Retail Map Russia
Date
13-04-2015
Retail map Russia
The Retail Map is a tool to make Danish companies aware of the big potential in Russia. 15 cities in Russia
have over a million inhabitants. The level of education is still rising and the Russian middleclass is growing.
This means that there is great potential to expand or establish ones business in other cities than Moscow
and St. Petersburg. This is something a company should consider.
The purpose of this retail map and this presentation is to make you aware of the different options available
in Russia. The aim is not to point out what to do and what not to do. The information in the presentation is
just indicators to give you an overview of some of the possibilities in Russia.
RETAIL MAP RUSSIA ___________________________________________________________________________________ 3
RECENT CHANGES IN THE RUSSIAN RETAIL SECTOR _________________________________________________________________ 3
LARGE CITIES IN RUSSIA __________________________________________________________________________________ 4
STORES IN RUSSIA ______________________________________________________________________________________ 6
SHOPPING MALLS IN RUSSIA _______________________________________________________________________________ 7
COSTS OF A RETAIL BUSINESS _______________________________________________________________________________ 9
SHORT DESCRIPTION OF THE CITIES __________________________________________________________________________ 11
Recent changes in the Russian retail sector
Before 2014 the Russian retail market looked very promising. Thanks to relative political stability and strong
oil and gas prices, Russia’s retail turnover became five times bigger 2011 comparing to 2001. In 2015 it
became clear that the Russian retail sector and the overall economy are struggling because of the Western
and self-imposed sanctions as well as a decline of national currency and low oil prices. However, there are
still lots of opportunities for Danish companies in Russia. Alone in 2014 - 65 new shopping centers opened
and the total stock of quality retail space in Russia reached almost 23 million m2.
Due to the geopolitical environment and the economic situation, some international retail operators have
left the Russian market, others still consider the market attractive and have chosen to expand or enter. The
current situation presents some new opportunities for investment in Russia. The retail space is typically
cheaper than before, competition is reduced, and there is room for expansion. This is something a Danish
company should take into consideration.
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Large cities in Russia
Economic, as well as demographic indicators for Russia is often associated with some uncertainty. The
actual numbers of inhabitants in the cities are expected to be higher than the official numbers, because
many people live a shadow existence – they are not registered, are not paying any taxes and are therefore
hidden from the official statistics.
Hence, the data used in the map and presentation only indicate
conditions in the country. The figures used in this presentation have been obtained through official sources,
but these sources also have some complications; e.g. it is assumed that up to 60% of the Russian economy is
grey or black. A grey economy is when part of the income is not declared.
Table 1: Income and number of inhabitants of Russia's largest cities
Ranking by number City
Population (in
Income per. month
of inhabitants
millions) (2014/2015)
in the rub. (2013)
1
Moscow
12.2
54.869 city /
23.738 region
2
St. Petersburg
5.2
31.407 city /
26.166 region
3
Novosibirsk
1.6
22.597
4
Yekaterinburg
1.4
31.013
5
Nizhny Novgorod
1.3
24.502
6
Samara
1.2
26.864
7
Omsk
1.2
21.363
8
Kazan
1.2
26.161
9
Chelyabinsk
1.2
21.888
10
Rostov-on-Don
1.1
20.994
11
Ufa
1.1
23.892
12
Volgograd
1.0
17.589
13
Perm
1.0
26.054
14
Krasnoyarsk
1.0
24.921
15
Voronezh
1.0
22.056
146.3
25.928
The Russian Federation
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The figures in the table indicate the number of inhabitants in the cities and not the region surrounding the
city. It can be assumed that people, who live outside the cities, go to the larger cities to buy retail goods.
Therefore one can assume that the potential customer volume is larger than shown in the table.
Russia is urbanizing and people are moving from the countryside to the cities for better education and job
opportunities. This means that the population in the cities is expected to rise in the coming years.
The right side of the table shows the monthly average income for the regions where the city is located.
Further, as is shown in the table for Moscow and St. Petersburg, there are differences between incomes in
the cities and the surrounding regions. This trend is general and the income is considerably higher in the
cities. It is important to understand that the regions vary in size, but most of them are bigger than Denmark.
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Stores in Russia
Establishing a company on the Russian market can be challenging. Linguistic and cultural barriers can for a
Danish company be hard to handle, and can prevent companies from seeking out the opportunity.
However, European goods have a good reputation in Russia and it is possible to make profit in Russia.
Table 2 shows a selection of retail companies, and the extent to which they are represented in Russia. The
major cities are often geared to international trade, and have many more brands on the market. This is to
illustrate how some companies have chosen to expand in Russia.
Table 2: Number of stores spread over the 15 largest cities
City\Store
IKEA
Ecco
H&M
Zara
INWM
Pandora
(number)*
MEGAMall
Moscow
3
74
13
24
2
24
3
St. Petersburg
2
32
5
8
6
21
2
Novosibirsk
1
4
4
1
Yekaterinburg
1
3
6
2
8
1
Nizhny
1
6
2
2
6
1
Samara
1
6
3
3
5
1
Omsk
1
4
Kazan
1
3
3
2
5
1
1
4
3
1
Novgorod
Chelyabinsk
2
1
1
1
5
1
Rostov-on-Don
1
3
2
3
5
1
Ufa
1
4
2
3
3
1
Volgograd
1
5
2
2
2
3
1
1
3
Perm
2
Krasnoyarsk
2
1
1
2
2
1
2
4
Voronezh
1
* Source: Corporate websites, manual search 2015
In Russia there is a tendency that foreign companies give the smaller cities lower priority than Moscow and
Saint Petersburg, despite the fact that the population of many of the smaller cities is over a million and the
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income is relatively close to the major cities. The costs of marketing, wages and store rent are typically lower
in smaller towns – this is illustrated with average costs of billboard space in table 3. Also, the competition
tends to be less fierce than in Moscow and St. Petersburg.
Eastern Russia is noteworthy because of the great amount of natural resources found here. The resources
create a high income for certain segments which means that there are a lot of potential customers. However,
there are also difficulties associated with the Eastern Russian cities. For example there can be some
infrastructural, cultural and linguistic difficulties that need to be taken into consideration. The Eastern cities’
business culture is further away from the European, which can pose unique challenges to Danish
companies. The English language is also less prevalent in the Eastern cities than in the Western.
Shopping malls in Russia
It is important to keep in mind that Russians use shopping centers in a different way than Europeans.
Russians use shopping malls to hang out. They can spend a whole day in a shopping center together with
family or friends. The shopping malls are created as a funfair where children can play, you can relax in a
cafe, or you can shop in the stores. Most shopping malls have food courts where the whole family can eat,
and some opportunities for entertainment, such as cinema or ice rinks.
Despite the current geopolitical and economic environment, the supply of retail space in Russia remains
positive and 2.3 million m2 of retail space was completed in 2014. Shopping mall space is in high demand
and the vacancy rate is only 6% in Moscow and 5% in St. Petersburg respectively. There was a very
ambitious plan to open another 4 million m2 of retail space in 2015. This is very unlikely to be achieved due
to the current situation in Russia, but new retail space will be completed in 2015.
Three examples of shopping malls in Russia
Europeisky
Europeisky shopping mall is located in the center of
Moscow and has 8 floors with more than 500 stores
divided among the over 180,000 m2 available. The mall
offers quality restaurants and bars, saunas and health
treatments and many European brand shops. You can
find everything you desire and much more. There are
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around 100 cafes and restaurants, an ice rink, a cinema, a supermarket and parking for 1200 cars.
Europeisky has more than 3.5 million visitors per month and is one of the favorite malls among Danish
companies. Danish companies, who already are established on the Russian market, find that the shops
started up in Europeisky quickly becomes the most profitable stores they have after a few months.
MEGA-Malls
MEGA-Malls are part of the IKEA Group and manage a chain of major shopping malls throughout Russia.
The MEGA-malls are placed next to IKEA stores and usually also Aushan and OBI – the stores
supplement each other very well and people have the opportunity to buy almost everything in one place.
The chain of MEGA-Malls includes 14 shopping centers across Russia. Each MEGA-Mall features an
average of 200 stores. The chain has around 270 million visitors a year.
Aviapark
On November 28th, 2014 Aviapark the largest shopping mall in Europa opened. Located in the Northern
part of Moscow, Aviapark is expected to be visited by 40 million people during the first year and even more
in following years. The mall has more than 225.000 m2 of leasable m2 available and over 500 stores to meet
your every demand. The center also features a winter garden, a movie theater with 17 screens, a huge
aquarium, and more than 80 restaurants. Parking is available for 5000 cars and the metro is within walking
distance.
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Galeria
Galeria is one of the biggest shopping centers in St. Petersburg and its ideal location next to the Moskovsky
railway station and less than 5 minutes’ walk from Nevsky Prospect make it very popular. The center
features around 300 stores spread across the 200.000 m2 available. Like most Russian malls you can find
other kinds of entertainment besides shopping; the center offers a ten-screen cinema, a bowling alley, a
children’s play area and a huge food court. The center hosts underground parking for 1200 cars and a large
supermarket.
Costs of a retail business
The cost of establishing and running a retail business differs from region to region in Russia. Due to fierce
competition, the costs are typically higher in Moscow and St. Petersburg than in the other cities. Also,
tourism (both local and foreign) can affect costs – cities located in large regions, typically experience local
tourism.
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For comparison of the cost of the 15 cities, billboard prices are chosen as an indicator of the level of costs
of running a retail business. Table 3 shows the average cost in rubles per month for a billboard of 3m x 6m
in the 15 cities. It is important to mention that the retail map only is a snapshot, where the figures are used
as indicators to provide a general overview of possible differences in prices and costs.
Table 3: Billboard costs for comparing costs
City
Average cost for
Billboard / Costs in
RUB per month
(April 2014)
Moskva
116.247
Skt. Petersborg
47.080
Novosibirsk
33.240
Jekaterinburg
18.790
Nizhny Novgorod
39.070
Samara
17.420
Omsk
89.840
Kazan
33.390
Chelyabinsk
17.610
Rostov-on-Don
27.160
Ufa
21.610
Volgograd
16.370
Perm
16.430
Krasnoyarsk
23.670
Voronezh
17.820
All data are in RUB for one month's rent of a 3m x 6m billboard.
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Short description of the cities
Moscow
Moscow is Russia's capital and commercial center. Moscow has about 12.2 million inhabitants, but has also
a large region around it, inhabited by several million people. Retail has a strong momentum in the city and
Moscow has 5.5 million of m2 of retail space. Moscow can be compared to every other big capital in
Europe.
St. Petersburg
St. Petersburg is the second largest city in Russia. It was the capital of Russia from 1732 – 1918 and has
around 5.2 million inhabitants. Because of the historical and cultural heritage it is the most popular tourist
destination Russia. The city is often described as the most westernized city of Russia and as its cultural
capital. St. Petersburg is a huge industrial center and its production includes everything from tanks to beer
and sculptures.
Novosibirsk
Novosibirsk has 1.6 million inhabitants and is the largest city in the eastern part of Russia. Novosibirsk is an
industrial city and its primary industries are agriculture, electricity, gas- and water supplies, fuel mining,
metal extraction, and processing. During the 20th century the city experienced rapid growth and
industrialization.
Yekaterinburg
Yekaterinburg has 1.4 million inhabitants and is on the border of Europe and Asia – about 1600 km east of
Moscow. The main industry is centralized around machine manufacturing, metal processing and mining of
ferrous and non-ferrous metals.
Nizhny Novgorod
Among the major cities in Russia, Nizhny Novgorod is the one closest to Moscow. Besides the more basic
industries, the city has a large concentration of firms engaged in R&D, IT and a large engineering industry.
The city’s population is around 1.3 million.
Samara
The former closed city of Samara is located on the Volga River. With a population of 1.2 million, it is one of
the leading industrial centers in the Volga region. Because of the location Samara is a popular tourist
destination. The industry is centralized around various space services and machinery.
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Omsk
Omsk is the second largest city east of the Ural Mountains with 1.2 million inhabitants. It is a major river
port and production includes agricultural machinery and railway equipment.
Kazan
The newly renovated city of 1.2 million inhabitants is one of the largest industrial and financial centers of
Russia. The city’s industry is centralized around mechanical engineering, chemical, light, and food
production.
Chelyabinsk
The industry of Chelyabinsk is centralized around ferrous and non-ferrous metal production. The size of
the metal industry is unequalled in Russia. It is located east of Ural south of Yekaterinburg and has 1.2
inhabitants.
Rostov-on-Don
Rostov-on-Don is a trading port city of five seas; the Black Sea, the Sea of Azov, the Caspian Sea, the White
Sea, and the Baltic Sea. The Don River is a major shipping lane connecting Southwestern Russian with the
north. The city with 1.1 million inhabitants is sometimes referred to as the “gateway to Caucasus”. The
agricultural region around Rostov-on-Don produces one-third of Russia´s vegetable oil from sunflowers.
Ufa
With 1.1 million inhabitants, Ufa is the greenest city in Russia with a population above a million.
Ufa’s industry is centralized around oil refining, chemistry and mechanics such as aircraft engines.
Volgograd
Volgograd has about 1 million inhabitants. The city's industry consists of oil refineries, shipyards, aluminum
plant, tractor factory and steel plant. Volgograd is also an important hub for rail and river transportation.
Perm
Even though Perm is the smallest of the big cities in the Urals with around 1 million inhabitants – it has the
largest industrial output ahead of Yekaterinburg, Chelyabinsk and Ufa. The city has serval large industries
which include electric power engineering, oil and gas refining, machine building, and chemicals.
Krasnoyarsk
Krasnoyarsk is the most eastern city with a population above a million. The region is rich in raw materials
and is one of Russia’s largest producers of aluminum.
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Voronezh
Voronezh is the latest city to reach 1 million inhabitants in Russia. The industry includes aircraft production
and pharmaceutics. With the help of the Investment Fund of Russia implementations of big projects have
begun in the recent years.
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The Trade Council is a part of the Ministry of Foreign Affairs and is the
official export and investment promotion agency of Denmark. The Trade
Council benefits from around ninety Danish Embassies, Consulates
General and Trade Commissions abroad. The Trade Council advises and
assists Danish companies in their export activities and internationalisation
process according to the vision: We must be a partner preferred by
enterprises in international trade and investment activities.
The Work in the Trade Council follows specific procedures and quality
guidelines.In this way our customers are secured the best possible quality
under the varying working and market conditions at any given point of
time.
Ministry of Foreign Affairs of Denmark
Royal Dansih Embassy in Moscow
9 Prechistensky Pereulok
119034 Moscow
Tel: + 7 495 6426800
Fax + 7 495 7750191
E-mail: [email protected]
www.rusland.um.dk
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