2013-12-13 11:09:12 - Fast Market Research recommends "Russia Retail Report Q1 2014" from Business Monitor International, now available
The retail market has achieved dynamic growth over the past few years as disposable incomes have increased, the expanding middle class emulates Western patterns of consumption and the level of consumer credit penetration rises. The market is expected to continue expanding rapidly, boosted by one of the world's fastest growing car markets and accelerating foreign direct investment (FDI). The attraction of Russia's retail market to potential investors centres on the continuing rise in disposable incomes, the growing desire for a wider choice of products and price points, easier access to credit and an increase in car ownership. Recent or upcoming EU membership and significant foreign direct investment should also lead to an expansion of retail markets. www.fastmr.com/prod/752062_russia_retail_report_q1_2014.aspx
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Moreover, the availability of consumer credit also allows an increasing number of Russians to make 'luxury' purchases. However, consumer credit is of relevance only to the wealthy and the emerging middle class; there are huge regional inequalities in the buying power of Russians, with millions of poorer citizens -particularly the elderly - living on fixed incomes. Most players already in the market are now moving aggressively to Russia's regional customer bases, where the market for modern retail outlets is still poorly developed. Some large regional cities are getting crowded, if not saturated, and local chains are being bought up. Western hypermarket chains have recently begun to expand beyond Moscow and St Petersburg, while Russian chains have moved more quickly to capture urban markets throughout Russia. Activity in the capital has shifted towards the outskirts, with several projects under construction beyond the Third Transport Ring including recently completed developments in Krasnodar and Volgograd.
At the same time non-essential status purchases, whether of food, clothes or household appliances are on the rise. We expect to continue to see Russian retailers adopting familiar Western retail strategies, like the growing use of private-label brands and linking inventory management technology to key suppliers. As in Western markets, retailers see big name labels as a way to increase profit.
* The most recent data available show that Russian retail sales rose by 3.5% y-o-y in June (in line with analysts' expectations), following a 2.9% increase the previous month.
* Auchan, which manages 52 outlets in Russia and has plans to triple its number of stores within five years, is unveiling its first Russian Auchan Drive outlet in Moscow in 2013; customers will be able to order groceries online and pick up the goods at a store without leaving their car.
' * Netherlands-based grocery retailer SPAR International has issued two new operating licences to retail companies in the Russian market, The licences have been granted to Anix, which operates within the Altay Republic, and to Semya Group, which serves the Kaliningrad region.
* Inland-based project management company SRV partnered with Russian real estate company Russia Invest to build a shopping centre, called Okhta Mall, in St Petersburg, Russia. The cost of the project, which is a part of a bigger Septem City Project, is estimated to be around US$335mn, and each company will contribute US$63mn, while three-fifths would be financed by a Russian bank. The construction of the 144,000 sq m mall is expected to start in winter 2013, while the mall is scheduled to open in spring 2016. The mall will be a short distance from St Isaac's Square.
* San Gally Park, Multi-purpose complex, St Petersburg, under construction again following delays due to financial crisis.
* A third mobile operator in Russia has ended its contract with consumer electronics manufacturer Apple for its popular iPhone devices. VimpelCom is the latest player to cancel its deal with Apple over the devices company's refusal to soften the terms of the distribution deal. MTS and MegaFon have previously ended their deals with Apple. Despite the popularity of the device BMI believes that the operators have made a smart move given that the majority of iPhones in Russia are likely to have been acquired on the grey market.
Key BMI Forecasts
* We expect total household spending to reach US$1127bn over 2014.
* This will account for over 50% of GDP.
* The majority of this (US$321bn) will come from food and non alcoholic drink purchases.
* The average NET income will increase to US$8909 per capita.
* Over 38mn households will fall into the US$10,000+ income bracket by the end of 2014.
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