Retail brands do not reach Russia

Due to the worsening investment climate in Russia, in 2022, half as many foreign brands were expected to enter the country’s market as compared to a year earlier. Most retailers from Turkey, China and India, who announced the opening of their stores in the Russian Federation, have not yet done so due to ongoing difficulties with logistics. Reducing the number of chains reduces the supply of commodity diversity, experts say. Although more than half of Russians have not noticed this yet: they believe that there are still a sufficient number of various stores in shopping centers and online.

In 2022, 9 new foreign brands entered the Russian market compared to 19 brands in 2021, according to Nikoliers. NF Group talks about the opening of 11 brands last year, in CORE.XP – about 10 versus 16. Among the new networks on the market are Perspective (previously presented only on marketplaces and in a multi-brand network), Efor, Ipekyol, Twist and Alex YVN , Li-Ning sporting goods store, L&L Skin and Vilhelm Parfumerie cosmetic chains, and Coffee Boom coffee shop, Nikoliers said.

At the same time, in 2022, the Russian market lost more brands than new players entered.

According to Nikoliers, in 2022, 23 retailers announced their final withdrawal from the Russian Federation, and another 27 companies suspended their work in the country. About 22 foreign retailers owning 31 brands have sold Russian divisions to top management or holdings from Turkey, China and the Middle East. They opened stores under new signs.

Nadezhda Tsvetkova, head of CORE.XP retail space leasing, explains the decline in the number of new brands by the reluctance of foreign retailers to invest in the Russian economy due to high risks. General Director of the Stockmann chain Gennady Levkin also says that foreign brands in general have taken a cautious position: “The point is not only the vagueness of the prospects for the country’s economy, but also the continuing difficulties with logistics.”

Nikoliers partner Anna Nikandrova explains that launching a new brand on the market is a time-consuming process that takes at least a year. In 2022, Nikoliers estimates that about 45 brands have announced their intention to enter the market, but most of them have not yet opened outlets.

The prevailing number of retailers who have announced their entry into the Russian market are from Turkey (74%). Another 7% – from Kazakhstan, 4% – from China and India, 2% each – from the USA, Armenia, Japan, Belarus and Italy.

Shopping center owners are already seeing a decrease in competition due to a reduction in the number of foreign brands – this gives rise to a limited selection of goods in some categories, for example, children’s goods, sports goods, household appliances and electronics, says Alexei Vanchugov, managing partner of Vanchugov & Partners. In his opinion, the enlargement of these segments can lead to a decrease in quality and an increase in prices. But consumers themselves do not notice this yet. Thus, 56% of Russians surveyed by Kokoc Group in December 2022 still believe that there are a sufficient number of various stores in shopping centers and online.

New brands from China, Turkey, Italy will continue to try to enter the Russian market, but at least half of them already have mostly unsuccessful experience in the country, Mr. Vanchugov notes. The release of new brands in the coming year depends on the results of those brands that managed to open in 2022, adds Evgenia Khakberdieva, director of the retail real estate department at NF Group. Olga Antonova, CMWP partner, believes that the investment climate currently does not provide for a wide expansion of international players, so it is hardly possible to expect their serious entry into the Russian market.

The reduction of brands significantly affects the business of shopping centers. According to Focus Technologies, from January to November 2022, the Mall Index (number of visitors per 1,000 sq. m) in the largest shopping centers (more than 80,000 sq. m) in Moscow and the Moscow region decreased by 25% year-on-year, and traffic of facilities ranging from 40 to 80 thousand square meters m – by 7%. According to Olga Antonova, in September, 11.5% of the space in Moscow shopping centers was empty, by the end of 2023 18% is expected.

Daria Andrianova