JLL has prepared its Destination Russia report exclusively for MAPIC. In this report, JLL has analysed more than 250 international and domestic retailers’ presence in Russia’s main cities, in addition to looking closely at the growth potential, penetration of modern retail formats and demand across each market and scoring each against the backdrop of overall international and domestic retailer presence.
The main conclusions are:
- In terms of the number of all retail chains, it is not surprising that Russia’s three most developed cities Moscow, St. Petersburg, and Yekaterinburg top the list.
- The outstanding leader in luxury retailer presence is Moscow compared to its Russian peers, followed by St. Petersburg, Yekaterinburg, Nizhny Novgorod, Samara, and Rostov-on-Don.
- Only eight of the analysed retailer chains have achieved 100% market coverage across key Russian markets.
- Only international brands such as adidas and Yves Rocher have 100% retail coverage of the largest Russian cities analysed in the report.
- Italy, driven by luxury brand expansion, is the largest exporter of cross border retailers across Russian key cities.
It is not surprising that Moscow has ranked first on the JLL Russia Retailer Presence Index, thanks to its high level of income, rising population, quality modern shopping centres and actively developing street retail supply. It should be mentioned that Moscow also has the third largest presence of international brands in Europe as the prioritised destination in Russia for retailers planning to enter Russian market. After entering the Moscow market, retailers typically expand selectively deeper into other markets.
The highest index scores are in St. Petersburg, Yekaterinburg, Krasnodar, Novosibirsk, and Rostov-on-Don, which are in the top five cities of the JLL ranking. St. Petersburg is the second most popular destination for retailers with 80% of all analysed retail chains present there. Approximately 65% of brands have a presence in the Yekaterinburg retail market and half of all operators are in Krasnodar, Novosibirsk, and Rostov-on-Don. Also featured among the top 10 cities of the JLL Russia Retailer Presence ranking are Samara, Ufa, Kazan, Nizhny Novgorod, and Tyumen.
“Unlike Europe, Russia has the ‘mall’ market model where the majority of retail income is generated in shopping centres. Due to this, the openings of new shopping centres in the region could be a key driver for new brands looking to enter the market,” - explained Maria Shpakova, retail research analyst, JLL, Russia & CIS – “As the highest developers’ activity was observed in the cities with the large population and largest incomes, we see our Russia Retailer Presence Index as higher on the markets with healthy level of these indicators.”
The top three cities in the JLL Russia Luxury Retailer Presence are also Moscow, St. Petersburg, and Yekaterinburg. In terms of luxury brand presence, Moscow has a much higher index score than any other Russian city. There is a huge gap between Moscow and St. Petersburg. Almost all analysed luxury brands (98%) are present on the Moscow market while only approximately 50% of the analysed brands operate in St. Petersburg. Approximately 35% of the analysed upmarket brands cover Yekaterinburg - the third most popular destination in Russia for luxury operators.
International brands in Russia: Top countries-exporters
A larger number of Russian cities analysed in this report are covered by retailers of Russian origin, including Gloria Jeans (fashion), Carlo Pazolini (footwear), Sportmaster (sporting goods), L’etoile (cosmetics), kari (footwear) and Eldorado (W&B) with 100% coverage of analysed markets. It should be mentioned that most retailers are related to the mainstream segment. As a rule, low cost Russian brands have a high level of penetration into Russian cities which is why the majority of analysed Russian brands have more than 70% coverage of the market.
When considering the number of cities covered by international retailers, German sport fashion retailer adidas and French cosmetics and beauty brand Yves Rocher have 100% coverage of the analysed markets. These retail chains are represented by at least one store in all 35 cities.
Danish footwear operator ECCO shares the second place with sport brand Reebok and hosiery and beachwear brand Calzedonia which operate in almost all key retail markets of Russia. Another brand of the Calzedonia Group – Intimissimi – is also in the JLL Top 10 International Retailers on the Russian market and ranks fourth in this rating. In the third position are United Colors of Benetton, Reserved, and Subway.
The top international brand ranking in Russia is absolutely dominated by the mainstream segment. The only premium operator Swarovski and ESCADA achieved more than 60% key Russian markets coverage. Premium retailers’ key focus is on Moscow and St. Petersburg.
Elena Zadorozhnaya, head of retail tenant representation, JLL, Russia & CIS, commented: “Conclusions reflect the activity of retail operators in the Russian market over the past years, whereas the dominant trend in the current environment is the course of optimization, rather than development. In particular, retailers are focused on the reviewing lease terms for existing stores, consolidation or even closing them, and the current activity can affect the position of individual cities in the ranking. It should be mentioned that almost 70% of newcomers that entered the market for the last 12 months opened just a single store, mainly in Moscow. At the same time, nowadays the Russian market provides opportunities for those retailers who do not stop their development in Russia, such as selection of premises for flagship stores in key existing shopping centres previously were inaccessible. We do see the gradual restructuring of the Russian retail market under the influence of external factors and its adaptation to the new realities.”
The full report will be released next week and available for download right here at Europe Real Estate.
