Since the turn of the century, the growth of the Moscow consumer market has been really explosive. The main reasons for this are external: developments not connected to internal factors, namely the sharp rise in energy prices and the constant influx of people into Moscow.
Obviously this is a powerful incentive for the development of entrepreneurship, including – even primarily – for the small and medium business segments. Furthermore, it is believed that Western entrepreneurs will also take part in this process, particularly in those sectors in which Russian business simply does not have enough experience.
The attraction of foreign investments is an important element in the economic policy of the Moscow administration, and this is not limited to major corporate projects. The city authorities aim to create as favourable conditions as possible for Westerners in small and medium businesses. But what sort of consumer will they have to deal with? We can already give quite a detailed description.
Muscovites’ income growth is well ahead of inflation.
The capital’s population is increasing largely because of the influx of young people not yet burdened by financial or family obligations. As a rule, their budgets are open for random expenses and spontaneous purchases. This has made Moscow a real Mecca for unorganised trading aimed specifically at such purchases. This trend is reflected in the halving of the amount spent on buying food in family budgets and the huge rise in what is spent on eating out. Another important factor in the restructuring of the family budget of Muscovites, and indeed of all Russians, is the expected rapid development of the budget air travel industry, bringing with it a considerable expansion in the internal tourism market, on the model of New York, for example. That is, Muscovites will travel around Russia more and tourists from other Russian regions will literally flood into Moscow. And all the capital’s guests will need hotels, restaurants and entertainment.
Muscovites will travel around Russia more and tourists from other Russian regions will literally flood into Moscow.
The stepping up of the actions taken by the capital’s authorities against illegal street and internet trading restricts the import (primarily contraband) of consumer goods. At the present time, retail prices for branded goods in Moscow can be many times as much as they are in the West. In fact, it is now cheaper for a consumer to travel abroad to shop during the sales period and buy a selection of non-food products for the entire season. It can be assumed that the expansion of the category of well-heeled but canny consumers will lead to a reduction in the proportion of goods based on a high mark-up and modest sales figures for specific forms of goods.
This means that in the capital’s market, there will be an increase in the proportion of small and medium enterprises operating in the medium price range with a low mark-up, in a smaller number of goods categories, but with wider sales. This niche is already being filled, but it is by no means full yet, and is extremely attractive for Western entrepreneurs.
Moscow will undoubtedly continue to be “a city of bright lights”. And the wealth of the capital super-city can only be multiplied by the rise in the mobility of the Russian population and the expansion of the internal tourism market. But the key consumer in the city will be more rational, and so new players in the market, including Western ones, will always find something to offer them.