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Monday, May 01, 2006

Russia's Retail Sector Fizzling Out

Kommersant reports that Russia's retail market is close to saturation and its growth is peetering out. The Russian business news daily states: "Russia’s Statistics Committee signaled the slowdown in retail is obvious. The growth slid from 12.5 percent in 2004 to 12 percent in 2005 and to 10.2 percent in this first quarter.These trends in Russia’s retail will soon trigger a qualitative leap, the analysts of A. T. Kearney forecasted, emphasizing the window of opportunity is closed at 90 percent now. "

What is meant by "qualitative leap"? Kommersant explains: "While shifting to a new phase, bigger companies will be taking over regional chains and discounter format will be promoted to the regions, said Anton Poryadin, who is in charge of A.T. Kearney’s division for strategy, arrangement, merger and takeover in Russia and CIS. "

Good luck with that discount strategy in the regions! As noted previously by La Russophobe, the average Russian income is only $300 per month. As anyone remotely familiar with Russia knows, the average figure is skewed by a number of millionaires living in Moscow; there is a vast population out in the regions with incomes far below the average. RIA Novosti reports that the Kremlin plans to increase public sector wages by 15% and the minimum wage by 30%, which sounds like a lot until you realize that the minimum pay for employees is currently at 800 rubles (about $29) and would only be raised to 1,100 rubles (about $40) starting from May 1. That extra $11 isn't exactly going to fuel a retail boom, now is it?

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