Opinions were mixed at today’s World Retail Congress about whether international retailers should attempt expanding into the Russian market.
Svarog Capital Advisors managing partner Oleg Tzarkov said that it wasn’t a good time for international retailers to enter Russia.
He added that he expects to see more retail bankruptcies and consolidation in the country leading to more space in the market. “If a retailer has an efficient business model they could grow organically” by buying a small sized company, he added.
However, Dixy Group president Ilya Yakubson said: “It’s time to come to Russia for international retailers.” He said that he expected there to be “a very low rise” in rent over the next three years and that land prices are low at present.
He added that fashion retail rent is three to four times lower than before, whereas there is less of a drop off in prices in the grocery sector, where there is more competition.
Russia is in the depths of a severe recession largely due to its dependence on exports and commodities. Consumer confidence has been hit by high unemployment, falling disposable income and the weakening rouble. As a result, the retail sector has seen a move to value retailers and a reduction in spending on non-essentials such as holidays.
The lack of credit and high leveraging has also led to retail bankruptcies. Yakubson said that since the crisis the Russian government had become more open to talks with retailers, however they are yet to see any practical results of meetings.