Scott's convenience expedition: Moscow calling

Moscow debut

In the final part of his East-West convenience store tour, srcg director Scott Annan travels to Moscow.

Gum department store at night

My first visit to Moscow was an exciting experience from the start. I travelled from Domodedovo Airport to my hotel by airport express – more of this in a moment – and the Metro.

My client had assumed I had booked a hotel car and I had assumed that public transport was low cost and worked.

It was and I survived the rush hour connections with help from friendly Muscovites when I looked dazed and confused at the Cyrillic names.

My Cyrillic is limited to understanding that Moscow is Mockba, which I discovered from a sign hung in huge neon letters at the train station.

High-end independent retailer

My retail experience started on board the airport express. Think, for a moment, of the comfort and speed of the Paddington Express, the service trolley on the Gatwick Express, or the white-gloved attendants on Japanese bullet trains who bow as the enter and leave the carriage. Then forget about it all.

Opposite my crowded bench was a bashed and rusty supermarket trolley full of magazines, snacks, Coca-Cola, vodka, beer and a huge pot of tea.

The lady in charge was wearing about six coats as the carriage was freezing, which was perhaps why my fellow passengers were enjoying their tea and vodka.

Jokes aside, the trolley came back almost empty just before we pulled into Mockba, so something clearly worked.

Moscow’s population is officially 13m but my hosts believed it to be nearer 15m; so it ties with Istanbul as Europe’s biggest city.

Retail is an interesting mix of 3,600 independent kiosks and convenience stores, clustered in and around Metro stations, and modern supermarkets and hypermarkets operated by the big Russian retailers such as X5 Retail Group and Seventh Continent. Auchan and Metro are also there.

Traditional tobacco kiosk

X5 is the market leader. It was founded in 1995 and operates the two leading chains, Pyaterochka and Perekrestok.

We visited its discount, mid- and high-end fascias. The stores are open 24 hours and pricing was above London. Moscow is very expensive. The Euro is the benchmark currency and the weak pound makes any conversion horrible.

X5's Pyaterochka

Petrol convenience is new in Russia. BP is present in a joint venture and operates 54 Connect stations with smart convenience stores and Wild Bean Cafés. Judging by the cars at the pumps, the store assortment and pricing, these stores are targeting high-end drivers.

There are plenty of these in Moscow: I have never seen so many big BMWs, Mercedes and Range Rovers in one afternoon.

BP in jv and operating Connect stores and Wild Bean Cafes

Retailers like X5 have rapidly built their businesses on bank and supplier credit but the economic downturn is impacting investment.

The Russian government is supporting the modern trade with credit lines to the seven biggest retailers but the structure of retailers and retailing will change and some major retailers may go bankrupt.

The modern retail trade is unlikely to develop much over 15% of total spend in the next five years and will experience considerable consolidation. It was forecast to be 20% of total sales.

Jamie Oliver in Gum department store and Gum foodhall

No retailers use western-style category management techniques. Instead they focus on fees for listings, slots and promotions. Jamie Oliver’s cookbooks were being featured in a Gum Department Store so who knows what’s next?