Page 131 - RusRPTJun21

9.1.5 Retail sector news
The share of private label (PL) in the sales of Russian retailers was 5.3% for the period May 2020- April 2021 (4.7% in 2020), according to NielsenIQ.
This is the highest level in the last five years. In value terms, the category grew 12.2% y/y, which five times more than the FMCG growth. Including culinary, specialised stores and Vkusvill (a 97% PL share), the respective figure is estimated at 10% for 2020, according to InfoLine. Still, the market remains underpenetrated compared with developed peers: Switzerland has a 50% share of PL in sales, while the UK and Germany the figure is 40%. InfoLine estimates that in the medium term, Russia is to have 25-30% of products sold under private label.
This trend can be attributed to falling real disposable incomes (-3.6% y/y in 1Q21), as customers tend to shift towards promo sales and become more price sensitive. Private label is one of retailers' responses to the situation, and they are constantly increasing its share. Pyaterochka chain (the market leader, belongs to X5 Group) had a 17.4% share of PL in 2020, which reached 20.4% in 1Q21, while the second player, Magnit, had 10% share in 2020.
Both chains have announced their targets for the category, with Magnit aiming at a 25% share in 2025, and X5 Group looking for 23% by 2025. More importantly, both players have started rolling out hard discounter formats recently (Chizhik and My Price), which have a higher share of PL in their assortments than other formats (around 60%). Furthermore, private label also becomes an important driver in online sales of food (stocking-up and express delivery), with two large express delivery operators, Samokat and Yandex.Lavka, having 65-80% of PL in certain sales categories.
The sales of apparel and footwear in March 2021 added 10% y/y and 20% y/y in Moscow, or 15% y/y on a blended basis, while St Petersburg saw y/y growth of 11% and 41%, respectively (which translates into a blended 26.5% y/y). Russia, however, saw y/y sales declines of 17% for apparel and 15% for footwear (-16% y/y blended).
As for the average ticket on the fashion market, it increased 12% y/y to RUB2,300 in Russia, while the check surged 36% y/y to RUB5,000 in Moscow and added 11% y/y in St Petersburg (RUB3,200). The overall fashion market in Russia lost 25% y/y to RUB1.7tn in 2020, according to Fashion Consulting Group. The agency factors in a recovery by 2023 in its upbeat scenario, and by 2025 in its bear case.
Various market participants also assume that it will be a couple of years before there is a complete recovery. That is largely affected by local currency depreciation, which translated into increasing prices for materials, whilst logistics and personnel expenses have also risen. The result of such cost inflation is gradual price indexation by fashion
131 RUSSIA Country Report June 2021 www.intellinews.com