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Own-label Latest Tactic for Success in Russian Kids' Goods Sector

With spend returning, children's product sector is the new battleground on the Russian High Street.

Photo: Detski Mir: Expanding in line with increased spend in the children’s goods sector.
Detski Mir: Expanding in line with increased spend in the children's goods sector.
Photo: Detski Mir: Expanding in line with increased spend in the children’s goods sector.
Detski Mir: Expanding in line with increased spend in the children's goods sector.

Demand for children's goods across Russia is showing the first signs of growth since the country's economic downturn began in 2014. Last year, according to a study by Ipsos Comcon, a Moscow-based research consultancy, the market was valued at around US$8.2 billion. In 2016, the market is expected to grow by a maximum of 3%, with the biggest shift taking place across the "spontaneous demand" sector, areas where certain goods – notably toys – are impulse bought by browsing consumers.

Overall, the hypermarket chains – most notably Lenta and O'Kay, two of the largest players in the Russian retail sector – have again upped their stocks of children's goods in a bid to capitalise on this resumed demand and as a means of reducing the market share of the specialist stores and chains active in the sector. With overall consumer spend still below the pre-crisis level in dollar terms, the primary route to growth is seen as targetting competitors' revenue streams rather than anticipating increased overall spend.

The hypermarkets' expansion of their children's goods range first began back in 2014, a time when sales of consumer electronics, household electric appliances, clothing and footwear dropped dramatically. This saw the stores finding particular success with disposable nappies, baby food and child-oriented hygiene products, with most Russians still opting to buy toys from specialist retailers.

As a consequence of the expansion of the hypermarkets, a number of specialist children's goods retail chains went into receivership during the course of 2015, with St Petersburg-based Deti and Novosibirsk's Nati the most high-profile casualties. With such operators absent from the market, it was left to the hypermarket chains and e-commerce operators to jostle for dominance in the sector.

Despite this, a number of specialist children's goods chains did, however, manage to weather the storm. Most notably, Detski Mir not only survived, but also launched an accelerated expansion programme, opening some 80 new outlets in 2016. As with the hypermarket chains, the company's current best sellers are said to be products for newborns, as well as certain toy ranges.

Of late, a notable change in terms of the children's product portfolios of both the hypermarkets and the specialist chains has been the increased prominence of own-label items. Dixy, Russia's second largest retail chain, for instance, has introduced an extensive range of children's goods under its proprietary Baby Boom label. Primarily, this has focussed on a range of non-food items, such as back-to-school essentials, plastic toys, clothing and footwear.

For Hong Kong-based suppliers and exporters, it may well be worth considering the opportunities now opening up in the children's goods own-label sector. A number of Russian retailers specialising in this sector, including Dochki-Synochy, Korablik and Olanta, are said to be re-evaluating their own-label options as a means of maintaining market share.

Leonid Orlov, Moscow Consultant

Content provided by Picture: HKTDC Research
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