ABSTRACT
Overview The Russian retail environment has faced a number of challenges during the last century. From the result of the Russian Revolution and the nationalization of retail trade within the planned market Communist system, through the end of the Soviet period in the early 1990s and the liberalization of retailing practice, the role of official retail policy has presented a number of challenges. With the collapse of the Soviet Union in 1991, and the establishment of an independent Russian Federation, reform to the retail sector was pursued rapidly and relentlessly (Anonymous, 1992). The removal of price controls on many retail goods led to a severe drop in retail sales, due to hyperinflationary pressures that limited the affordability of these products to the mass market. Conversely, the liberalization of pricing had the effect of increasing the actual supply of desired products in the retail shops for those that could afford the higher prices, preventing an even higher drop in sales volume. Furthermore, during these early transition times Governmental policies that were aimed at reforming the financial and banking sectors had the effect of tightening the money supply, resulting in cash shortages and affecting consumer demand. Critics acknowledged that the switch from a planned to a market economy involved a number of challenges. Certain industries such as large manufacturing enterprises (i.e. automobile and steel production) would take time, but the so-called ‘petty privatization’ (Dolan, 1992, p. 6) of retail shops could begin immediately. It was noted that at this time the retail sector, and State shops specifically, were limited in terms of price mark-ups (25 per cent was the maximum, versus the comparable 50+ per cent in Western markets) but after 1992 prices were fully deregulated. In terms of other regulations, the role of local officials continued to have an impact on the shape of the retail sector. There was overt and active encouragement to support regional producers, wholesalers and retailers, further impacting a true market and thus supply and demand based pricing for goods. Although officially the economic systems had changed, there was a continuation of Soviet era policies and therefore limited incentives for suppliers to provide the needed level of products. The consequence of this reality was that an
artificial limit on price increases existed (except in the major cities of Moscow and Saint Petersburg). By the summer of 1992, Russian ministries continued to actively manage up to half of all demand and supply for consumer goods, and over 25 per cent of foodstuffs were still being sold by government shops (Dyker, 2012). The focus of this chapter is to provide a review of the strategies and policies in the Russian Federation as it pertains to the retail sector. The chapter begins with an historical perspective, with a focus on both the Soviet period as well as the post-transition free-market time frame. An emphasis is placed on the numerous changes that have occurred in Russia since the start of the twenty-first century, including retail trends and activities. A brief overview of some of the major retail players in Russia is presented, and then a case study of Stockmann, a Finland based department store that has entered the Russian retail market. The study reviews the challenges and opportunities that Stockmann has faced in Russia. The case is supported through empirical findings of a comparative study of consumer perceptions of Stockmann’s performance in Russia and its neighbouring country Latvia. The chapter concludes with some thoughts on the future of the Russian retail sector.
