Russian food retail market and its “low hanging fruit”
Russian food retail business has been showing impressive growth during the last decade. And there is small doubt that this process will be over any time soon. There are still a lot of white spots on the map and a number of local and international retailers are willing and able to fill them with their concepts.
However a market with such potentials as the Russian one naturally appears to be shaped very unevenly and presents itself as unfinished and rough.
Although organized Russian retail has been growing rapidly over the last years- the retail scene is still dominated by non-organized / traditional players. According to studies three-quarters of Russians living in larger cities with a population larger than half a million buy groceries already at supermarkets but at the same time still half of these cities’ inhabitants continue to frequent traditional markets.
If benchmarked against the international retail landscape, two other main peculiarities of Russian retail can be noticed: discount plays a far bigger role than in most European countries and convenience chains are virtually non-existent. So as the ratios of hyper-, supermarkets and discount are concerned the composition of the market comes very close to Germany.
However the mentioned discount segment has still a long way to go in order to offer a comparable level of efficiency, value proposal, right assortment depth and private label policy of Western discounters.
Another big difference to longer established retail markets is that there still is not really one dominant market leader despite the similarity of the formats’ overall market shares. Especially when it comes to supermarkets Russian retail is very fragmented- the biggest retailers have a market share of just around 10% (the same situation can be witnessed in Poland).
Saturation is also very unevenly distributed. Small cities and the Eastern part of the country are still heavily underserved.
These open points and potential of the market is widely known.
The remaining challenge for Russian retailers is to model their format or to create a new offspring in response to the demands of the Russian consumer and to fill up the vast empty space of the retail landscape with a fitting and consistent concept. Whether a retailer wants to shape a concept that suits smaller cities, wants to confront the competition with the best-in-class private label products or a discounter that strives to further sharpen his profile and lift efficiency:
With the correct lessons from the leading and pioneering global retail executers (like ALDI and Biedronkaf.e.) and an expert knowledge of the retailer’s own native market this should turn out a very rewarding task. Long-term profitable growth is a question of efficiency and of strategies that work.