Innovation needed for Russian retail space shortage

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A shortage of fresh retail space and growing environmental concern
in Russia present opportunities for innovative food storage and
display unit suppliers, as Italian firm Arneg has shown, reports
Angela Drujinina and Chris Mercer.

The compact size and good aesthetics of Arneg's state-of-the-art refrigeration equipment and showcases meant that it was recently chosen by Russian retail firm Argus to supply the group's new mini-market in Usinsk, Comi.

Argus, squeezed for space in the new 180 sq. metre store, said Arneg's two-tier refrigerator system meant it made very effective use of each square metre, helping it to place similar products together in a rational order for consumers. The upper remote lighting used also makes the showcases more welcoming to shoppers.

The ability to present products well within a small space is especially important in Russia, as food and drink markets have emerged strongly leaving retail space to catch up.

About one third of all Russian retail space is found in Moscow, though the city still only has around 50 sq. metres per 1000 inhabitants compared to the European average of 120-140 sq. metres; a problem which led the British embassy to report that Russia suffered from a "clear lack of retail space"​ last year.

There are signs that the situation is improving. Moscow in particular tripled its combined retail space to three million sq. metres between 2001 and 2003, and the city government is currently implementing a plan to build around eight million sq. metres by 2020.

The food industry has also increased its dependence on hypermarkets and supermarkets with 30 per cent of food sold through these in Moscow amid a government clamp-down on open-air markets and kiosks.

Multiple retailers accounted for 21 per cent of food sales in Russia's big cities last year, according to analyst group ACNielsen​, and analysts from United Food Group​ forecast this will rise to 34 per cent by 2010 (52 per cent in Moscow).

Nevertheless, building more space will inevitably require time and money, leaving a gap for companies looking to develop new ways of compact, yet attractive storage.

Of course, price is also a huge issue for many firms, including retail, in Russia and any prospective supplier would have to compete on this.

Vladimir Grischiuk, Argus general manager, said: "We have worked with Land for a long time as a supplier of Arneg equipment. The price of this equipment is competitive and it suits our conception of the units as the aesthetic 'clothes' of the shop."

Argus declined to reveal how much it had spent on equipment for its new mini-market, yet​ learned that it costs around RUB one million (almost €28,000) on average to equip a new supermarket.

Arneg has also managed to combine a cost-saving initiative with a helpful solution to growing environmental concern in Russia, something which has heightened since the country signed up to reducing emissions under the Kyoto Protocol.

The company says retailers can save energy, therefore cutting costs and emissions, with its 'Chester' refrigerated shelving which has special curtains to close the showcase up at night and prevent energy loss.

All Arneg equipment works on 'remote coldness', whereby temperature is controlled from a central engine room based around three waterproof washing compressors.

Argus uses Arneg's 'Sydney' showcases, which operate on two temperature ranges of -1 degrees Celsius to +5 degrees and -1 to +7, across all eight of its stores split between Comi and St Petersburg. The units are set up in a semi-circle formation for easier loading and viewing.

Russia's biggest product retailers are: Peaterocika (in 2004 the turnover was $1,59 billion, 445 shops, out of which - 235 their own), Magnit ($997 million, 1019 shops) and Perekrsestok ($766 million, 75 shops).

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