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Retail market in Russia to grow by over 9 per cent in 2010: Report

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PMR – a British-American company providing market information, advice and services to international businesses – has forecast the Russian retail market to grow by over nine per cent in 2010.

In its recent report, titled “Retail in Russia 2010. Market analysis and development forecasts for 2010-2012”, the Russian retail market was valued at $461 billion in 2009, an increase of five per cent over the previous year.

The report says improved economic conditions this year, and relatively positive forecasts for following years, are the primary reasons for the retail sector’s improved results. Rising consumer confidence has been observed for several quarters and a stronger income growth will positively impact the retail market. The PMR report also expects further acceleration in the Russian retail market in following years.

The impact of the crisis changed the Russian retail market’s overall structure. While before 2008, the non-food segment’s share had been systematically increasing with each year, its share dropped by three percentage points in 2009 to the lowest level in more than seven years. The demand for necessities, such as food goods, is usually less sensitive to unfavourable changes in the economy, compared to the sales of non-food items. As a result, the value of food retail sales in Russia maintained a positive growth rate last year, as opposed to the sales of non-food goods. A significant percentage of Russian consumers experienced serious economic effects on their day-to-day life due to the crisis. This, the report says, negatively impacted their decisions about purchasing durables. Consumer electronics and the DIY sectors were two of the most severely affected segments of the non-food retail market.

At the same time, the food segment saw a considerable growth of value, albeit one significantly lower than in previous years. According to PMR estimates, the value of the grocery retail market grew by 13 per cent last year to $224 billion. As in previous years, the share of the modern retail format continued to rise. However, the growth rate was more moderate than in previous years, which was mostly due to lower investments in new shopping area development than in the prior-crisis period.

Falling consumer confidence has restrained demand, while the rouble’s devaluation has negatively affected the financial results of companies and increased liabilities to creditors. Undue reliance on credit for operating expenses and vast investments before the crisis resulted in liquidity problems, growing indebtedness and difficulties accessing external financing for many retailers. As a result, many long-term investments have been put on hold, and companies have shifted their focus toward operations efficiency and profitability.

– IndiaRetailing Bureau

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