''The number of legislative norms is growing exponentially. But are they necessary?''

Experts discussed the problems of retailing and further development of the industry at the St. Petersburg forum

''The number of legislative norms is growing exponentially. But are they necessary?'' Photo: pravdapfo.ru

The retail sector is strongly regulated today, with retail suffering the most. Regional networks cannot compete with the feds and often have to shut down their business. At the same time, federal players consider Alibaba and Aliexpress to be the main competitors, and they see centralization as a threat. This was discussed at the AKORT media forum, which has been recently held in St. Petersburg. The correspondent of Realnoe Vremya learned what else trading networks should be afraid of and what trends should be guided with. Read the details in the material of Realnoe Vremya.

“Poor hedonists”, who is not getting richer

Representatives of the authorities, large retail chains and independent experts gathered in St. Petersburg yesterday to discuss the acute and urgent problems of retail related to the further development of the industry. The third media forum of the Retail Companies Association (ACORT) took place in the Northern capital of Russia.

“Now we are being at a very difficult stage. Not everything is as rosy as we would like,” Head of Infoline-analysts Mikhail Burmistrov began the speech with the disappointing forecast.

According to the speaker, today trading networks are competing not only with each other, but also with online trading. Chinese Alibaba and Aliexpress are strong in this, first of all.

“The turnover of Aliexpress in Russia last year amounted to about 220 billion rubles, more than 20 million people constantly use and buy goods on this resource. In 2019, it is expected that Aliexpress in Russia will reach 300 billion rubles. This is a very serious challenge,” said Burmistrov.

The situation is also aggravated by that over 5 years the real incomes of the population have not grown. As Burmistrov said, in the first quarter of 2019, people's incomes fell again. Defining today's consumers, the analyst noted that buyers are “poor hedonists” who are not getting richer, but their demands are growing.

Besides, in 2018, consumers greatly increased the volume of the loan portfolio. Today, each resident of Russia has an average of 100,000 rubles of loans. So, the big sinkhole that appeared in the trade in 2015-2016, is not yet possible to overcome.

The market of food products, according to the expert, is being in a new phase of development. It is characterized by omnichannelness (combining all communication channels) and digitalization. Photo: infoline.spb.ru

“The number of new square meters is not growing”

Large regional retailers are also facing difficulties. They often suffer defeat before federal networks and are forced to curtail business. But among the feds there is no special growth. Only X5, Magnit and Lenta are in the lead in this segment. But the indicators of the giants such as Metro, Auchan and OK are declining.

“In the last 3 years we have reached a certain plateau, if we talk about the 200 largest networks. The number of new square metres is not growing, especially in the segment of hypermarkets. This is an objective phenomenon associated with the saturation of the market,” Burmistrov described the investment activity.

The market of food products, according to the expert, is in a new phase of development. It is characterized by omnichannelness (combining of all communication channels) and digitalization. E-commerce in the food market is a key trend in the nearest future.

“Today, retail space no longer plays the role they played 5-7 years ago. The consumer wants to choose using all available channels (smartphones, tablets). At the same time, we have very good potential in e-commerce. Russia is characterized by the saturation of mobile devices. By this indicator, we are comparable with Japan,” the analyst told.

“Retail is most strongly regulated”

According to Nikita Kuznetsov, the director of the department for the development of domestic trade, the system of digital marking of goods and the legalization of turnover of products at the ministry of industry and trade, the main problem of retail today is a large number of legislative norms and rules.

“If somewhere something gets burned or someone gets poisoned, it is immediately followed by a response from the government. And the number of legislative norms is growing exponentially. But it is necessary to understand at first whether this norm is necessary, and already then to adopt it,” Kuznetsov declared.

“We have made a change in the bill ‘On markets’ and brought it for consideration. We are proposing to cancel the current bill, and to transfer the norms on the markets to the bill ‘On trade’ in a minimum amount on the principle of regulatory guillotine,” the speaker told.

According to Kuznetsov, today the market has supernatural requirements. Retail is most strongly regulated. “Networks cry that they are too regulated, but if they saw that occurs to retail — they would bless themselves,” Nikita Kuznetsov told.

According to Kuznetsov, today the market has supernatural requirements. Photo: retail-life.ru

The advantage of decentralization

Another challenge retail is facing today is the centralization of procurement networks. According to the speaker, in the near future the advantage will be given to those who maximally decentralize purchases. Up to one store. “Now the largest networks are all very centralized — purchases go either through the central office or through the division. The number of stores in the hundreds, which creates great difficulties.”

“In the West, you can buy goods particularly in this area in a village hypermarket. This means that the store buys itself, not through the central office in Paris, for example. If networks can decentralize its activities, the problem of cooperation with suppliers will disappear for us,” said Kuznetsov.

According to the expert, it is important to develop small trade formats. “In the Duma it has been brought in the bill ‘On non-stationary and delivery trade’. There is already an instruction from the prime minister to speed up its consideration. We expect that this will happen after the May holidays,” said Kuznetsov.

As for the networks, the growth due to the opening of new stores for the main players is exhausted. Kuznetsov's position is also that trade should be omnichannelled.

“Quality does not always depend on price”

The main trend from the point of view of director for the development at Roskoshestvo Alexander Belyaev — customization. Trading networks no longer care where the consumer came from, it is important to make him a personal trading offer. The main element of customization is the customer's request for quality.

“We live in an era of information overload, for many it is a great shock to spend an hour in a hypermarket, comparable to an 8-hour working day. In the conditions of such overload to the consumer it is important to find reference points to understand what he can trust,” Belyaev told.

He noted that myths are common among consumers, many of which are associated with the doctor sausage. “It is believed that the sausage may contain rodent particles, toilet paper and so on. We conducted a study that involved about 40 brands. And we didn't find any rodents or papers in any of them. Our sausage consists of meat,” Belyaev reassured the audience.

Experts discussed the problems of retail and further development of the industry at the St. Petersburg forum. Photo: ACORT

For manufacturers, the Russian quality mark is gradually becoming an important element both in terms of product positioning and from an economic point of view. And it is also one of the latest trends. “Roskoshestvo’s research showed that the growth of products with a quality mark last year amounted to an average of 116 per cent, which is twice higher than in 2017.”

Also, Belyaev explained that the quality of products does not always depend on price. “The studies on caviar, pollock, dumplings show that products that are more expensive can be worse in composition than those that are cheaper. And this is the topic of conscious consumption. If we learn how to look for information correctly, if not a beautiful bank is important, but its contents, then we will come to the correct model that exists in European countries,” the expert believes.

“You either produce or trade”

The central thesis of the speech of Dmitry Bogoda, the director for strategy at Lenta, was the return of retail to the origins. “Retail actually goes back to the time 100 years ago, when the buyer comes to his store for their goods,” Bogod believes. In other words, trade becomes localized and personalized.

The head of the committee for the development of the consumer market of St. Petersburg Elgiz Kachaev complained about the eternal struggle of small businesses and large networks.

“There is an eternal struggle for the turnover of the shelf. I always say to small business, networks are a given, you can not get away from them, so learn to work so that the client goes to you,” shared Kachaev. As an example, the speaker cited stores with goods from Belarus, which managed to become successful in the competition with trading giants.”

Also, Kachaev rebuked large networks in manufacturing of products under their own brand. “You either produce or trade. The studies of our quality control centre have shown that Own Brands quality is often so-so. It is also necessary to understand when a network starts to produce goods, another producer closes production,” the speaker declared.

However, Head of ACORT Sergey Belyakov disagreed with Kachaev. “If networks can't start producing, why the manufacturers can sell?” he asked. According to Belyakov, the Velikoluksky meat-packing plant has its own retail, not to mention the networks of gas stations owned by large oil corporations.

As a problem, Belyakov also highlighted the drop in household income and the increase in retail costs. Photo: rsppenergy.ru

“Retail costs are increasing”

Belyakov also noted the high regulation of trade, but did not share the optimistic sentiments of the representative of the ministry of industry and trade.

“I do not expect a reduction in attention to the economy from the government. Rather on the contrary, the worse the situation is, the higher the desire to apply methods of manual control will be,” Belyakov believes.

“It is believed that we have built a market economy, but in terms of what initiatives appear from time to time, apparently it still has not been built. The desire to manage the trade margin, to regulate all relations ‘network-supplier’ is a very dangerous trend. Moreover, this is not a feature of retail, but a feature of the state's behaviour in relation to the economy,” the head of ACORT added.

As a problem, Belyakov also highlighted the drop in household income and the increase in retail costs.

“We record a drop in the average purchase size, a decrease in revenue from the trading metre, a change in the behavioural model of the population. Retail costs are increasing because of the growing fiscal burden, utilities, costs associated with logistics. All this seriously worsens the economy of retail chains, reduces their marginality, further aggravates the situation in the market in terms of the concentration of retail around major players,” said Sergey Belyakov.

The speaker also noted the importance of using IT-technologies. “Alibaba's capitalization is $500 billion. The company itself does not consider itself a retailer and calls itself an IT company. This is the trend of trade development in the world. Our companies should learn to use all trends related to digitalization. The more companies invest in these technologies, the higher their market share will be,” concluded Belyakov.

By Alina Gubaydullina

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