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. Last Updated: 07/27/2016

A City Eager to Shop 'Till It Drops

MTMany prominent international retail chains have been entering the Russian market.
Riding on a wave of growing consumer spending, the retail business is booming, and foreign and local companies are vying to get their piece of the pie.

Shoppers with a taste of what the bountiful West has to offer -- and experience of Moscow's pioneer efforts at providing clean, pleasant venues for them to spend their spare rubles -- are demanding more. Domestic production is up and competition is increasing, which raises quality.

"Positive trends in the Russian economy have given confidence to Russian and international investors, developers and retailers," real estate firm Stiles & Riabokobylko, an affiliate of Healey & Baker, said in a report titled "Retail Market Profile" released in March.

"The potential for shopping center development in Moscow is greater than in other Eastern European capitals. Large cross-border retailers are expanding into the Moscow market. Rents are increasing, vacancy rates are decreasing and the amount of shopping center space coming on line is phenomenal."

Moscow has a large population -- officially 8.5 million, although the real figure is estimated at more than 12 million -- and it also draws many visitors. Because of this, the capital accounts for about a third of all retail sales nationwide.

Michael Lange, managing director of Jones Lang LaSalle, said that Muscovites' average annual personal income rose from about $2,500 in 1999 to $6,000 per capita last year.

Muscovites spend 40.5 percent of disposable income on food, 34.3 percent on non-food items and 14.5 percent on services, according to Stiles & Riabokobylko.

Real estate firms predict the total supply of shopping center space will double this year to 914,000 square meters after last year's opening of 14 new shopping centers. Occupancy in shopping centers reached 98 percent in 2001.

At the same time, old stores are being renovated and spawning local chains.

Scope for expansion derives from the still low amount of quality shopping space compared to other comparable cities internationally. Moscow has about 48 square meters per 1,000 inhabitants, while East European capitals average 365 square meters per 1,000 inhabitants, according to Stiles & Riabokobylko.

The Moscow city government is planning to develop 49 new shopping centers by the year 2020, while the Moscow region wants to build 20 hypermarkets on the Moscow Ring Road, or MKAD, over the next five years.

Among the leading local retailers are Perekryostok, Sedmoi Kontinent, Stolitsa and Kopeika.

Turkish retail chain Ramstore, which was the first international operator to open a supermarket in Moscow, now has nine Ramstores in Moscow and plans to open seven more by the end of 2002.

Swedish furniture retailer IKEA is constantly expanding its presence. This year it is to complete Russia's first regional-level shopping center, the $200 million, 150,000-square-meter MEGA mall in the southwest of the city. Peter Odlund, the project's head, said this week that 95 percent of the leasing space has already been filled.

Prominent European chains such as Spar, Metro AG, AVA and Auchan entered the Russian market last year and are planning expansion. Officials of U.S. chain Wal-Mart visited Moscow recently to look for opportunities.

German supermarket chain Rea is to invest $900 million to build a chain of 20 hypermakets in Moscow within the next three years, the daily Vedomosti reported this month.

While most of the country's middle class is in Moscow and St. Petersburg, new shopping malls and supermarkets are opening across the nation. As the provinces start to imitate the two leading cities, secondary centers such as Samara and Nizhny Novgorod in south central Russia, Yekaterinburg in the Urals and Vladivostok in the Far East are starting to open similar shopping centers.