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9 Jul, 2010 09:10

Russian retailing loses gloss as conditions get tougher

The Russian consumer has been an attractive proposition for global investors for a long time, pushing Russia into second spot in 2009 as a place to do business. But it's slumped this year to 10th place.

New laws limiting the size of retail chains have added to longer term woes like poor infrastructure. A.T Kearney Analyst, Ivan Kotov, says that due to a lack of information and new trade law amendments Russia has to face new competition from other retail hot spots.

“There were first of all objective factors that we considered that dealt with the Russian economy, like the new trade law. On the other side, there were a number of countries that had not been rated, because the objective information about them was not available. So it was actually a two-way street in a way.”

The introduction in 2009 of a new trade law restricting retailers opening additional stores where they already have 25% of the market, has dampened the enthusiasm of some larger global retail players about Russia.

Castorama Russia General Manager, Matthew Tyson believes that to succeed in Russian business markets a long term strategy has to be adopted – along with a focus on the potential gain for getting things right.

“For sure, this can be a difficult place to do business, but it’s worth the effort, because of the long term prize. If you’re committed to being here in the long term, the prize I believe is a big one. So yes, there are issues, but we’ve seen progress, even over the last 12, 18 months and if anything, our confidence has grown.”

For all that, the Global Retail Development Index has a reputation for accurately reflecting emerging retail markets. After the high-profile withdrawal of two retail giants from Russia – Ramstore and Carrefour – it's clear the country is no longer a place to make a “quick buck”, but a market that needs a long term strategy and a desire to succeed.