While everyone is busy hunting for Christmas and New Year presents and anticipating the Boxing Day sales, let’s have a quick look at some of retail successes in Russia.
The figures can vary but most advisors agree that Russia is one of the largest consumer markets in the world. The period of stability, a growing middle class and traditional Russian “we’re not rich enough to buy cheap products” helps European brands in particular. The total number of non-food sales in Russia increased by 22% in 2010, reaching $274 billion, according to the recent UKTI’s Doing Business in Russia report.
Russian desire to buy was not fulfilled when other nations in the West came through this. The consumption era is at its height in the East now. That is what we witness.
Russians are amongst the first to buy luxury goods – not to show off, but to indicate their status and success. Repeatedly some would use the Russian saying “We’re not wealthy enough to buy cheap goods” meaning the cheaper options are of worse quality, to justify their spenditure. Dozens of thousands of Russian millionaires would be frequently seen in boutique stores in London, Milan, and Moscow and generally retailers would now know how to serve them.
The middle class in Russia is growing steadily and that is it now that attracts the attention of retailers, service providers, airlines etc. It’s the right time for those companies to target the Russian market. On 1st September 2012, Debenhams opened their first department store in Moscow with eight more waiting in the pipeline. It is clearly not the first one among international retailers to step on the Russian soil, but it might well be the first one to lead other British companies serving the Russian middle class.
The inspiration can come from the French Decathlon which is now opening one store a week in Russia and doesn’t plan to slow down its pace in the near future. In fact, they have recently hired 18 new business development managers.
Or the Spanish Inditex, owning brands like Bershka, Zara et al, which got about $433 billion in 2011 in revenues from their 274 stores across Russia. They came here only in 2006, six years later they increased the number of their stores almost ten-fold.
But there is still plenty of space in the Russian regions for new-comers – just find your niche. You might want to consider joint-ventures with local partners which generally proves to be beneficial to all three parties: customers, foreign and local partners.
The paradigm is now changing, and it is wise now to think of how best serve Russian customers where they live.