Russia Retail Report Q1 2011

Business Monitor International's Russia Retail Report provides industry professionals and strategists, corporate analysts, retail associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Russia's retail industry.

The Q111 BMI Russia Retail report predicts that the country’s total retail sales will increase by more than 19% in local currency terms by 2014, growing from a projected RUB15.29trn (US$615.24bn) in 2011 to RUB18.22trn (US$732.85bn). Rising disposable incomes, an expanding middle class and rising levels of credit penetration are key factors behind retail market expansion. Accelerating foreign direct investment (FDI) has allowed retailers to make significant inroads into the market, contributing to forecast annual average retail sales growth of 6% in local currency terms.

Russia’s nominal GDP is predicted to be US$1,717.42bn in 2011, with growth of 4.3% expected, up from 4.1% in 2010. Average annual GDP growth of 4.4% is forecast by BMI between 2011 and 2014. Although the population is forecast to decrease, from 141.2mn in 2011 to an estimated 139.5mn by 2014, GDP per capita is predicted to rise by nearly 60% by the end of the forecast period, reaching US$19,436. Our forecast for consumer spending per capita is for an increase from US$894.61 in 2011 to US$1,453.38 by 2014.

The country’s large population – and the affluent urban population of Moscow in particular – is providing a solid base for the expansion of the retail market. Russia has 13 cities with more than 1mn people, and consumers are increasingly looking to modern retail outlets for aspirational purchases.

In 2005, 37% of the Russian population was in the 20-44 age range, according to UN Population Division data, and this is forecast to have increased slightly in 2010 to 38%. This segment of the population represents a key element of future retail spending. The proportion of the population classified by the UN as economically active was 71% in 2005, and an estimated 73% in 2010.

Retail sales advanced every month between February and August 2010, increasing by 3.4% year-on-year (y-o-y) in the first six months of the year, but fell 1.9% month-on-month (+4.7% y-o-y) in September. BMI food consumption data suggest that the food retail segment will have a market share of 33.7% in 2011. The sub-sector is forecast to be worth US$207.52bn in 2011, and sales are expected to grow by 49.6% to US$310.46bn by 2014. Our forecasts suggest an increase in the retail market share of food to 42.4% by 2014.

According to BMI data, over-the-counter (OTC) pharmaceutical sales will reach an estimated US$5.97bn in 2011 and are forecast to increase by 38.2% to US$8.26bn by 2014.

The consumer electronics sector is predicted to expand by 37.3%, from an estimated US$18.43bn in 2011 to US$25.30bn by the end of the period. The market has huge potential because of its sheer size, with a population of more than 140mn people, handset sales of about 32mn and TV set sales of 7.6mn in 2008. Computers will be the main growth driver, with PC penetration expected to reach 30% within the forecast period.

Vehicle sales are forecast to increase by 49.3%, from an estimated US$89.41bn in 2011 to US$133.47bn by 2014 as low car ownership levels reflect untapped potential for growth.

The availability of consumer credit is allowing an increasing number of Russians to make luxury purchases. Press reports said that Russia’s second-largest lender, VTB, is expected to have doubled its consumer credit portfolio to U$13bn in 2009 through its retail banking unit VTB24. However, a leading lawmaker told a Moscow conference in June 2010 that Russia needs a law to encourage retailers to accept credit cards and penalise those who do not – many retail outlets, even large ones in Moscow, do not accept cards.

Retail sales for the BMI universe of Central and Eastern European (CEE) countries in 2011 are forecast to total US$1,214bn, based on the varying national definitions. Total consumer spending for the region based on BMI’s macroeconomic database is expected to be US$2,359bn. Russia, Turkey and Poland are predicted to account for an estimated 83% of regional retail sales in 2011, a share that is likely to be sustained through to 2014. Russia’s predicted market share of 50.7% in 2011 is expected to rise slightly, to 51.3%, by 2014. SHOW LESS READ MORE >

Executive Summary

SWOT Analysis
- Russia Retail Business Environment SWOT
- Russia Political SWOT
- Russia Economic SWOT

Business Environment Outlook
- Table: Central And Eastern Europe Retail Business Environment Ratings
- Russia’s Retail Rating
- Limits To Potential Returns
- Risks To Realisation Of Returns
- Market Overview
- Current Trends
- Key Players

Industry Forecast Scenario
- Table: Key Retail Indicators, 2007-2014
- Table: Retail Sales Breakdown By Key Segment, 2011f
- Macroeconomic Outlook
- Table: Russia Economic Activity, 2007-2014
- Regional Retail Outlook
- Table: Regional Retail Trends, 2007-2014
- Table: Regional Retail Sales By % Share, 2007-2014
- Regional Retail Trends

Mass Grocery Retail
- Russia Mass Grocery Retail SWOT
- Market Overview
- Table: Russia’s Top 10 Mass Grocery Retailers
- Leading Retailers
- Table: Structure Of The Mass Retail Grocery Market By Estimated Number Of Outlets, 2000-2009
- Table: Annual Average Value of Sales by Format, 2009
- Industry Forecast Scenario
- Table: MGR Value Sales By Format, 2007-2014
- Industry Developments

Consumer Electronics
- Russia Consumer Electronics SWOT
- Market Overview
- Computers
- Table: PC Sales
- AV
- Table: AV Sales
- Mobile Handsets
- Table: Mobile Communications
- Industry Forecast Scenario
- Table: Consumer Electronics Overview, 2007-2014 (US$mn)
- Industry Developments

Automotives
- Russia Autos Industry SWOT
- Market Overview
- Industry Forecast Scenario
- Production And Sales
- Table: Russia Autos Sales, 2005-2014
- Table: Russia Autos Production, 2005-2014
- Trade
- Table: Russia AutosTrade, 2005-2014

Country Snapshot: Russia Demographic Data
- Section 1: Population
- Table: Demographic Indicators, 2005-2030
- Table: Rural/Urban Breakdown, 2005-2030
- Section 2: Education And Healthcare
- Table: Education, 2002-2005
- Table: Vital Statistics, 2005-2030
- Section 3: Labour Market And Spending Power
- Table: Employment Indicators, 2001-2006
- Table: Consumer Expenditure, 2000-2012 (US$)
- Table: Average Annual Wages, 2000-2006

BMI Methodology
- How We Generate Our Industry Forecasts
- Sources