MOSCOW. (RIA Novosti political commentator Alexander Yurov)
Russia is fast becoming a model consumer society. Since 2000, its retail market has been the fastest developing area of the economy, growing by 12% in January-June 2006 compared with the same period in 2005. Nationwide retail trade volumes have been increasing by 10-15% annually, considerably outpacing local industrial growth. The figures for retail chains are even more impressive: their trade volumes increased by 25% last year.
Retail trade growth is likely to continue in 2006, further encouraged by the new trend among retail chains to expand into the regions. Several retail chains have entered regional markets this year. The German holding Metro Group AG plans to add nine more outlets to its existing chain of 23 Metro and three Real stores, six of which will be established in Russia's provinces. Hans-Joachim Korber, Metro Group board chairman, said his company was determined to penetrate all Russian regions. It is now setting up outlets in eastern Russia to supplement those in the country's west and south.
By purchasing the largest shopping center in Krasnoyarsk, the Russian holding Marta has expanded its regional chain featuring 40 supermarkets in 11 regions. Marta is developing eastern Russian markets in conjunction with the German company Rewe.
German retailers are not the only ones to operate on the local market. Pyaterochka, Metro, Turkey's Ramstore, Perekryostok, Sedmoi Kontinent, Kopeika, French Auchan, German OBI and Swedish IKEA now dominate the formal Russian retail market. These companies set the pace of the entire retail market's development. Two other international retailers, the French Carrefour and the transnational giant Wal-Mart, are expected to appear on the Russian market in the near future.
Rising local standards of living are not the only reason why businessmen want to operate in Russia's regions. Analysts say Russia will rank among the world's five largest retail markets in the medium term. Major market players are therefore in a hurry to enter Russia.
Retailers have their eye on cities with a population of 300,000-700,000. New Metro, Ramstore and Pyaterochka stores are opening in Russian regional centers. This seemed unthinkable only two years ago. However, experts are sure that these stores can operate at a profit because people in smaller Russian towns have a sufficiently high purchasing power. Per-capita monthly incomes in Russian provinces have soared 20-fold since 1992 to reach $300; this provides sufficient impetus for retailers to expand.
Kopeika and Perekryostok supermarkets have started opening in towns with a population of up to 50,000. For instance, the Kopeika trading house plans to open 17 supermarkets in the Kaluga Region and about 100 stores in the Moscow Region. The first Perekryostok supermarket has opened in a town with less than 45,000 people in the Nizhny Novgorod Region.
This does not mean, however, that retailers are leaving big cities because of financial losses. On the contrary, virtually every major retailer plans to expand operations in sprawling metropolises. But shortage of store premises in cities curbs retailers' profits. There are too many supermarkets in Moscow and Kazan, whereas other Russian regions still do not face this problem.
