Russia new destination for leading global retailers

14 Jun '16

3 min read

Courtesy: HKTDC Research

In a first of sorts, more than 50 per cent of the world's leading retail chains now operate in Russia. This has taken the country to an exclusive club of nations that command such attention from global merchandisers, with the existing members including the UK, the US, the UAE and China.

According to HKTDC Research, this is the second positive development for the country's beleaguered economy is as many months. Back in April, the World Bank predicted that Russia would return to growth – albeit by a modest 1.1 per cent – in 2017. In something of a caveat, however, it also forecast that the country's economy would shrink by a further 1.9 per cent in 2016 before tempered growth resumed.

A total of 52 global retail chains launched their first stores Russia in 2015. Forty of these outlets were opened in Moscow, with the remainder opting for one of the country's less expensive cities for their initial venture into the market. Regardless of location, it is believed that all of these retailers succeeded in renegotiating their rental terms to their own advantages by the end of last year. This was largely because the availability of commercial property still continues to considerably outweigh demand across Russia, the HKTDC Research report said.

Aside from Moscow, the most popular cities with multinational retailers proved to be St Petersburg, Yekaterinburg, Nizhny Novgorod and Samara. All of these cities are home to international standard shopping malls complete with globally significant anchor retailers, including Ikea (Sweden), OBI (Germany) and Auchan (France).

Among the retailers making their Russian debut in 2015 were Tsumori Chiasto, MCS, Malo, Nelva and Henry Cotton's. Overall, the most significant proportion of these newcomers – some 25 per cent – came from Italy.

Balanced against these arrivals, however, was the departure of number of familiar names from the Russian High Street. In total, 11 retailers exited the market, primarily those in the clothing, footwear and accessories sectors. These closures were headlined by several British retailers, most notably Laura Ashley, New Look, Esprit, OVS and River Island. Another high profile casualty came in the form of Finland's Stockmann Department Stores, which sold its retail operation to Debenhams' Russian franchisee.

Sadly, the more recent news has also been less than reassuring. Finland's Kesko Group has announced it is to sell its Intersport sporting goods and sportswear stores. While the company has been developing the brand as a licensee in Russia for several years now, it has pulled out following falling sales and increased competition from two rival chains – France's Decathlon and Russia's Sportmaster. In a similarly disappointing move, UK-owned Monsoon Accessorize has sold its Russian operation to Podium Market, a domestic fashion and accessories retailer.

Despite these mixed signals, a number of commentators see this as the ideal time for new brands and overseas retailers to enter the Russian market. This could see such operators take advantage of the depressed property market and the competitively priced promotional and logistics support available across the country. In terms of an added incentive, hard-pushed Russian consumers are said to be extremely open to new – but competitively-priced brands. (SH)

Fibre2Fashion News Desk – India

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