Retail defeats sanctions

Minus 814 trade enterprises

Retail trade turnover in Tatarstan reached 1.4 trillion rubles in 2023 — an increase of 11.3% in comparable prices by 2022. This is an impressive figure against the background of last year's 3.1% drop. The main contribution to this growth was made by non-food retail, whose turnover increased by 15.6% over the year to 772.4 billion rubles.

The turnover of the food retail trade increased by 6.3% to 627.7 billion rubles. Retail turnover per capita increased from 304 thousand to almost 350 thousand rubles.

Main indicators of the consumer market of Tatarstan in 2023

Based on Tatarstan Statistics

The number of trade enterprises in Tatarstan decreased by 814 units in 2023 — to 16.441. On the contrary, the supply of retail space per 1,000 inhabitants increased from 924.4 to 948.4 square metres. The number of public catering enterprises increased by 341 units to 5 443, and the number of consumer services enterprises increased by 1 370 to 6 587 facilities.

Consumer market enterprises and availability of retail space

Based on Tatarstan Statistics

Tatarstan catering grew by 14.8% over the year to 67.2 billion rubles, the volume of turnover of household services to the population increased by 5.8% to 63.7 billion rubles

Turnover of public catering market and household services

Based on Tatarstan Statistics

The Bank of Russia notes overheating in the Russian retail market. The increase in the key rate over the year from 7.5% to 16% did not save the situation either — consumer activity continued to remain high.

However, inflation, which is being fought by the head of the Bank of Russia, Elvira Nabiullina, has begun to decrease compared to 2022. According to the Bank of Russia, in December 2023, annual inflation in Tatarstan amounted to 7.1%. In 2022, inflation in the republic reached a historic high of 11.4%.

Inflation is caused by that manufacturers and suppliers of many goods have increased costs, which they continued to transfer to prices, the National Bank of the Republic of Tatarstan stated. For example, the costs of poultry farms continued to grow. The cost of imported equipment, feed and hatching eggs has increased, and labour costs have increased. Accordingly, the rise in egg prices accelerated. Cafes and restaurants also increased prices. The reason is the rise in price of some products.

However, according to the forecast of the Bank of Russia, annual inflation in the country will decrease in 2024 to 4-4.5% and will be near 4% in the future.

Income growth outstrips inflation

Consumer optimism is caused by that household incomes are growing faster than inflation, and in those regions that have been growing more slowly for many years. “The main reasons are the costs of structural transformation, staff starvation and wage growth, as well as a longer working life for pensioners," explains Tabakh. “So retail growth is quite brisk even after accounting for inflation.”

According to the expert, today the Bank of Russia pays too much attention to the increased demand for goods and services, rather than increasing supply, which requires a completely different interest rate policy.

According to forecasts, in 2024, the growth of the consumer market will slow down slightly: some of its locomotives will move more slowly (due to the narrowing of preferential mortgages, for example) or the end of recovery growth. On the other hand, income growth will continue — and this usually leads to an increase in current consumption.

In 2024, Anton Tabakh expects the car market to recover due to the restart of production at automotive enterprises owned by international concerns that left Russia. Besides, the expert expects changes in the structure of consumption against the background of income growth — the population will choose better food and clothes or buy even more food and clothes.

A market for mega-optimists

In 2023, we saw a fairly deep devaluation of the ruble, which fell in price by 30% against the dollar and euro, and by 50% against the currencies of a number of neighbouring countries. Russian products are becoming more and more interesting in Asian markets. But the growth of currencies in Russia has led to an increase in prices, and so far inflation is only gaining momentum. According to INFOLine forecasts, its peak will be in the early spring of 2024.

Among the key factors that influenced the consumer market in 2023, we can note the growth of retail food turnover, in which inflation played a significant role. Besides, the previous year was a record year in terms of the absorption of regional FMCG networks by federal players. X5 Group and Magnit account for more than 50% of the total increase in retail space in Russia today.

The absolute leader in the number of new store openings in Russia is the Krasnoe&Beloe chain, which launched more than 4,500 alcohol markets in 2023.

Consumer sentiment index has reached its highest level since May 2014

By the results of 2023, retail trade turnover — the main indicator of the state of the consumer market, according to Rosstat, in comparable prices increased by 6.4% compared to 2022 and amounted to 47.4 trillion rubles. In absolute prices, the indicator of 2023 exceeded the indicator of 2021 by 19.8%, however, taking into account the inflation accumulated over 2 years (19.4%), the growth in comparable prices is much lower, says Ignat Ivanov, an analyst at Finam.

The range of consumer goods in Russia has almost completely recovered after the withdrawal of foreign brands, discretionary goods are imported through parallel imports or from friendly countries. However, it is premature to talk about a full recovery of the entire consumer market, at the same time, it showed significant growth in 2023, the analyst believes.

The growth of the market was primarily facilitated by high consumer demand and growing incomes of the population. The real disposable incomes of Russians in 2023 increased by 5.4% against the background of wage growth at the level of 10.9%. High salaries were caused by record low unemployment in the country, which has fluctuated between 2.9% and 3% in recent months.

There is overheating in most segments of the Russian economy today: in industry against the background of a boom in manufacturing and active investment activity, in real estate due to the growth of preferential mortgages, in the consumer sector against the background of low unemployment and high incomes. The overheating of the economy is evidenced by GDP growth of 3.6% in 2023. This is higher than the global GDP growth rate (the IMF and the OECD forecast +3%) and the highest figure for the last 10 years (excluding post-pandemic growth of 4.9% in 2021). Also, the overheating of the economy is evidenced by the record utilisation of production capacities of Russian enterprises (81% in the fourth quarter of 2023).

Raising the key rate to 16% and keeping it at a high level for a long time will slow down the growth rate of the economy and, in particular, the consumer sector. Unemployment is expected to remain low in 2024, and salaries will continue to grow in the face of a shortage of personnel. Low unemployment and rising incomes of the population are pro-inflationary factors that will drive the growth of the consumer market. At the same time, the increase in the key rate limits consumer lending to households and, at the same time, creates attractive double-digit rates on bank deposits. Against this background, it is expected that in 2024 the savings activity of the population will grow, and consumer activity will slow down its growth.

The drivers of consumer market growth in 2024 will not change significantly relative to 2023. The growth of the average check, the expansion of the network of discounters, the growing popularity of online trading and market consolidation will remain key.