The revolution is over: Internet-commerce volumes declined at the end of 2012

Yesterday’s daily Slon.ru referred to a study performed by the National Research Institute of the Higher School of Economics that analyzed the situation in the Russian retail sector. Focusing on the capital city in particular, the study found that more than 25 percent of all retail businesses in the Moscow region reported a decrease in turnover during the 4th quarter of 2012. The study also found that the percentage of online retail trade in the overall retail turnover across the country fell from 9 percent to 7 percent, thus depriving the retail sector of the desired support. However, the share of online retail trade in Moscow increased from 8 to 11 percent, which was probably caused by a decision of several large retailers in the capital to expand into the online arena. (Translator’s remark: this could also be a result of disappointing experiences with delivery outside of large metropolitan areas)

Consumer lending helped the retail market noticeably, increasing its share in the overall retail turnover in Russia from 13 percent in 2011 to 18 percent in 2012. Within the Moscow region, the share of consumer lending in total retail spending increased from 10 to 20 percent.

The study found that the domestic producers lost the battle with foreign suppliers, which was especially noticeable in Moscow, where the share of foreign products in the overall retail turnover in 2012 reached 51 percent, three percent more than in 2011. The respective percentage across the country in 2012 was 35 percent.

Retailers continue to struggle with profitabiliy, and most of them tried to increase their margins during the second half of 2012. According to the study, the average retail margin in Moscow during the fourth quarter of 2012 was at 34 percent, while the average retail margin for the entire country stood at 27 percent. For certain categories of subsidized products, the margins can be as low as 7 percent. Retailers themselves claim that the average margin in Moscow should be no less than 41 percent. If this is truly the case, the authors expect to see signs of consolidation in the market.

Average share of online retail and consumer lending in total retail turnover (in percentages)

2011 2012
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Share of online retail in total retail turnover
Moscow 8 9 9 8 12 13 11 11
Moscow region 11 12 11 11 8 8 8 8
Russian Federation 7 8 7 9 7 7 7 7
Percentage of   consumer lending in total retail turnover
Moscow 9 13 13 11 20 20 20 18
Moscow region 10 10 10 10 20 18 20 20
Russian Federation 13 11 12 12 12 12 14 14

Average share of foreign products in total retail turnover (in percentages)

2011 2012
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Moscow 42 41 46 48 47 49 49 51
Moscow region 44 41 40 39 38 39 39 38
Russian Federation 31 32 33 34 32 31 33 33

 

 

Average retail margin

Current retail   margin Desired retail   margin
Moscow Russia Moscow Russia
2011 1Q 26 25 38 38
2Q 26 24 38 39
3Q 26 28 38 39
4Q 27 27 37 39
2012 1Q 27 26 35 38
2Q 26 27 36 38
3Q 27 26 35 38
4Q 27 26 35 38

 

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