of trading organizations and markets

The share of sales in open markets has steadily decreased in recent years. The only exception was 2009, when there was a slight increase in the share of markets due to the financial crisis, which affected the purchasing power of the population. According to the results of nine months of 2011, the share of markets continued to decline, which indicates an increase in the level of penetration of organized trade.

M&A transactions

2011 was marked by several major transactions in the M&A market , which led to an increase in consolidation (acquisition by the DIXY Group of Companies of the Victoria chain, X5 Retail Group - Ostrov chain and Seventh Continent network).

Also in 2011, an agreement was finally reached to acquire a 44% stake in the Lenta network by a pool of investors in the EBRD, TPG  and VTB, which put an end to the conflict between shareholders that lasted more than a year. Analysts expect that key M&A deals  will soon be conducted mainly between Russian players. The likelihood of buying Russian networks by foreign strategic investors is currently low.

Legislation

In the legislative plan, 2011 did not bring retail companies a solution to most of the problems that have long faced the industry. In the field of tax administration and antitrust regulation, there continues to be a tendency of government interference in  relations between suppliers and retailers, which led to the need to raise already seemingly agreed polls again.

Transfer pricing

It is especially worth noting the adoption of the Federal Law of 227-FZ, which presented a completely new approach to the issue of transfer pricing. For the first time since 1999, the state has established detailed requirements for the determination of prices for tax purposes both between interdependent  and in some cases between independent persons. With the introduction of these norms , a separate direction appeared in the Russian tax legislation, the administration of which is no less important than other directions of the companies' tax policy. Taking into account the specifics of retail trade, the provisions of the law on transfer pricing in some cases can have a significant impact on the current activities of market participants. Nevertheless, with the end of the transition period in 2015, most participants will have to develop an approach to the procedure for determining transfer prices and monitoring them in the implementation of intra-group and foreign trade transactions.

As part of the application of the law on transfer pricing, it is worth separately pointing out the first opportunity to consolidate income tax liabilities within a group of companies. This innovation became possible after the adoption of the law on the consolidated taxpayer, but the current consolidation criteria do not allow even the largest players in the retail market to apply this regime.

Taxation of commodity losses

In 2011, the issue of losses/losses arising from combat, damage and shortages in trading floors was never resolved. The Ministry of Finance of the Russian Federation, together with the Federal Tax Service, took an uncompromising position, believing that  there is no economic justification for the losses occurring in trading floors and that taxpayers have no  right to deduct these expenses when determining the taxable base. At the same time, practice shows that litigation is mostly settled  in favor of taxpayers (which directly correlates with the peculiarities of doing business by retail companies).

Electronic Document Management

It is worth noting separately a number of changes that can simplify the activities of retail sector companies - the introduction of electronic document management  on VAT, as well as correction invoices. However, there are administrative issues that make it difficult to achieve positive results from these innovations.

Taxation of bonuses

In 2011, we also observed a return to the issue of applying VAT to bonuses (bonuses) paid by suppliers to retail operators. In the absence of a clear legislative approach to the procedure for applying VAT to bonuses (bonuses) for the volume of goods purchased, this issue was first raised in the Resolution of the Presidium of the Supreme Court of Ukraine No. 11175/09 in the case of Dirol Cadbury LLC of December 22, 2009. Then, after a long discussion by all interested parties, a compromise was reached that reflected the interests of both retailers and suppliers. Nevertheless  , at the end of 2011, this issue was raised again by the Supreme Arbitration Court. At the moment, market participants are eagerly awaiting a decision in accordance with which law enforcement practice will be built in the future.

Tax Administration

As for the general state of tax administration in 2011, a significant share of companies continue to be checked as part of tax audits every two to three years. The results of such audits are usually additional tax liabilities, and subsequently tax disputes and litigation. The most common tax liabilities accrued in accordance with the decisions based on the results of tax audits are VAT  and income tax.

Key Market Trends

Current situation and development forecast

The increase in revenue, noted by all without exception participants in our study, indicates the continued growth of the market and the share of civilized trade on it.

The financial situation of the networks improved compared to the crisis year 2009. None of the participants in the 2011 survey  noted a decrease in revenue, although, apparently, some networks have to sacrifice profitability to maintain sales growth.

Nevertheless , the growth of the market and the expansion of networks allowed both large and medium-sized players to strengthen their position. Most of them do not stop there , demonstrating their readiness to develop business in the regions, create their own logistics infrastructure and increase their presence in the already developed regions. As already noted, it is becoming more and more difficult to enter the Russian retail market. New participants here are expected to compete with strong players, among whom  are not only industry leaders , but also smaller regional networks that have stable positions in local markets.

However, macroeconomic statistics suggest that growth is slowing. The population of Russia is aging and shrinking, which  , together with the dependence of consumption on  energy prices, makes it difficult to predict the development of the industry for the long term. As our survey showed, market participants do not have an unambiguous opinion about its development  in the short term. They take a single view only that  growth will continue in the near future. As for the estimate of growth rates, forecasts vary here: from insignificant growth within 5% to an increase of 10-20%. Some respondents found it difficult to indicate the expected growth rate of the market.

I would like to note the plans of the networks to increase revenue. Almost all survey participants plan to increase the network's revenue in excess of the market growth indicators they predict.

Competition

Apparently, planning to increase revenue at a high pace, the networks expect to squeeze out both unorganized trade and competitors. At the same time, if the share of unorganized trade really decreases, then competition in the organized trade market grows as it saturates.

All participants in the survey are unanimous in their opinion about the growth of competition. The comparison of the results of the study for 2009 and 2011 shows that today a larger number of respondents expect increased competition between Russian networks. However, the proportion predicting increased competition with foreign networks is also large.

Survey participants expect increased competition also between federal and regional players. After the takeover of the Victoria and Kopeyka chains , eight major federal-level players remained on the retail market: six Russian chains (Kh5, Magnit, DIXY, Lenta, Seventh Continent and O'KAY) and two foreign ones (AUCHAN and METRO/Real). Most likely, foreign chains will grow organically (thanks to the large format of their stores, involving investments in the construction of new facilities), displacing regional players. Russian operators can move into the regions and by acquiring local companies.

Entry of new foreign networks into the Russian market

Despite the fact that a number of analysts consider entry into the Russian market of foreign companies unlikely, the majority of participants in our survey are confident in the opposite. Apparently, the landmark departure of Lev Khasis to Walmart2 was assessed by many as the eve of a possible resumption of the network's attempts to settle in the Russian market. According to respondents, the appearance of foreign players is most likely  in the food and clothing segments.

Problems

The market as a whole

The overwhelming number of study participants believe that  the crisis to trade in retail has not yet ended. At the same time, although 57% of respondents believe that   there will be no deterioration in the market, the remaining 43% expect a deterioration in the situation compared to the current situation.

Perhaps that is why most respondents believe that the main threat to the industry today is unfavorable general economic conditions. It should be noted that the proportion of participants who put this factor first is almost the same as in 2009, when we conducted the study during the crisis. In general, the top three problems remained the same.

It should be noted the aggravation of the problem with the search for qualified personnel, as well as the growing dissatisfaction with the legislative regulation of the industry. This year , the "administrative barriers" answer option was included in the questionnaire of study participants, which immediately became quite popular among respondents. It also appears to be directly related to the dissatisfaction of those surveyed with the actions of regulators and local authorities.

It is possible that dissatisfaction with the legislation is associated with such an unloved retail representatives by the trade law . 69% of respondents believe that the market has still not fully adapted to the requirements of the law. In addition, more than half of the survey participants expect further tightening of regulation.

The only factor whose popularity decreased in assessing threats to the industry was financing problems associated not so much with the state of the retail market as with the normalization of the situation in the banking sector. Most of the survey participants noted a significant improvement in the field of financing.

Company problems

With the end of the acute phase of the financial crisis, the internal problems of companies have changed markedly. If during the crisis the main concern was the decline in consumer demand and high interest rates, now the problem of hiring personnel has come first, the scale of which seems to be quite significant. 47% of respondents included this factor in the list of the main threats to the industry as a whole.

Real estate

In second place in terms of importance are the problems of retail associated with the real estate market. Indeed, retail is highly dependent on the state of the property market. After all, rental costs are one of the main factors affecting the financial performance of chains, and the development of the retail market is impossible without the restoration of the real estate market. The problems of the latter hinder the development of both large-format grocery retail and the non-grocery segment, which depends on the emergence of shopping centers.

In the post-crisis period, foreign financial institutions show unwillingness to increase funding for development projects on the Russian market. This leads to a reduction in the number of new facilities, as well as an increase in the cost of construction, which is associated with the replacement of foreign loans with more expensive loans from Russian banks.

Today, retail (however, as always) is experiencing difficulties in both main areas of interaction with the real estate market. Rental rates in promoted shopping centers are growing, while new high-quality facilities are not enough for development through organic growth.

According to experts, in the future rental rates will continue to grow, but this trend will affect only well-located objects. Experts also note a fairly high level of primary saturation of the commercial real estate market in large cities and a tendency to reduce traffic. With the advent of new shopping centers, competition between them is increasing. This trend affects, first of all, the non-food segment - in fact, retail points of one chain are starting to compete with each other.

The results of our survey show that the approach of chains to working with real estate has changed after the crisis: the share of companies considering rent as the only option has decreased (from 66% in 2009 to 43% in 2011). At the same time, the popularity of a combination of various forms (rent, construction or purchase of finished objects) has grown, which indicates an increase in investment in its own real estate.

Among companies that are considering building or acquiring finished real estate, half are going to acquire their own retail space. The rest of the companies are planning investments in both retail space  and distribution centers.

 Network Development Plans

46% of the study participants indicated the expansion of the geography of presence as one of the main strategic tasks in the near future. Only 7% of respondents do not plan geographical expansion.

According to market analysts, the main direction of retail trade development in the near future will be the movement from large cities to smaller ones, as well as from already well-developed central regions to others. Indeed, in many regions, network retail is not yet present at all, which is associated with logistics problems, the lack of suitable real estate and the low purchasing power of the population.

Despite the opinion of analysts, Moscow remains the most popular direction of geographical expansion for the participants in our study. Apparently, high incomes of the population and developed infrastructure still outweigh the saturation factor of the Moscow market - while the city's population and its income grow, the market will remain attractive to retail. Nevertheless , it should be noted that for the overwhelming majority of respondents, Moscow is only one of the regions in which it is planned to open new points. UFO took the second place , overtaking the Central Federal District by a small margin.

 Unlike the grocery segment, in non-grocery chains, the degree of popularity of Moscow is not so significantly different from the indicators of other regions. The presence of the Siberian Federal District and the Far Eastern Federal District in the plans of non-food networks can also be noted. Obviously,  expansion in the regions requires companies to solve, first of all, logistical problems. Among the main factors that hinder development (along with the level of consumption and the availability of retail space), this is the only problem that can be solved by the efforts of the chains themselves.

Probably, for grocery chains this issue is more relevant  due to the limited shelf life of goods,  as well as against the background of the trend of growth in sales of products with shorter shelf life. Therefore, many companies today associate further prospects with the construction/development of their own logistics system, including investments in distribution centers in the regions.

Perspective formats

According to RBC, discounters and large-format stores provide more than 70% of the network retail turnover in the grocery segment. However, their share is reduced by the restoration of the need for supermarkets.

Opinions on the prospects of various formats among representatives of grocery and non-grocery retail companies differ significantly. Participants of our survey from among the operators of the grocery segment mainly strive to develop several formats, preferring the store at home (63% of survey participants plan to expand this format). Hypermarkets and supermarkets intend to develop about 50% of participants, and only 13% noted discounters in their plans.

Non-grocery retailers tend to focus efforts on one or two store formats. As priority areas of development, they noted discounters (57%) and online stores (43%).

The vast majority of the study participants (representatives of both grocery and non-grocery retail) consider stock stores to be a promising direction in the development of non-grocery chains.

According to the majority of respondents, stores located within the city in large cities have the most successful location.

Hypermarkets

Hypermarkets are stores that sell both food and non-food products mainly on the principle of self-service. The area of ​ ​ such outlets is from five thousand square meters and above. They differ from other retail enterprises not only in scale, but also in a universal assortment of goods.

In 2011, Russian retail chains opened 100 new hypermarkets, which was a record for the entire history of retail in the country (Infoline study). As a result, the number of hypermarkets in Russia increased to 580.

42 new hypermarkets launched the retail chain "Magnit." Seven stores were opened by O'key, the same number by Metro Group, six more by X5 Group (Pyaterochka, Perekrestok, Karusel) and five by Auchan.

Infoline predicts that at least 800 more large stores will open in the country over the next five years. Currently, the largest in terms of the number of hypermarkets is the Magnit retail chain, but Metro Cash & Carry ranks first in terms of their total area.

Internet trade

Speaking of the modern retail market, one cannot ignore such an important area as Internet commerce. Our country does not yet have a high level of development of this trade segment. Market participants cite a number of reasons that impede the growth of online commerce  in Russia.

 First of all, this is the underdevelopment of the electronic payment system  and problems with logistics. In addition, one can note the low degree of Internet penetration in  a number of regions.

In general, online commerce is growing at a fairly high pace, but so far its turnover is not comparable with offline retail. Therefore, today large offline networks are not concerned about competition from online companies. However, this does not  mean that offline operators can afford to ignore the possibility of selling online. Indeed, in addition to an additional distribution channel, the presence on the Internet allows you to increase traffic  in offline stores. Today, many experts note a tendency to combine online and offline.

As the results of our study showed  , representatives of non-grocery chains are primarily interested in the development of the online store format. This format is planned to be developed by 43% of companies in the non-product segment and only 25% of companies in the product segment.

Own brands

Another trend in modern retail to trade is a gradual increase in the share of sales of goods under the own brand (STM) in revenue. The prospects of this area are associated both with a higher potential for profitability of STM,   and with a still economical model of consumer behavior.

If in 2009 a significant part of companies (42%) noted that the share of STM in the turnover does not exceed 5%, then in 2011 the share of such companies decreased to 17%.

  Respondents consider dairy products and soft drinks (grocery segment), as well as clothing (non-grocery segment) as priority segments for the development of sales of goods under their own brand.

The trend towards an increase in the share of STM sales reflects global practice. In Western chains, STM sales sometimes reach 50% of the total turnover. Experts and market participants note the prospect of further development of this area and an increase in the share of STM in turnover. Representatives of the non-food segment (in particular, manufacturers of clothing and footwear, as well as pharmacy chains) consider the development of STM exclusively in a positive way, since this allows them to better manage the assortment and reduce the cost by changing the country of production (for clothing and footwear).

At the same time, representatives of the product segment point out the risks associated with the instability of Russian suppliers. The development of STM in product retail is hampered by dissatisfaction with the quality and timeliness of supplies, as well as  due to the unwillingness of manufacturers to become dependent on a specific network. It seems that the development of STM in the product segment will be determined by the capabilities of networks in the field of investing in the creation of their own production base.

Prospective development segments

As  in 2009, the product segment retained its leadership in terms of growth prospects. Indeed, even in the face of stagnant real disposable incomes of the population and against the background of the trend towards savings in purchases, consumers cannot abandon consumer goods. Therefore, the position of grocery retail companies in conditions of uncertainty will always be more stable and predictable compared to other segments.

It should be noted the increased (compared to 2009) confidence of the study participants in the prospects for the development of the non-food segment. The popularity of the clothing segment grew from 33% to 57%, and shoes  - from 22% to 36%. The prospects for the development of network trade in these segments are primarily related to hopes for a decrease in the share of uncivilized trade. This should be facilitated by a reduction in the share of gray imports, in particular due to Russia's accession to  the WTO.

Today, according to most representatives of the non-food goods segment, the share of "gray" imports is 10-20%.

Development financing

The most popular type of development financing is still a bank loan. However, compared  to 2009 in 2011, the share of companies that plan to use other sources of financing along with bank lending increased significantly (43% in 2011 compared to 19% in 2009). Other sources of financing include issuing bonds (30%), placing shares on the stock exchange (about 25%) and attracting a financial investor (23%). Several participants in the study noted the IPO as one of their strategic goals for the next three years to five years.

Compared to 2009, the share of companies that plan to use their own sources to finance development also increased (14% in 2011 compared to 3% in 2009).

Information on study participants

The survey was attended by representatives of various segments of the retail market, including industry leaders. Most of the participants are grocery chains (40%), as well as chains  selling clothes and shoes (33%). In addition, the respondents included multidisciplinary networks, operators of household appliances and other goods. Both Russian companies (87% of respondents) and international networks took part in the survey.

1992: Free Trade Decree

1991: The Food Crisis

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See also

• Retail (Global)
• Trade Automation Systems
• Real-time retail: How retail chains are speeding up data processing

Notes