Ian McGarrigle, Congress Director World Retail Congress speaks on trends and challenges in world retail market
— What are, by your opinion, the most significant trends in the world retail market, generated recently or formed before our eyes?
— Retailing seems to be facing unprecedented challenges and change brought about by the economic situation in so many countries. This has been going on now for more than 4 years and retailers are having to learn how to trade in times of very low or no growth. It is forcing businesses to look at how they can ever more efficient and to learn how to get consumers to buy when money is tight. But there are also other challenges being brought about by the move towards online shopping and the use of mobile which is changing the traditional retail business model. Without doubt, a very different retail industry will begin to emerge over the next few years.
— What do you think of the Russian market potential, from the point of view of foreign investors (the retail companies)?
— With tough times in many markets, the pressure is on retailers to find new and sustainable growth and this is where international expansion is so important. Russia has been discussed for some time along with China, India and Brazil. My sense is that more retailers are actively looking again at Russia as they are attracted by the improving infrastructure, improving investment situation and increasingly good retail locations with new shopping malls.
— Has the investment climate in Russia changed recently to the best, by your opinion? What do representatives of the largest networks in the world think of it?
— There has been concerns about whether the climate is right to invest in Russia but I think that there is a new confidence from what I understand in talking to retailers. I know of several that are enjoying great business in Russia.
— Why havn’t all experiments on entering Russian market been appeared to be successful: so, American Walmart, French Carrefour, Turkish Ramstore left it. Why?
— Addressing all these questions, I would say that the Russian market is not unique in often proving to be very difficult for even big retailers to make a success. International expansion is very, very difficult to deliver successfully. This also explains the level of caution that retailers display in saying they are looking at Russia but take a long time to do anything. It is about really understanding the market and whether their format and brands will work there. It is about knowing which partners they need to work with, understanding how logistics and technology can be used and it is also about understanding the needs and wants of the Russian shopper.
— What western players, in your opinion, are at the moment more ready to enter the Russian market?
— I could not give specific examples but the leaders in international expansion are usually the major food retailers and the luxury brands. Luxury is a very strong market in Russia.
— Does the world retail market feel the second wave of crisis? If yes, how is it expressed?
— Absolutely! The recent events with the debt position of Eurozone members and the situation in the US has led to extremely nervous consumers who are already cutting back on spending. This will lead to many retailers having to close stores or some businesses collapsing. Retailers will have to look even harder at their costs, how they source product and how they can make their prices even more competitive.
— What is the condition / level of consumer ability in the West?
— Consumer confidence is extremely fragile in the west. The only sector holding up seems to be luxury and that is being sustained by international tourists.
— How do you think, do world retail networks consider Russian retailers as worthy competitors? Reached a high level of development, due adaptability to manufacture, ability to work in difficult conditions?
— Whilst there are not many Russian retailers that have begun to figure on the international stage, I think it would be true to say that retailers admire a number of Russian retailers. X5 is certainly one business I hear talked about a lot and there is huge admiration for what Lev Khasis did to make that business the number one retailer.
— What are the main threats for retail corporations at the moment?
— The biggest threat is if they do nothing! They have to change and adapt to the new market conditions, but they must also prepare themselves to take advantage of the online developments and international markets. If they do not restructure to become an online multichannel business then they will not survivie. If they are serious about international expansion then they have to move fast to secure an entry point in their chosen markets before others do it for them!