Wal-Mart resignation throws further light on competitive Russian retail market
Fanderl was engaged in early 2008 to spearhead the worlds largest retailer’s push into Russia, but is believed to have resigned after no progress was made. The company says it is still exploring business opportunities in Russia.
Business RT spoke with Art Vartanian, CEO at Retail Solutions, about the problems of global retailers making their presence felt in Russia’s retail market.
RT: Wal-Mart wanted to enter the Russian market through the existing retailers. Why did they fail?
AV: “For a while they were talking to X5, which never made any sense to me, as their shops, like Pyaterochka, for example, are too small, it’s not their format. Later they talked to Lenta stores in St. Petersburg, which made much more sense, because Lenta has a bigger format, it’s more comfortable and they could be a little more forward thinking and they sell different merchandise. But they didn’t make a deal with Lenta, because the valuation was too high. They were asking for pre crisis prices when the crisis had already started.”
RT: What are the major difficulties for foreign retail chains when entering the market?
AV: "To some degree it, of course, depends on the retailer. In some cases retailers could have better opportunities, like Carrefour and Wal-Mart in South America and China, and Mexico, which are big and closer markets. As for Russia, everybody knows it doesn’t rate very high in terms of business transparency. That’s another reason.”
RT: What advantages do existing retailers in Russia have over the newcomers?
AV: “There is “the first market mover advantage” for the existing chains, like Auchan, for example. If you are already here, there’s definitely the advantage, as you have better opportunity to build more stores, to get better space, etc.”
RT: Are there any advantages, for Russian consumers, of the global retailers coming into the market?
AV: “Nothing really important, as far as for a consumer. What’s really important, is that new western retailers could improve retail expertise, retail prices and thus boost competition in the market."