Boston, MA -- (ReleaseWire) -- 04/10/2014 -- Russia's retail market is an extremely attractive investment prospect, with an increasingly affluent population leading to projected household spending growth of 6.7% over 2014-2018. International chains in particular are eager to cash in on Russia's increasing purchasing power, with 17 international brands having already announced plans to enter Moscow's retail market by the end of the 2014. However, economic growth continues to be below the global average, with some areas, such as the beer sub-sector, set to decline over the coming years.
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The attraction of Russia's retail market to potential investors centres on the continuing rise in disposable incomes, the growing desire for a wider choice of products and price points, easier access to credit and an increase in car ownership. Recent or upcoming EU membership and significant foreign direct investment should also lead to an expansion of retail markets.
The success story is set to continue over the coming years, with the percentage of households falling into the middle-income wage bracket of US$10,000+ to exceed 90% by 2018. This will lead to a pronounced increase in aspirational purchasing, with clothing & footwear, household goods and personal care & effects, set to see average growth of 6.2%, 6.4% and 5.5% over the 2014-2018 forecast period.
However, the sector is not without its problems. Despite Russia having one of the largest, and most promising, e-commerce markets in the world, strict customs laws are hindering online sales, particularly for Western retailers such as Amazon and Net-A-Porter. Although just 2% of Russia's retail sales are conducted online, the country's e-commerce market is cited as being fast-growing, with this figure expected to rise to 5% by 2015, according to Morgan Stanley.
Russia's beer sector is also in trouble, due to a ban on advertising and stores only being allowed to sell alcohol until 11pm, in a bid to curb consumption. The sector was on course to shrink by 25-30% over 2013 from its 2008 size.
- 60% of international chains that entered Moscow's retail market in 2013 were European, according to CBRE, with 35% originating from the US and 5% from Japan. Domestic retailers are also cashing in, with fashion chains Lexmer, Funday and Bella Potemkina setting up their first stores in Q413. 2014 looks set to be equally as promising, with 17 international brands having already announced plans to enter Moscow's retail market by the end of the year.
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