Financial results from the first half of 2021 show that Russian retailers are chipping away at the market share of international rivals within the Russian Federation. This comes as a domestic and global retail boom is shaking up the sector.

Retail in Russia is undergoing a transformation as the local market accelerates out of the COVID-19 pandemic. The Russian sector is outpacing even the booming global retail sector as real wages increase and consumer behaviour begins to change. Whereas the longstanding leaders of the Russian market are international companies, this shift is playing to the advantage of Russian retailers, who are fast catching up.

Auchan and Metro – two European hypermarket giants – have dropped off the list of the top ten largest retailers in Russia at the end of 1H21, writes daily newspaper Kommersant. In their places, Russian retail giants Ozon and Svetofor have broken into the top ten, according to data from analytical firm Infoline.

As a result, nine out of the top ten retailers are now Russian companies. The exception is French home and gardening retailer Leroy Merlin, which currently sits at eighth place on the list.
One of the main beneficiaries of the change is e-commerce. As the coronacrisis pushed more consumption online, the sector expanded five times faster than the real economy. Ozon is a case in point. Often likened to e-commerce giant Amazon, the company is in fact a much younger player with more growing to do. Ozon’s IPO last year raised $1.2bn, and its appearance on the prestigious list of top ten retailers testifies to its rapid growth since then. Q2 results showed that orders placed with the company have jumped from 14.6mn to 40.9mn year-on-year. Revenue has correspondingly grown by 108.4% in the same period.

Food retail is another winner. Online sales of food products in Russia tripled in the first half of this year, reaching RUB149bn ($2bn). X5, a food retail group which maintained its position as Russia’s largest retailer, recently announced that total sales for Q3 were up 11.6% year-on-year, with 353 new stores opened in the quarter, as reported by bne IntelliNews.

The Auchan network, meanwhile, saw its Russian income shrink by 17.3% in the first half of the year according to Infoline, while Metro’s stayed the same. For Auchan, this is the sixth year in a row that sales have fallen. The CEO of Auchan in Russia, Ivan Martinovich, disputed Kommersant’s evaluation, telling the newspaper that the company’s overall profit was up 3% this year, with EBITDA up 66%.

Nonetheless, as consumption soars in a market undergoing a rapid shift in dynamics, Russian retailers are indisputably outperforming their cohort. Some will put this down to their ability to quickly interpret and adapt to changing demands. X5, for example, has put particular emphasis on the success of its digital business, which grew by 157% year-on-year in 3Q21. Ozon, meanwhile, has touted the rapid expansion of its Express service, with the opening of its first dark store in St Petersburg earlier this year. It is clear that the key to growth in this highly competitive sector is to capture a large customer base as quickly as possible. Expect international retailers to try out ever more inventive services and products in an effort to win back their slice of the pirog.

 

Income of the top ten biggest retailers in the first half of 2021
X5 Retail Group	supermarkets	RUB1.05 trillion ($14.1bn)
Magnit	super markets	RUB801.6bn
Bristol and Krasnoe & Beloe	retail	RUB330bn
Wildberries	e-commerce	RUB241.3bn
DNS	retail	RUB227.2bn
Lenta	supermarkets	RUB214.9bn
M.Video Eldorado	consumer electronics	RUB212.8bn
Leroy Merlin	DIY	RUB207bn
Ozon	e-commerce	RUB141.9bn
Svetofor (Traffic Light)	discount retail	RUB120.5bn
source: Infoline