diy market in russia - inventica ? Â· diy market in russia 2 contents macroeconomic review diy...

DIYMARKETINRUSSIA2nd edition

182012.

DIYMARKETINRUSSIA

2

CONTENTS

MACROECONOMICREVIEW

DIYGOODSMARKET

DIYRETAIL

OPERATINGCONDITIONSOFRUSSIANDIYCHAINS

FINANCIALSOLVENCYRATING

APPENDIX1.DIYCHAINSTORESINRUSSIA

APPENDIX2.TOP10DIYCHAINSTORES

CONTENTS(1)1. CONTENTS2. MACROECONOMICREVIEW

Grossdomesticproduct(GDP) Comparisonwithforeigneconomies Inflationrate Nominalpersonalincomeandrealdisposableincome Unemploymentrate Retailturnover GlobalRetailDevelopmentIndex

3. DIYMARKETINRUSSIA SalesofDIYandhouseholdgoodsinRussia Retailmarketsegments CrisisimpactonRussianDIYmarket ComparisonofRussianDIYmarketwithforeigncountries RussianDIYmarketforecast

4. DIYRETAILINRUSSIA SpecificsoftheRussianDIYmarket SaleschannelsofDIYgoods TypesofRussianDIYstores TypesofDIYchainsinRussia DIYchainstoresinRussianregions DIYhypermarketsinRussia DIYsupermarketsinRussia

3

CONTENTS(2)5. OPERATINGCONDITIONSOFRUSSIANDIYCHAINSTORES

Generalrequirements EnteringDIYchains Deliveryterms Paymentterms Bonuses Marketingcosts Penaltiesandtotalcontractcost

6. FINANCIALSTABILITYRATINGOFRUSSIANDIYCHAINSTORES Ratingoverview Financialsolvencyrating Detailedoverviewofcompaniesintherating

A. APPENDIX#1:DIYCHAINSTORESINRUSSIAB. APPENDIX#2:TOP10DIYCHAINSINRUSSIA

4

DIYMARKETINRUSSIACONTENTS

MACROECONOMICREVIEW

DIYGOODSMARKET

DIYRETAIL

OPERATINGCONDITIONSOFRUSSIANDIYCHAINS

FINANCIALSOLVENCYRATING

APPENDIX1.DIYCHAINSTORESINRUSSIA

APPENDIX2.TOP10DIYCHAINSTORES

In20102011Russianeconomyhasshownsignificantsignsofrecoveryaftergreatdeclinein2009.In20122015RussianMinistryofEconomicDevelopmentforecastsstablegrowthwithCompoundAnnualGrowthRate(CAGR)at..,.%incurrentpricesand.,.%inconstantprices

0

10

20

30

40

50

60

70

80

90

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F

trln.R

UR

GDP(currentprices)*

CAGR+..,.%

.,.%

+..,.%+..,.%

+..,.%+..,.%

+..,.% +..,.%

+..,.%

Sources:FederalStateStatisticsServiceoftheRussianFederation(FSSSRF),MinistryofEconomicDevelopmentoftheRussianFederation(MEDRF)

*The forecast is based on Forecast of socioeconomic development of Russian Federation till 2015 MED RF, adjusted according to the results of 2011

100%

120%

140%

160%

180%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F

CumulativeInde

xofGDPactual

volumeGDP2003

=100%

CumulativeindexofGDPactualvolume(constantprices)*

.,.%

+.,.%+.,.%

+.,.%+.,.% +.,.%

+.,.%+.,.%

CAGR+.,.%

6

AtthesametimerecoveryrateofRussianeconomyismuchslowerthaninotherBRICcountries

10%

5%

0%

5%

10%

15%

2008

2009

2010

2011

2012

F

2013

F

2014

F

2015

F

yoy,%

GDPgrowthrate(constantprices)

China+.,.%

India+.,.%

Brazil+.,.%

RussiaRussia+.,.%

Sources:InternationalMonetaryFund,EuropeanCentralBank

CAGR20122015

AccordingtotheInternationalMonetaryFundforecasteconomiesofChinaandIndiawillincreasein.,.timesin20122015,whileeconomiesofBrazilandRussiawillgrow.,.times.

TheimpactoffinancialcrisisonRussianeconomywasthemostsignificantcomparedtootherBRICcountries:GDPofRussiahasdecreasedby.,.%in2009whileGDPofChinahasshowngrowthof.,.%

7

DIYMARKETINRUSSIACONTENTS

MACROECONOMICREVIEW

DIYGOODSMARKET

DIYRETAIL

OPERATINGCONDITIONSOFRUSSIANDIYCHAINS

FINANCIALSOLVENCYRATING

APPENDIX1.DIYCHAINSTORESINRUSSIA

APPENDIX2.TOP10DIYCHAINSTORES

TheconstructionworksvalueisthebasicindicatorthatpromptlyreflectsthedynamicsofDIYgoodsmarketvalue

9

0

150

300

450

600

750

900

2005 2006 2007 2008 2009 2010 2011

bln.RUR

DIYANDHOUSEHOLDGOODSMARKETVALUE

0

2

3

5

6

2005 2006 2007 2008 2009 2010 2011

trln.R

UR

CONSTRUCTIONWORKSVALUE

Sources:FederalStateStatisticsServiceoftheRussianFederation(FSSSRF)

+..,.%

+..,.%

+..,.%

..,.%

+..,.%

+..,.%

+..,.%

+..,.%+..,.%

..,.%

+.,.%

+..,.%

ConstructionworksvalueIncludesthecostofconstructionandinstallationworksofthefollowingtypes: constructionofnewfacilities; capitalandcurrentmaintenance, reconstruction,modernizationofcommercial

andresidentialbuildingsandengineeringstructures.

In20002008annualgrowthofconstructionworksvaluereached..,.%.

In2009reductionofconstructionworksvaluewas..,.%. DIYmarketreactedby..%decrease

In2010mostexpertsbelieved,thathouseconstructionvaluehasadelayedimpactontheDIYmarketwithalagof..,.yearsandDIYmarketwouldplungeintocrisisinnextfewyears

Despiteoftheseexpectations,in20102011DIYgoodssales showedhigherratesofgrowththanconstructionmarket

CAGR+..,.%CAGR

+..,.%

CAGR+..,.%CAGR

+..,.%

IninternationalcomparisonRussianDIYmarketreductionin2009wasoneofthemostsignificantinEurope

10

DIYMARKETTRENDSIN2009(EUR)

Sources:EuropeanDIYRetailAssociation,DIYGlobal

Fallinnationalcurrency(inRUR)

FallduetodevaluationofRussianRuble

44,2

36,5

20092008

EXCHANGERATE,RUR/EUR

Austria Belgium Germany

France Netherlands Spain RUSSIA

In2009salesofdoityourselfproductsweredowninthemajorityofcountriesinEurope.AccordingtoinformationfromEDRA,acomparisonofthelikeforlikesalestrendsrevealsthatitwasthecountriesofeasternandsouthernEuropethatsufferedmostfromtheconsequencesoftheeconomicandfinancialcrisis.

WhileAustria,BelgiumandGermanycanpointtopositiveresults,France,theNetherlands,SpainandRussiawereunabletoavoidlosses.

CAGR+20,9%

AtthesametimeconsumptionofDIYproductsperpersoninRussiaisseveraltimeslowerincomparisonwithEUcountries

11

0

100

200

300

400

500

600

IE UK GR DE FR HU PL IT RO BG ES RU AL TR UA CN

DIYMARKETVALUEPERCAPITA,EUR

Sources:KingfisherAnnualreportandaccounts,CastoramaRussia,FEDIYMA,DIYGlobal,FederalStateStatisticsServiceoftheRussianFederation(FSSSRF),20092010,2011(Russia)

TwoyearsagoDIYmarketvaluepercapitainRussiawasalmosttwotimeslessthanthecurrentvalue just..EUR

RapidgrowthofRussianmarketcanquicklycatchupwithEUcountriessomeofwhichareclosetothestagnation.

DIYMARKETINRUSSIACONTENTS

MACROECONOMICREVIEW

DIYGOODSMARKET

DIYRETAIL

OPERATINGCONDITIONSOFRUSSIANDIYCHAINS

FINANCIALSOLVENCYRATING

APPENDIX1.DIYCHAINSTORESINRUSSIA

APPENDIX2.TOP10DIYCHAINSTORES

SPECIFICSOFTHERUSSIANDIYMARKET

13

Intheverycentre oftheDIYtermstandconstructionandmaintenanceofhouses,homesandgardens,includingeverythingfromrenovationofe.g.kitchenandbathrooms,todecorations,accessoriesandfurnitureofthelivingrooms.Privatepersons,i.e.notprofessionals,shouldaboveallperformalltheseactivities

ThisdefinitionwasintroducedinEuropeandNorthAmericaandeventhereitisnotworkingproperlyinpractice now.AsforRussiathereareseveralconstraintswhichimplyontermDIY:

Doityourself(DIY):HomemaintenanceandimprovementworkconductedbyhouseholdmembersontheirownhouseholdwithoutthepaidservicesofaprofessionalWilliams,C.(2008) Rethinkingthemotivesofdoityourself(DIY)consumers

Firstofall,thecultureofDIYisnotwidespreadinRussiaandthenpeopledoconstructionandrenovationworks,theyusuallycallprofessionalstodoitforthem.Thus,thetermDIYinRussiaismoreoftenDIFMdoitforme

Second,InRussia,especiallyinregions,theboundariesbetweenDIYretailers,wholesalersandprofessionalstoresareevenmorefuzzythaninEurope.InregionsbigDIYstoresarejustbecomingconventionalandgraduallyreplacetraditionalshopsandDIYgoodsmarkets.StillmostofRussianDIYretailershaveasignificantshareoftheirsalesemanatedtocorporateclients(e.g.buildingandengineeringcompanies).ThereareeventypesofDIYstores(retailwholesalebase,constructionwholesalebase)whicharemostlyspecifiedforcorporatetypeofclientsbutalsosellingDIYgoodstoprivateconsumers

TheotherpeculiarityoftheRussianmarketisalargenumberofstoressellingDIYgoodswithareaabout100200sq.m.ThereareevenregionalchainsconsistingjustofsuchsmallshopswhichcallthemselvesDIY,butthisDIY canhardlybecomparedtoEuropeanDIYstores

1

2

3

INDOORANDOUTDOOR(OPEN)MARKETS

14

Outdoor(open)marketsareopenareaswherelargegroupsofsmallshopssellingdifferentDIYgoodsaregrouped

OUTD

OOR(O

PEN)M

ARKETINDOORMAR

KET(TRA

DINGCEN

TRE)

IndoormarketsarebigormiddlesizetradingcentreswhereareaisdiviededbetweenmanysmallshopswhichselldifferentskindsofDIYproducts

ThemajortypesofcivilizedDIYstoresinRussiaaresupermarketsandhypermarkets,whilediscountstoresandcashncarry arenotwidespread

15

STOREAREAsq.m STORELOCATION

ASSORTMENTthousands

DEPTHOFPRODUCTASSORTMENT

HYPERMARKET

SUPERMARKET

Sources:RosBusinessConsulting,companydata,Inventicaestimations

CASH&CARRY

DISCOUNTSTORE

NEIGHBOURHOODSTORE

BOUTIQUESTORE

MAJOR

STORE

TYP

ESothe

rstore

type

s

ForthepurposesofthefollowingresearchwewilltakeintoaccountonlycivilizedDIYretailwhichmeetsthefollowingrequirements

16

CRITERIA REQUIREMENTS

STOREASSORTMENT

Thestoreassortmentshouldincludemostoftheseproductcategories:

Timberandbuilding materials Finishingmaterials Doors&Windows Handtools&Powertools Electrical&Hardware Plumbing&Heating&Cooling Furniture&Kitchen&Bathrooms Garden&