Buyers miss holidays
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The traditional period of discounts in the pre-New Year period is unlikely to bring the usual dividends to retail real estate operators this year. The traffic of facilities in November-December may be 8-14% lower than a year ago, market participants predict. Seasonal sales are unlikely to turn the tide: discounts, which have been offered by Western brands leaving the Russian market since spring, have already become boring for buyers.
The Mall Index (reflects the number of visitors per 1,000 sq. m of retail space) in Moscow in the second half of November-December may lag behind the same period last year by 12-14%, predicts Mikhail Vasiliev, head of research and consulting at Focus Technologies. “The limiting factor is the declining income of Russians and the declining number of retailers,” he explains. Some shopping centers, the expert does not exclude, due to the activity of retailers and operators of shopping centers, this decline will be leveled to 8-10%. The president of Magic Group (which develops Slava department stores), Alexander Peremyatov, assumes that traffic in the pre-holiday period will lag behind last year by 15–20%. Glincom CEO Ivan Tatarinov estimates the decline at 10-15%, adding that the gap with 2019 levels has already reached 35-40%. Boris Katz, the owner of the Leonardo network, has the same forecasts.
The end of November and December is traditionally the high season for shopping malls and retailers. On November 24, promotions are held as part of Black Friday, and after that the New Year’s revival begins. This year as a whole has become difficult for shopping centers: on average, the Mall Index in Moscow has decreased by 6-10% since January and by the beginning of November. “The recession could be stronger, but the negative trend partially compensates for the good start of this year,” says Mr. Vasiliev.
Alexander Peremyatov does not rule out that the restriction of New Year’s street events in cities due to the military operation of the Russian Federation in Ukraine, which the authorities of a number of regions have already announced, may stimulate the flow of buyers to shopping centers. Objects have a chance to attract more visitors through local events, agrees Marina Malakhatko, head of the CORE.XP retail department. But this is unlikely to seriously affect the revenue of retailers, she doubts.
Eterna CEO Dmitry Tomilin is not sure that sales will reverse the trend, as consumers have already become fed up with them since spring. Alexander Peremyatov also speaks about the abnormally long series of discounts, adding that at first buyers were buying up IKEA goods, and now they are buying H&M clothes. Both of these Swedish retailers announced their withdrawal from the Russian market. Such stocks have created a premature demand effect, he explains. According to Mr. Tomilin, now, in principle, traffic is being converted into sales worse due to reduced purchasing power. The situation is aggravated by the non-holiday mood of the Russians, the expert adds.
Baon President Ilya Yaroshenko also doubts that this year retailers will carry out promotions in the usual volume, pointing to the shortage of goods in fashion chains. “We order the assortment for autumn and winter in February and March, when the dollar exchange rate reached 130 rubles, and loans were not available,” he notes.
Andrey Shlyaev, director of the marketing department of the 585* Zolotoy network, does not expect a decrease in sales, since the New Year is one of the reasons to buy jewelry. Hoff does not count on the restoration of attendance of shopping centers in November-December, but they hope for a stable traffic of buyers in furniture and home goods stores.
Marina Malakhatko does not expect a recovery in attendance at shopping centers in the foreseeable future. Evgenia Khakberdieva, Director of the Department of Retail Real Estate at NF Group, adds that the adaptation of the business to the new conditions is unlikely to return to pre-pandemic indicators in the short term.
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