Russian retail market to grow at a slower pace in years to come

In 2015, the Russian retail market increased in value by 9.5%, year on year, to RUB 18.1tr (€276.4bn). The growth rate was lower than in previous years, however, it was still high considering the current economic crisis in the country. The market’s growth was mainly driven by inflation. It is expected that the market’s growth rate will continue to decline in the next few years, however, the Russian market will still be gaining value more rapidly than some other Central and Eastern European countries, according to forecasts included in PMR’s new Retail in Russia 2016. Market analysis and development forecasts for 2016-2021 report.

 

In 2014-2016, the Russian retail market suffered because of the economic crisis in the country, caused by a decline in oil prices, as well as sanctions imposed on Russia by Western countries following the annexation of Crimea and the conflict with Ukraine, as well as Russia’s countermeasures in terms of its own sanctions imposed on the West (mainly bans on imports of food products). Moreover, in 2016, the market suffered from the sanctions imposed by Russia on Turkey, following the downing of a Russian fighter jet over Syria in November 2015. However, in October 2016, Russia decided to gradually lift the ban on imports of certain Turkish food products.

The best performing segments during the current crisis were those selling basic, daily-use products, i.e., grocery and cosmetics, which recorded the highest growth rates in 2015. The DIY segment also increased, fuelled by record high commissioning of new housing as well as a higher interest among Russians to do small home improvements on their own (without hiring professionals). Meanwhile, some of the analysed segments that lost in value in 2015 were consumer electronics and home appliances, as well as clothing and footwear. The main reasons for the decline were consumers cutting expenses on non-essential goods as well as abnormal consumer demand in Q4 2014, when consumers bought higher quantities because of inflation (more purchases were made before the anticipated price hikes). As a result, at the beginnings of 2015, demand fell to very low levels.

In virtually all segments of the Russian retail market two distribution channels have the best growth perspectives: retail chains and e-commerce. The former is mainly driven by organic expansion of the largest players in each segment: for example, Magnit, X5 Retail Group, Lenta (in the case of grocery), Magnit Kosmetik, Sangi Stil, Ulybka Radugi (cosmetics), Leroy Merlin, OBI, Stroitelny dvor (DIY), Inditex, H&M, Detsky Mir (C&F) and M.Video, Technosila (consumer electronics). In the case of online sales, a growing number of internet stores as well as growing delivery ranges have a positive influence on the channel’s growth. The increasing popularity of e-shopping plays a major role, as well.