Guiding Lines: Waiting for a Fight

A variety of segments in that market, however, are still vacant. The Russian capital lacks diversity in the various formats of shopping centers, shops, international brands and chains. But a new stage in retail development is looming as the market awaits international operators whose arrival will mark the beginning of a battle of the brands.

There are a number of market development theories. In line with one of those proposed by international property consultants, the shopping centers of the first generation are covered properties of up to 30,000sqm in size, run by a single manager or a management company. Their format and retail profile are shaped by the tenants who make up the majority. Examples of this type are the Druzhba and Zapadny shopping centers.

Moscow has already passed that stage, with second-generation shopping centers already present in the capital. They are properties of 50,000sqm and larger, rising two to three levels above the ground, with parking facilities on lower levels, though this is not always the case. Some of those projects are clusters of developments that are not linked to each other by covered passageways. As a rule, such complexes have a number of anchor tenants, and feature entertainment facilities, shopping arcades with dozens of brand names present (Mega, Atrium).

The third-generation centers are sometimes referred to as “hybrids”, because those enormous developments usually comprise a variety of formats. They include retail parks, malls, entertainment centers; most often, hybrids are to be found in developed cities of Southeast Asia.

These days, Russia is witnessing the rapid growth of major domestic retail chains, with pressure from western competitors growing steadily. In the long run, consumers benefit from that process, because, as they say, the more retailers are present on the market, the more diverse the shopping centers are both in terms of format and merchandise.

It is no wonder that the public has welcomed the emergence of the regional retail chain Lenta and the arrival of the British landmark chain Marks & Spencer in the capital…

The next stage will be marked by the saturation and segmentation of the market. By the year 2008, or so, the capital will enter the phase of price wars. A couple of years later, the competition of marketing strategies will begin. In about five years competition in that field will become especially acute.

Undoubtedly, 2005 pleased the public with a number of novelties and pleasant news. For example, a retail park of nearly 50,000sqm opened on Varshavskoye Shosse, developed by Garant Invest Group. Moscow only has a handful of retail parks as yet.

The 220,000-square-meter Rostokino center near Medvedkovskoye Shosse is likely to become the city’s second retail park, currently under construction by the company Kashirsky Dvor Severyanin. The developer has pledged to open the facility by late 2006.

Specialized complexes, such as, the Moskva car center on Kashirskoye Shosse, or sports goods stores, such as Decathlon on Ostashkovskoye Shosse near Auchan, are entering the market. CNA, Real, Atac, and The Body Shop have already arrived in the Russian capital. H&M and Saturn are expected to follow in the near future.

And still, there are so many things the Russian consumer has not seen yet! Take, for instance, the gigantic multi-tier vertical structure malls – magnificent retail high-rises with overhanging tiers. All sorts of goods are available in such buildings because those retail formats are able to accommodate so much. Such structures can be seen in the streets of Hong Kong. Germany’s Zeil Gallery in the main retail street of Frankfurt-am-Mein has a similar structure.

But Moscow consumers have not yet even been spoilt by such concepts as family-oriented malls or children’s shopping centers, which are widespread elsewhere around the globe. Winnie on Rublyovskoye Shosse – one of the few shopping centers offering children’s goods in Moscow – is built in line with international standards featuring playgrounds and a bar for the parents, but prices there are astronomical. Another project – Sovyonok near Savyolovsky train station, largely reminiscent of a Soviet-era marketplace with a roofed pavilion – was partially destroyed by a recent blaze.

Nor has Moscow seen state-of-the-art retail parks, such as those IKEA builds across Europe, or those similar to the large family-oriented West mall in Graz, Austria. The Russian capital still has no modern department stores. For the time being, real competition is unfolding perhaps only in the segment of supermarkets and hypermarkets.

If no external obstacles arise, international retailers will soon arrive in Russia. And those who want to retain their leading roles will have to prepare for the competition now.