Jos de Vries The Retail Company: "The Russian revolution in retail"

by Irina Bolotova, retail strategy consultant for Jos De Vries the Retail Company in Russia.

Let me tell you a story about Russian retail – one of the most rapidly developing and interesting markets at the moment. Do you know something about Soviet retail? I do, I remember it very well. It’s unforgettable when there is absolutely nothing in the stores! No bread, no milk, no meat... To buy food, people had to stand in queues for hours. Maybe they were lucky and there would be enough food for the family today, maybe not.
At that time being a salesman in a store or a manager in a warehouse was a very prestigious job; it meant free access to many goods. People were ready to overpay or bribe to get certain products or the clothes they needed. This situation was caused by failing production and distribution politics and resulted in a total crisis in the Soviet system. In 1991, the Soviet Union came crashing down. Nobody could imagine how it would develop in the future.

crazy 1990
When the Russian borders opened, a massive inflow goods followed. For the first time in their lives, most people could taste products from abroad. Despite high inflation and the majority of the population’s very low income, everyone wanted to buy and taste new products from abroad. Coca-Cola, Snickers, chewing gum – it was all so new and attractive for us!
Everybody tried to be a businessman. People with money invested in clothes from China or Turkey and sold it quickly in the market place. Nobody cared about quality, only the cheap price mattered. It was a time of fast and high-risk money. And it was the time that most modern retail companies started. We call this period “Crazy 1990”. Most people continued to buy everything on the markets or in small kiosks until the first supermarkets opened in 1996. There were no special retail technologies or good lay-outs. Only price and assortment were important.

Today, Russian retail remains one of the most rapidly developing and specific markets. The official sales volume in 2006 was 150 billion dollars. Unofficial statistics estimate that number is closer to 240 billion. The modern retail formats have a market share of only 15% of the entire retail market. This shows competition between modern stores is not very strong yet. It also means that Russian retail is not consolidated at all. In fact, there are no chain stores in Russian cities. The reason for this is the enormous distance between cities, placing sever strains on distribution systems. But Russian retail is developing very quickly and retailers are studying and learning to build stores that match European standards. Product and service quality are becoming increasingly important.. Stores need an efficient lay-out, a strong corporate identity and added value compared with competitors. It is predicted the Russian retail market will be the fifth largest rapidly development market in the world by 2011. Hypermarket formats are also set to take a leading part, with an increase in their numbers of 40% per year.

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