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Russia's 'Pound Shop' Eyes Rapid Retail Expansion Across Europe

Fix Price opens outlet in Georgia, with Kazakhstan, Armenia and the Baltic States set to follow.

Photo: Fix Price: Aisles of choice welcome new Georgian shoppers.
Fix Price: Aisles of choice welcome new Georgian shoppers.
Photo: Fix Price: Aisles of choice welcome new Georgian shoppers.
Fix Price: Aisles of choice welcome new Georgian shoppers.

Fix Price has opened its first stores outside of Russia. The group, Russia's largest domestic price point retailer, has opened an outlet in Georgia, its near neighbor and a former Soviet-era republic. It has also announced plans to further expand its presence across Eastern Europe, making it an interesting prospect for Hong Kong suppliers.

With its first Georgia outlet already up and running, the group is now targetting Kazakhstan, with plans in place to open its first presence there before the end of the year. While the choice of Georgia for the company's first venture outside of its home territory surprised many – given the recent and historic enmity between Russia and the western-oriented republic – Kazakhstan is seen as a far more logical second step.

Kazakhstan is a member of the Eurasian Customs Union, along with Russia, Belarus, Armenia and Kyrgyzstan, granting Fix Price easy access to its consumers. Typically, many Russian businesses find expanding into Kazakhstan no more challenging than opening a new store in their home country, given the similarity in consumer preferences and spending patterns between the two.

Once established in Kazakhstan, the group has plans to move further afield, with Armenia, as well as the three Baltic states – Estonia, Latvia and Lithuania – all said to be in its sights. The Baltic States are seen as key targets for the retailer, given their similar consumption patterns to Russia, wide availability of commercial premises and a significant number of prospective partner companies keen to enter into franchise arrangements. With the three countries all EU members, Fix Price is said to be considering establishing a dedicated distribution centre in order to comply with the very different regulatory regime in place.

At present, Fix Price operates 2,097 outlets across Russia, making it Europe's second largest player in the "pound shop" sector after Euroshop, the German variety retailer. With 13 newly opened stores in the east of Russia, Euroshop has now begun to expand onto Fix Price's home turf.

With the Fix Price brand and trademark registered across the whole of Europe and throughout the former USSR territories, it is clear that the retailer sees its future expansion plans lying well beyond Russia's borders. It is an understandable move given the cut-throat nature of the domestic market, with many of Russia's giant discount chains – notably Dixi and Magnit – jostling for market share.

As well as targetting Fix Price, Southeast Asian suppliers would be well-advised to take a closer look at one of Russia's newest price point retailers – Zaodno. Founded by Oskar Hartmann, the German entrepreneur behind KupiVIP, one of Russia's most successful online shopping clubs, Zaodno has aped Fix Price's business model, though not its commitment to franchising. In 2015, the company opened 10 new stores a month in central Russian cities with a population of 50,000 or more.

Leonid Orlov, Moscow Consultant

Content provided by Picture: HKTDC Research
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