Luxury retailers have dashed to set up shop in Moscow this decade, but there’s far more to know about retailing in Russia – and the U.S. has yet to make its mark.
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By John Ryan
Anybody attending Walmart’s annual general meeting this year in June might have noticed something curious. A fair number of the retailer’s associates were from Russia – a country where Walmart has had an office since the beginning of the year, in Moscow, but has no stores: at least not yet. At the same gathering, recently installed ceo Mike Duke said that one of his best-ever visits was to Russia: “I’ve never seen so many people in a store. The only thing was, it wasn’t our store!”
Even the ceo of Russia’s largest grocer, X5, has said that he expects Walmart to arrive soon, backing up the (by now) pretty strong suspicion that the Bentonville behemoth is considering a Russian debut.
Whatever the truth behind all of this, Walmart’s Russian overtures are symptomatic of a broader phenomenon: the desire on the part of retailers across the world to open in what’s still perceived to be a land of opportunity. To date, the European retailers and big-box operators have made the best strides in opening stores beyond St. Petersburg and Moscow. Names such as IKEA, Obi (a German DIY retailer) and Castorama (a French DIY outfit) are all now up and running, in some cases as far east as Siberia, which only begins around four hours’ flying time east of Moscow.
But for the great majority of European retailers that have taken the plunge, Russia means Moscow or St. Petersburg. And, significantly, there are still few North American operators in Russia, Walmart’s Moscow office notwithstanding.
Several factors are contributing to this lag. First, there’s the spectre of corruption. The recent decision by IKEA to suspend further investment in the country, owing to what it said is the requirement to back every initiative with a bribe, exposes the problems that foreign retailers are almost certain to encounter. Russian president Dmitri Medvedev has made curbing corruption one of the goals of his presidency and has signed a law prohibiting surprise inspections by fire and health authorities that are often used to extort companies.
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What Nick Hill said is true that “The trick is that the middle sector is actually everything but the top end,” from my understanding of what Nick said the middle sector is really important because there are plenty of people in the middle section who wants to buy stuffs like the people at the top. It is great to aim at the middle section than the top end section because the people in the middle section can also afford things that they want. GuyRiordan