A view from the East

I embarked on a career in retail consulting in Moscow as I was told that I would be spending lots of time shopping. Joking aside I found that even on vacation instead of aimlessly shopping and taking in the sites I find myself comparing brands and store sizes on the high street and counting fast-food operators in the food courts. This was no different on my recent trip to London.

While making my way through the bank holiday crowds on Oxford Street, I was wondering when all these mid- and mass-market brands and department stores will hit the Moscow high streets?

The Russian market is perceived by retailers as attractive but plagued with a number of risk factors. This view is unfounded as Russia is one of the most fast-recovering economies and the retail market activity is driven by increasing purchasing power and very low debt and saving levels. The level of multichannel sales that have been recently jeopardizing the high street store sales in countries like the UK is an issue that is yet to emerge in Russia. Many large retailers such as Inditex Group, H&M and Topshop benefit from the relatively unsaturated Russian market and thus are achieving high turnovers.  2010 saw newcomers such as All Saints Spitalfields, Kurt Geiger and Reiss, but international brands such as these are still few and far between outside Moscow and St. Petersburg.

Perhaps the most obvious reasons for the current lack lustre interest is the deficit of quality retail space supply, lack of professional and reliable franchise partners for those who prefer this type of market entry vehicle. Also when looking in to feasibility income disparity between Muscovites and the rest of the country’s population makes sales estimates problematic.

The hot spots for international brands such as Hollister, Apple, Forever21, American Apparel etc are currently Spain, Germany, Nordics and Turkey. The reasons behind their active expansion strategy vary on a country by country basis. Potentially in Spain they are attracted by relatively low rents, and in Germany or Sweden they are taking advantage of the stable consumer demand but also sufficient supply of prime retail space to accommodate these retailers. Wherever they locate they are targeting lucrative young fashion spend and seeking locations that will compliment their brand and the Russian markets will need to prove this in abundance before establishing itself as the next hot spot.

However, the trends for Russia are positive, and it will just take time for more global retailers to realise its potential and formulate the right expansion strategy in Russia and maybe CIS.