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25 Dec, 2008 07:56

Russian retailers offer discounts to bring in the buyers

Russian retailers offer discounts to bring in the buyers

Facing tough times, some Russian retailers have introduced anti-crisis discount programs – like many of their global competitors. But the practice of price reduction is not common in the Russian retail sector yet.

Shoppers thronging into stores enticed by steep discounts on clothes, toys and electronics – the typical start of holiday shopping season across the USA as retailers introduced anticrisis discounts of up to 70%.

Some Russian сompanies have imitated their global competitors. Major food retailer X5 reduced prices by 30% for a number of essentials. Those focusing on high-end clients like car dealers were forced to introduce price reductions to support demand and maintain their financial stability according to Dmitry Rotkin, CEO of Rolf Mitsubishi Motors Distributor.

“Banks stopped giving credits, not only to consumers, but to distributors and dealers as well, to finance working capital, so we had to do urgent actions to recover. That’s why in October we launched a very big promotion campaign across all the range. Absolutely the right decision at that point of time.”

Dale Clark, Partner at PriceWaterhouseCoopers says reducing prices is a natural market reaction to financial turbulence.

“Primarily it would be cash-related – by having a discount program you increase the stock turnover and that turns your inventory into cash a lot faster. Another reason why some of the larger retailers are doing it is to attract buyers from competitors to gain market share. By giving a large discount across your entire store portfolio you’re going to get consumers coming into your company or into your stores and hopefully they’ll stay with you for a longer period.”

However, on a global scale the Russian market is not used to such massive price reductions as in the USA or Western Europe. The programs implemented here are minor and the size of discounts is lower.

Despite the unprecedented growth – up to 35% – that the sector has experienced in the last several years, there's still a long way for Russian retailers to grow. Even in the midst of global financial crisis growth rates have only declined slightly, and the Russian customer is still ready to go shopping.