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Inflation Slows Down, Retail Sales Go Up in Russia
Apr 28, 2010

Declining unemployment, increasing wages, and hence rising confidence of the price-conscious Russian consumers has contributed to the growth of country’s retail sales.

According to Moscow-based Federal Statistics Service, retail sales in Russia grew consecutively for the third month in March this year, as per the news published by BusinessWeek.

After a revised gain of 0.9% in February 2010, it was an annual rise of 2.9%. The retail sales recorded 7.9% increase on the month.

The country’s retail trade turnover reached 3.608 Trillion Rubles, up 1.3%, in Q1 2010. The share of stationary trading outlets in total retail trade was 87.4% while markets and fairs accounted for 12.6%. The share of food products, including groceries, beverages and tobacco, was 49% of the total, and the share of non-food items stood at 51%.

An increase in the household spending as a result of higher wages and slowing inflation is the main reason for the growth in retail sales. Compared to March 2009, the average monthly wages surged 3.4% this March. Disposable income saw year-on-year increase of 4.2% in March 2010.

The consumer confidence is also being boosted by stabilizing unemployment, which remained unmoved at 8.6% in March.

In the years to come, indications of acceleration in bank lending and a downward unemployment trend point towards a more substantial domestic demand. The external outlook for growth is improving. Excluding Sberbank, there was an expansion of around 15% in the credit portfolio of Russian Banks in March, the first indicator of growth in bank lending. From April 19, 2010, Sberbank has slashed rates on retail loans and has also stopped charging of commissions to increase the demand for credit.

Companies are now adding employees due to growing confidence that improvement will continuously take place in demand and profits.

Russian retail industry outlook also seems shining. According to a market research report named “Russian Retail Industry Forecast to 2013” by RNCOS, by the year 2013, the sales will reach US$825 Billion. The share of food sales will be 42% and that of non-food sales will be 58%.

According to a Research Analyst at RNCOS, “As the Russian retail industry is projected to witness substantial growth in near future, baby food, diet food, organic food, and processed and packed food is also expected to grow in tandem. However, consumers in Russia are advertisement-driven and price-conscious. Therefore, considering all the possible aspects, Russian retailers should plan their marketing schemes accordingly to earn maximum profit.”

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