French hypermarket chain Auchan recently announced it is expanding in the Russian market, another sign that retail in Russia is booming. Over the past four years the brand’s value has doubled in Russia, and Auchan is now thinking of expanding its offering to include online deliveries – all this happening in the year when the company celebrates the opening of its fiftieth store in Russia and 10 years in the market. The director general of Auchan Russia, Jean-Pierre Germain, has announced that Auchan’s new format will be launched this summer. The company noted that currently modern retail in Russia only accounts for 14 percent of the market, while in other European countries this number is closer to 90 percent - offering international companies a huge potential for growth.
These numbers point to the rapid growth of retail in Russia, with an emerging middle class increasingly hungry for consumer goods. In the past 10 years the number of IKEA stores has jumped from one to 14, while the UK’s Marks & Spencer is also looking to expand beyond its nine stores in Russia. These western retailers are driving investment in the country, leading to a modernized and specialized work force that will help further develop Russia’s retail and business environment.
However, this expansion highlights the pressing need for a more modern infrastructure, which Russia is only just beginning to develop after a long period of under-spending and political instability. Western retailers sometimes find that the lack of good road infrastructure, the relative expensiveness of inner-city real estate and ongoing bureaucratic costs often slow down the pace of investment. But with political and economic stability, and a growing and increasingly prosperous middle class, the time is right for an increase in infrastructure development to help diversify the Russian economy and boost inward investment.
To this end, the Russian government has started to remove these obstacles to market growth, including not just road but also rail development. The government announced in 2010 that it would expand the Trans-Siberian railway eastwards as part of its drive to integrate the vast country and tie it in with the fast-growing economies of East Asia. As Italian Corriere Della Sera has announced, now the Russian government is looking to extend the railway’s route to Vienna, at the heart of the EU. Currently the trains stop in Slovakia because of the difference between the Russian and European railway gauge. This would improve the transport of goods from Asia to Europe, helping boost both economies as well as the Russian transit system. The project is also supported by the European Commission, which sees the benefit of this as a rail-link to central China, where a number of Western firms are active.
The government’s drive to improve Russia’s infrastructure and the increasing involvement of international logistics companies inside the country offers hope that Russia will manage to overcome the historical underinvestment in infrastructure. This will help the Russian business environment and foreign retailers, and will ease market access to Russia’s 140 million potential consumers.
For more information, please see the ModernRussia.com factsheet “Russia’s Logisitcs industry” below.
Russia's Logistics Industry
Post new comment