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www.russiaretail.com

Retail market in Russia

to grow by almost 10%
in 2010

Source: “Retail in Russia 2010. Market analysis and development

forecasts for 2010-2012”

November 2010
Retail market in Russia to grow by almost 10% in 2010

The growth rate of the Russian retail sector dropped severely last year due
to worsening economic conditions, weakening purchasing power growth and the
depreciating rouble. As a result, the retail market’s value increased by only 5% in 2009
after several years of roughly 25% annual growth. Nevertheless, the situation has
improved this year, and the retail market is expected to once again reach double-digit
growth rates in subsequent years.

According to our estimates, the Russian retail market was valued at RUB 14.6tr ($461bn)
in 2009, an increase of 5% compared to the previous year. The severe drop in the growth rate
– down from about 25% growth annually between 2004-2008 – was negatively affected by
the sharply decreasing GDP, which fell 7.9% in 2009, the declining growth rate of disposable
incomes, rising unemployment and worsening consumer confidence.
The improved economic conditions this year, and relatively positive forecasts for
following years, are the primary reasons for the retail sector’s improved results. Rising
consumer confidence has been observed for several quarters, and a stronger income growth
will positively impact the retail market. According to our forecasts, the Russian retail market
will grow by over 9% in the present year, and further acceleration is expected in following
years.

Retail trade turnover in Russia and growth rate, 2006-2010

23.7 24.8 28.1

15.9
13.9 14.6
10.8
8.7 9.3

5.0

2006 2007 2008 2009 2010f

Retail trade turnover (RUB tr) Growth rate (%, y-o-y)

f – forecast
Source: report “Retail in Russia 2010. Market analysis and development forecasts for 2010-2012”,
PMR Publications, 2010 www.pmrpublications.com

2 www.russiaretail.com
 Retail market in Russia to grow by almost 10% in 2010

Grocery market more resilient to turbulence

The impact of the crisis changed the Russian retail market’s overall structure. While
before 2008 the non-food segment’s share had been systematically increasing with each year,
its share dropped by 3 p.p. in 2009 to the lowest level in more than seven years. The demand
for necessities, such as food goods, is usually less sensitive to unfavourable changes in the
economy, compared to the sales of non-food items. As a result, the value of food retail sales in
Russia maintained a positive growth rate last year, as opposed to the sales of non-food goods.
A significant percentage of Russian consumers experienced serious economic effects on their
day-to-day life due to the crisis. This negatively impacted their decisions about purchasing
durables. Consumer electronics and the DIY sectors were two of the most severely affected
segments of the non-food retail market.
At the same time, the food segment saw a considerable growth of value, albeit one
significantly lower than in previous years. According to our estimates, the value of the grocery
retail market grew by 13% last year to RUB 7.1tr ($224bn). As in previous years, the share
of the modern retail format continued to rise. However, the growth rate was more moderate
than in previous years, which was mostly due to lower investments in new shopping area
development than in the prior-crisis period.
Falling consumer confidence has restrained demand, while the rouble’s devaluation has
negatively affected the financial results of companies and increased liabilities to creditors.
Undue reliance on credit for operating expenses and vast investments before the crisis resulted
in liquidity problems, growing indebtedness and difficulties accessing external financing for
many retailers. As a result, many long-term investments have been put on hold, and companies
have shifted their focus toward operations efficiency and profitability.

Composition of grocery market in Russia, shares by value (%), 2006-2009

2009 23.1 19.5 57.4

2008 20.4 19.0 60.6

2007 15.6 22.0 62.4

2006 12.0 23.0 65.0

Organised retail Open-air markets Independent stores

Source: report “Retail in Russia 2010. Market analysis and development forecasts for 2010-2012”,
PMR Publications, 2010 www.pmrpublications.com

This article is based on information contained in the latest PMR report

entitled “Retail in Russia 2010. Market analysis and development
forecasts for 2010-2012”.

www.russiaretail.com
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