In Russia, growth has been experienced in every segment from discount to luxury. Consumers’ increasing maturity and sophistication has stimulated the luxury sector in particular; Russia is currently the fastest growing market for luxury goods. While there is still room for further penetration through modern retail formats and brands and huge potential for growth, companies in Russia face a number of challenges. The retail sector is very dynamic, and companies need effective strategies to deal with developing private labels, changing consumer shopping habits, developing products and services to attract and retain increasingly discerning customers, regional (and potentially overseas) expansion, and expanding consumer credit. Challenges include attaining operational effectiveness and cost reduction, shortage of good retail space, warehousing, logistics and supply chain management (and availability of specialists), as well as potential accession to the WTO. With a largely unconsolidated retail market, further M&A activity is inevitable. This will lead to fewer retail players with greater competition for market share and downward pressure on margins (which will affect both the retailer and the producer). The trend for IPOs is also likely to continue. Thus, a clearly defined strategy for further growth in this promising sector has now become crucial for success. Retail companies’ ongoing competitiveness can be ensured only via cost and operational effectiveness, access to capital and other growth resources and, last but not least, effective mobilisation of human capital.
The Russian retail market demonstrated solid growth rates over the last several years, making the sector one of the most actively developing markets in the economy. This has been fuelled by growth in the overall economy, growing consumption and an increasingly organised marketplace.
Organised retail is booming due to improving living standards and Russians’ desire for more convenient stores with better prices and service. This boom has led to dramatically increased competition in the retail sector and introduced new issues for retail chains to address.
The main objective of this report is to provide a business perspective on significant issues and challenges faced by retail market players.Chris Skirrow