Fewer new foreign brands will enter the Russian market by the end of 2024

By the end of 2024, the number of foreign brands entering the Russian market will be lower than a year ago, consultants suggest. Expansion is slowing down due to the active development of local retailers who have occupied retail space already vacated by departing players, as well as logistical difficulties and high customs duties. Before the Russian-Ukrainian military conflict, almost all popular networks operated in the Russian Federation. But market participants are not yet expecting the return of those who decided to leave the country.

In 2024, the Russian market will be replenished with approximately 15 foreign brands, which is less than a year earlier, when 22 international retailers opened stores in the country, according to a study by IBC Real Estate. CORE.XP expects 20 new brands to appear this year, Nikoliers – 17.

Eight retailers have already opened their stores in Russian shopping centers since the beginning of this year.

Among them are the Turkish chain of household goods stores Chakra, the Chinese electronics retailer Tecno, and the Armenian perfume chain “22 | 11 Cosmetics”, as well as clothing brands Josiny from South Korea, Ellsay and Baasploa from China, Laurel from Germany and Rinascimento from Italy, note CORE.XP. 8 seconds, Home Box, Brands, Deha, Big Chefs, Panier des Sens, Semir, Balabala, Laplandia and Lifework also announced the opening of their stores in 2024, says Irina Tsarkova, director of the Nikoliers retail real estate department.

Asian brands are now the most active, notes Evgenia Khakberdieva, regional director of the retail real estate department at NF Group. In 2021, the situation was different: then Italy, Sweden and the UK formed the main pool of new foreign players, says Vasily Grigoriev, director of the market research department at CORE.XP. Western brands, especially from the US and EU, are showing less interest due to political and economic risks, says the director of Ricci | Retail” Olga Yarullina. Now European brands enter the Russian Federation mainly under the leadership of local management companies, explains Ms. Khakberdieva.

One of the important factors slowing down the expansion of foreign retailers into the Russian market is the lack of high-quality vacant space in shopping centers, explains Ekaterina Nogai, head of the research and analytics department at IBC Real Estate.

The retail vacancy rate has remained at 12% all year this year, just 1 percentage point above the 2022 level, before a mass exodus of international brands, she notes.

Now stores of brands that have suspended operations in the Russian Federation account for no more than 0.2% of the space in Moscow shopping centers, while in 2022 the figure reached 11.7%, or 750 thousand square meters. m, says Mrs. Nogai. Luxury brands including Chanel, Swatch Group, Prada and Fendi have begun closing stores as part of cost-cutting efforts (see “Kommersant” dated April 2).

Over the past two years, Russian retailers and new brands from “friendly” countries have occupied most of the space vacated after the departure of international retailers in shopping centers – 730 thousand square meters. m, calculated by IBC Real Estate. Russian companies Gloria Jeans, Melon Fashion Group, Just Clothes, Rendez-Vous and other tenants showed interest in these retail spaces, notes Ekaterina Nogai.

Despite the large number of niches being vacated, when new brands enter the Russian market, they experience competition with local manufacturers, as well as with international chains whose products are supplied as part of parallel imports, explains Polina Afanasyeva, head of the research and analytics department of the Commonwealth Partnership.

Foreign players are also hampered by logistical difficulties and high customs tariffs, adds Olga Yarullina.

Until 2022, almost all of the world’s major fashion brands were already represented on the market, both in luxury and in the mass market, says Baon President Ilya Yaroshenko. Therefore, he predicts, we should no longer expect a mass release of new brands.

Daria Andrianova