New retail law comes into effect in Russia

This week has seen a new trade law come into force. It regulates retailers and suppliers in an attempt to make their relationship more transparent and prices lower. Insiders say the effect may be the opposite.

The Trade Law is the subject of hot debate, even though it's now in force. Professionals say that in a rush to pass the law, legislators forgot their original goal of lower prices, believes Andrey Goltsblat, Managing Partner of Goltsblat BLP.

“Retail will be limited now in terms of bonuses. Previously they charged suppliers for assortment, shelf supply, volumes, now they can only charge for volume, but suppliers are not happy with the volume premium – so somehow the retail trade needs to find a way to fill that gap and an obvious way is to increase retail prices.”

That's not good news for retailers, most of them struggling to recover from the crisis, nor for customers. Non-food retailers were among the hardest hit last year, says Arkady Pekarevsky, Vice President of Sela clothing chain.

“The number of buyers is down, and while the average bill is up as prices have risen, the number of goods purchased has fallen. Yes, we're earning less than we used to.”

But sales growth has turned positive, on an annual basis, since December and the outlook is positive, says Aleksey Krivoshapko, Director Properity Capital Management.

“We assume that for 2010 we should expect the total income of the population to go up in roubles by 10-11% and the market on the retail side to go up in the same level.”

Analysts say that retailers will be able to absorb the cost of the new rules over the next year so long as the economy continues to recover.