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. Last Updated: 07/27/2016

Metro's $25M Store Under Way

Metro AG, the world's third largest wholesale and retail chain, laid the cornerstone Thursday for its first outlet in Russia, a $25 million complex that will open in northwest Moscow in November.

The 10,000-square-meter Metro Cash & Carry store at 71B Leningradsky Prospekt will employ 400 staff and be the first of six outlets that the German retailer will open here over the next two years, said Walter Demetz, the general director of Metro Cash & Carry Eastern Europe and CIS.

Each outlet will contain 10,000 square meters of retail space, cost $25 million and have parking space for 1,000 cars, Demetz said. Two stores will open this year.

"Arriving finally in Moscow and in Russia, Metro recognizes the fast development of social, political, economical environment of this geographical area, set as a bridge between Europe and Asia and with an enormous potential of human resources," Demetz said at a groundbreaking ceremony attended by Moscow Mayor Yury Luzhkov.

"After long thought and a lot of estimates, Metro believed that one can do business in Moscow," said Luzhkov.

"In Moscow, one need not to be scared of losing money when working with the Moscow government," he added.

The $150 million to be sunk into the chain will be recouped in six years, Demetz said. Each outlet is expected to bring in annual revenues of at least $67.5 million.

Metro will target small and medium-sized businesses, individual entrepreneurs and commercial and institutional customers by offering wholesale prices on 15,000 food and nonfood items.

Demetz said 60 percent of the products will be imported.

Metro's foray into Russia comes as a number of foreign and local chains set their sights on the market.

Last month, another German retail chain, AVA, laid the cornerstone of its first complex, an $18 million, 26,500-square-meter complex scheduled to open in the spring.

Turkish retailer Ramenka last month said it would open a fourth Ramstore hypermarket in October.

Dutch retail giant Spar International intends to open the first two of 30 supermarkets in Russia this year, and French retailers Carrefour and Auchan have also shown interest.

Russian retailers, meanwhile, have been consolidating to fight off foreign competitors. Last year, four retail chains — electronics store M-Video, sporting goods store SportMaster, the Sedmoi Kontinent supermarket and construction retailer Starik Khottabych — pooled together their resources to form an alliance. In March, retail giants Perekryostok, Kopeika, Dixi and Megamart created the Russian Retail Alliance.

Alexander Kasyanenko, director of Perekryostok, Russia's largest retail chain, and head of the Russian Retail Alliance, said Thursday he was ready to face the Western chains head on. "The Russian culture, the particularities of Russian legislation and other peculiarities that Western chains will bump into will make it hard to work here," Kasyanenko said.

Nevertheless, Russian retail chains are "preparing a worthy response" to the deep-pocketed Western chains, he said, declining to give details.

Kim Iskyan, a retail analyst at Renaissance Capital, said the arrival and growth of Western retail chains is good news for consumers.

"Russian retailers will be forced to offer better service and better goods, and Russian consumers will get cheaper goods," he said.