Russian shopping mall recovery slows as "price wars begin"

Russian shopping mall recovery slows as
Despite annual growth continuing, the index in isolation has fallen steadily since its 2016 high of 569 in February.
By Henry Kirby in London July 1, 2016

The level of footfall in Russian shopping malls has continued its 2016 recovery, with shopping activity in all but four weeks of this year marking a year-on-year increase in comparison to 2015.

The data, released by Moscow-based Watcom, a consultancy that measures shopping activity in malls using 3D camera technology, showed that the second week of June represented a 5.3% increase in footfall compared with the same period in 2015.

As the first bneChart shows, levels of shopping activity measured by Watcom’s weekly shopping index fell drastically throughout 2015, as the heavily weakened ruble and sanction-hit economy sent real incomes tumbling for most Russians.

Now, the bottom of the recession appears to have come and gone, real wage decreases are all but over and the double-digit inflation that chipped away at Russians’ purchasing power throughout 2015 has fallen from a high of nearly 16% last year to a steadier 7.3% for the last three months. 2016’s index score now more closely resembles that of 2014, before the economic crisis hit Russia.

As the second bneChart shows, the shopping index has remained in positive year-on-year territory since the fifth week of 2016, as inflation has eased and on-going decreases in Russian retail trade have slowed.

Despite annual growth continuing, the index in isolation has fallen steadily since its 2016 high of 569 in February. This is to be expected, according to Watcom group president Roman Skorokhodov, as the retail environment recovers and subsequently steadies, resulting in “a decrease in consumer activity and an increase in footfall”.

Skorokhodov attributes this to the fact that shoppers are now taking the time to shop around for deals as they remain loyal to their preferred brands, while “retailers are trying to attract consumers by sales and bonuses.”

“Price wars have started,” he says.

Data

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