OREANDA-NEWS. On 03 April 2008 was announced, that according to a retail industry survey conducted by Ernst & Young, the overwhelming majority of respondents (85%) believe the industry is set to grow significantly over the next three to five years. They believe the average growth rate will be around 30%. 

The survey was held at the end of 2007 among retailers operating in Russia in order to collect and summarize Russian and foreign retailers’ opinions on industry issues, as well as to set out key strategic objectives faced by the market players and possible methods of meeting them.

A total of 49 companies operating in various sectors of the retail industry took part in the survey. Respondents included 37 companies from Moscow and Moscow region, as well as 12 companies from Vladimir, Kaliningrad, Rostov-on-Don, Nizhni Novgorod, Nizhnevartovsk, Novosibirsk, and St. Petersburg. The majority of respondents are Russian companies (84%).

Since respondents represent both local and foreign companies from various retail sectors, it was possible to analyze responses in terms of geography, shareholder structure, as well as the sector in which respondents operate.

According to the survey results, foreign companies are less optimistic about industry growth rates compared with their Russian colleagues. The former expect the industry to grow by about 23% in the segments where the latter forecast 31%.

As for the most promising sectors, all respondents singled out the food sector (57%) in general, followed closely by the houseware and building materials sector (55%), clothing (47%) and footwear (33%). Russian companies considered the food sector as the most promising (61%), while foreign companies named the houseware and building materials sector as the most attractive (50%).

Irrespective of the sector they represent, the majority of respondents (90%) think that the competition will increase primarily between Russian and foreign players.

All respondents operating in the home electronics and luxury goods sectors said that the opening of new outlets was the core of their business strategy. The same answer was given by retailers in the clothing, footwear and accessories sector, by 75% of companies operating in the perfume and beauty products sector as well as the houseware and building materials sector, and by 73% of companies representing the food sector. At the same time, foreign respondents place much more of their hopes with creating a joint venture or strategic partnership than Russian ones (50% vs. 27%).

"Most respondents believe that all Russian regions are fit for expansion, while their top priority was Moscow and Moscow region," said Vitaly Pyltsov, Partner and Head of the RCP Group in the CIS.

More than 90% of large retailers operating in the in clothing and footwear, houseware and building materials, and food and beverages sectors are planning to expand in the CIS. Twenty-five percent of participants reported already having a foreign partner, while 38% are not planning such a partnership.

Among the most important issues facing companies in their regional expansion are lack of high-quality retail properties, lack of qualified staff, and logistical problems.

To implement a development strategy, companies use various sources of funding. The overwhelming majority of respondents (79%) said they used or were going to use a combination of equity and debt financing. Bank loans were also very popular, mentioned by 80% of respondents. Attracting financial investors and making public offerings were rated second and third, respectively.

"We hope that the results of this survey will help its participants gain insights into retail industry development trends in Russia. We are planning to conduct this survey on a regular basis," said Vitaly Pyltsov.