Bigger players driving retail construction boom

Russia topped Europe’s charts in September for the largest amount of retail construction underway. But even though it’s surpassed Turkey and France, retailers say the size, location and number of shops remain inadequate.

With dozens of shopping centres constructed in the past decade, one might think Russia is well- stocked with retail outlets. In fact, big retail chains are poorly represented across the country, with smaller ones, what Americans call Mom and Pop stores, struggling to find shop space.

Aleksey Chuikin, general director at Detsky Mir, also says big chains remain a comparatively rare thing in Russia, though they have a potential to increase their share.

“The share of big players in various sectors of retail is now only about 6%. This market is far from consolidation. Obviously the regions are more inclined to develop local brands but large retailers have more power for buying and promotion, so I think up to 70% of all trade will be in the hands of big companies within the next 7 years.”

Property specialists say Russia needs to build more shopping space for large chains and crack down on disorganized outlets and outdoor markets. But Dmitry Potapenko from Management Development group says Russia is wrong to copy Europe.

“The situation in Russia is ridiculous! By building endless malls we are not meeting demand, because our country is fundamentally different. We have large distances and lack trading space in residential areas, but nobody cares about that. Building malls and hypermarkets is more profitable and it’s easier. But we need a diversified retail market with individual outlets and outdoor merchants, only then small business will be able to thrive.”

A third of Russia’s GDP passes across the shop counter, with the country’s trade turnover approaching $500 billion last year. Half of that is spent on food, which is another argument for local shops. For now out-of-town shopping centres dominate retail construction in Russia and it’s likely to remain at the top of Europe’s construction league.