Far from the capital

As one of the so-called BRIC states (Brazil, Russia, India and China), Russia is frequently numbered among the emerging markets, albeit the biggest ones. But this is another case where consideration must be given to the fact that economic conditions are extremely varied within these countries. That goes for the DIY sector, too. For a long time the DIY retailers in Russia were fully preoccupied with getting hold of the markets in the Moscow area and around St Petersburg in the north-west, the two biggest cities in the country. Expansion has not penetrated into many other regions so far, even though these also have major cities with hundreds of thousands or even millions of inhabitants. One exception to this up to now has been the Ural region. Having undergone a stormy development process, the worry now is about stagnation. The Urals are a mountain chain with an overall length of 2 400 km that separates the continents of Europe and Asia from each other. Reserves of raw materials and industrial development have led to the creation of numerous cities, including the megacities of Perm, Chelyabinsk, Yekaterinburg, Ufa and Omsk. These cities were also the pioneers in the development of the DIY sector in the Ural region. Castorama has been represented in the Urals since 2009, in six cities meanwhile. Obi currently operates two stores in Yekaterinburg – Russia’s fourth-biggest city, which is located at a distance of 1 800 km from Moscow, more than twice as far as St Petersburg. Top retailer Leroy Merlin has three large-format stores in the Urals and is increasing the pressure on the region with the opening on 12 December 2013 of a store in Tyumen, western Siberia. Trest SKM, the local matador and operator of Story Arsenal and Superstroy, has already achieved a 20 per cent share of the regional market and is planning to increase that to 40 per cent in the next few years. The building industry is booming in the Urals, particularly in Yekaterinburg, and the regional suppliers of building materials are now filling the racks of both local and international DIY stores with a near-complete programme of goods, the only exception being premium products. And yet the DIY retailers are not happy, because their sales are not increasing at the same rate. The marketers see the growing number of competitors as the primary cause of this, since it means they have to share the customer resources with them now. So the DIY retailers are seeing their profit margins melt away in the…