Russians develop massive consumption instinct steadily

Russian people start spending their money with pleasure after many years of financial difficulties

Russians have been developing their consumption instinct lately. Russian people tend to do pleasurable shopping nowadays, although it used to be characterized with daily needs only before. Owners of commercial networks activate their presence on the Russian market. Russia has become one of the countries, which offers extensive investment opportunities for retail companies, according to a recent market research conducted by PricewaterhouseCoopers.

Two regions, which accumulate about 50 percent of the global population – Asia and Central/Eastern Europe – are becoming the driving force of the global economy, the consuming market inclusive. Most active consumers reside in China, India, Turkey, Vietnam, Russia, Romania and Bulgaria. PWC analysts concluded that such countries as Hungary, Poland, Singapore or Thailand could be attractive for investors in terms of certain retail sectors only.

Similarly to all other countries of the globe, Russian consumers are divided into two major categories: price-limited buyers and more or less wealthy individuals, who perceive shopping as a kind of entertainment. Shopping malls and boutiques enjoy great popularity with wealthier individuals in Russia.

Russian people start spending their money with pleasure after many years of financial difficulties. Consumers' expenditure increased by 22 percent last year, although the real income of population gained only 18 percent. PricewaterhouseCoopers specialists say that such a combination proves people's certainty in future incomes. Russians have started spending less on foodstuffs (dropped from 53 to 39 percent during the recent five years), and increased spending on transport, holidays, education and leisure (from two to eleven percent).

However, Russia still lags far behind developed countries in terms of the income distribution scheme. Russian companies still hold the leading position on the number of so-called discount stores and supermarkets. Foreign companies, however, own the majority of Russian mega-malls.

In spite of the fact that Russia does have an enormous potential for the development of the retail market, foreign investors may face specific Russian problems during their activities in Russia. Those may include tough competition for commercial space, a serious lack of high-skilled personnel, imperfect regional promotion of companies and so on and so forth.

The public excitement for massive consumption of goods will last in Russia for about four years, PWC specialists say. Many Russians start using crediting opportunities for expensive purchases. They all will have to pay back the loans afterwards, which will inevitably result in the reduction of massive demands in Russia. Nevertheless, investments in Russian retails will still return huge profits.

It is worthy of note that the prospect of retail boom is quite vague in Russia against the background of Russia's imminent WTO membership. PricewaterhouseCoopers specialists say that the membership may improve the investment climate in Russia and show a negative influence on domestic producers and trademark owners because of the growing competition.

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