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High Entry Barrier in Russian Retail
Mar 22, 2006
Russia’s food retail market comprises of two segments – the locally owned discounters and the foreign owned supermarkets and hypermarkets. The complicated title registration procedures create high entry barriers for international firms. Western European food processors find Russia’s retail market tough to compete.
In the last few years the market chains used the main development methods as anchor stores in new retail complexes; development of franchising, purchase of existing retail multiples; and as independent operators.
Some foreign chain operators like Ramenka, Auchan and Spar with their significant financial resources entered the Russian retail market. Some other large operators like Perekrestok, Sedmoi Kontinent and M. Video used bonds to convert their companies from Ltd., to Inc.
There have been widespread protests by local retailers in the face of entry of foreign retail chains. They have been lobbying with their politicians against the arrival of new hypermarkets with their low prices, economies of scale and aggressive purchasing practices. But as long as retailers give consumers what they want, shopping malls continue to be popular.
In a recently published market research report by RNCOS, namely “Organized Retail Sector in Russia (2005-2008)” experts predict that “the Russian retail market has grown to $193.2 billion in 2004 or 30.8% and food retail sales were over $83 billion, up 22%.”
The report enumerates the size and shape of the market at a national level. There are latest retail sales data, indicating the sector’s growth drive. The key factors influencing the market are listed as new product developments, packaging styles, distribution and pricing systems, and economic and lifestyle factors.
The report also contains strategic and technical information, which could help product suppliers, supply chain managers, investors and financial analysts and retail store equipment vendors to evaluate market performance and arrive at appropriate decisions.
According to the analysts “the discounter segment had a high growth potential owing to the fairly modest average income in the country particularly, region wise. It was found that few people owned a car while the rest went for frequent shopping ‘round the corner’.” Unlike many European countries Russia had no regulations limiting retail-operating hours – only the employees’ working hours were limited.
For more information visit: http://www.rncos.com/Report/CP14.htm
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