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E-commerce and shopping centers in Russia 2013
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E-commerce and shopping centers in Russia 2013

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E-Commerce and its impact on real estate business

E-Commerce and its impact on real estate business

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  • 1. RUSSIAN RETAIL E-COMMERCE AND SHOPPING CENTERS MONTH DAY, YEAR (12PT, ALL CAPS)
  • 2. GLOBAL ONLINE MARKET 4% of total retail trade
  • 3. 2CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS GROWTH IN THE GLOBAL MARKET Online powers ahead • Online retailing has been growing at an average of over 18% pa globally over the last three years compared to sales through other channels at just 1.3% pa. • Online market share has risen to 4% from 2.2% five years ago. • What’s more, this has been a global phenomenon, with all corners of the world increasingly wired for sales. • Market share is highest in North America (6%) and Western Europe (4.7%) followed by Asia Pacific (3.6%). • Recent growth (2009-12) has been strongest in Asia (33.3%), Latin America (21%) and Eastern Europe (17%). 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5% 4,0% 4,5% 0% 10% 20% 30% 40% 50% 60% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 MarketShare AnnualGrowth Global Online Retail Sales Growth Internet sales growth Share of total sales 0% 5% 10% 15% 20% 25% 0% 1% 2% 3% 4% 5% 6% 7% MarketShare(2012) AnnualGrowth(2009to2012 pa) RegionalTrends Recent Growth Source: Cushman & Wakefield, Euromonitor
  • 4. RUSSIAN MARKET €10 000 000 000 Annual volume of online transactions 2% of total retail trade
  • 5. 4CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS Online sales by market MARKET SIZE Online Sales per Capita €0 €100 €200 €300 €400 €500 €600 €700 €800 Norway Finland UK Denmark USA Ireland SouthKorea Switzerland Sweden Luxembourg France Japan Germany Austria Netherlands Belgium Australia CzechRep NewZealand Canada Taiwan Singapore HongKong Slovakia Poland Italy Hungary Russia Argentina Chile Israel Brazil Portugal Spain China Onlinesalespercapita,Euro2012 • Average Russian citizen spends EUR70 per year online • Active online shoppers spend up to $4000 per year Source: Cushman & Wakefield, Euromonitor
  • 6. 5CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS 0% 2% 4% 6% 8% 10% 12% 14% SouthKorea UK Finland Ireland Denmark USA Norway CzechRep Germany France Poland Sweden Netherlands China Slovakia Japan Switzerland Austria Taiwan Brazil Belgium Singapore Luxembourg Hungary Argentina Russia Chile Australia NewZealand HongKong Israel Canada Italy Portugal Spain , Share of online retail in total sales ONLINE MARKET PENETRATION • Online retail sales in Russia grow at rate 20-30% per year • Online market penetration is expected to grow from 2 in 2012 to 4.5 in 2015 Source: Cushman & Wakefield, Euromonitor
  • 7. CONSUMERS 22 million Online Shoppers 30% Annual growth
  • 8. 7CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS Content and tickets 40% Electronics 26% Clothing and footwear 8% Auto parts 6% Furniture and houseware 4% Kid's goods 3% Cosmetics 2% Books and CDs 2% Food 2% Other 7% Other 60% 2012 online sales structure MARKET STRUCTURE • Average Russian citizen spends EUR70 per year online • Active online shoppers spend up to $4000 per year Source: Cushman and Wakefield, DataInsight
  • 9. 8CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS Restrictions PAYMENT METHODS Primary means of payment • Russian economy is still cash based • 74% of Russians possess bank cards • Only 40% of those use bank cards for retail purchases 58 49 32 23 12 11 Cash on Delivery Web money Bank card Bank transfer SMS payment Terminal Source: Morgan Stanley research, DataInsight
  • 10. 9CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS Restrictions DELIVERY MEANS • Cross region deliveries are limited because of poor postal service • Own courier delivery is the most common practicу for online stores of all sizes • Share of pick up points and store pick up is increasing. Courier Russian Post Pick up points Pick up at store Other Source: Morgan Stanley research, DataInsight
  • 11. 10CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS Restrictions and opportunities RUSSIAN SPECIFIC • 40% of online shoppers line in Moscow and St. Petersburg • 10% of total online purchases are cross board transactions • Travel Tickets is the largest online retail segment • Each year several million people make their first online transaction • Major growth comes from regions
  • 12. ONLINE RETAIL SCENE 25 000 Online Stores
  • 13. 12CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS Top 10 online retailers cover 20% of whole market RUSSIAN ONLINE RETAIL SCENE • 10% of online purchases are done abroad • In the USA top 10 online retailers cover 52% of the market 2012 Sales, million EURO 292 277 235 182 144 130 129 118 115 113 102 85 Ulmart.ru Exist.ru Svyaznoy.ru Ozon.ru Kupivip.ru Holodilnik.ru Wildberries.ru Sotamarket.ru Biglion.ru Mvideo.ru Utkonos.ru Citylink.ru Source: DigitalGuru
  • 14. E-COMMERCE AND SHOPPING CENTERS Top performing sectors It took decades to create decent offline retail infrastructure. Online has a long way to go
  • 15. 14CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS SHOPPING CENTERS Market share 12% 14% 16% 17% 19% 21% 23% 26% 26% 27% 30% 31% 33% 35% Russia Belgium Germany Italy Netherlands Czech Republic United Kingdom Finland Sweeden Spain France Ireland Poland Slovakia Share of shopping centers sales in total sales in country •In Russia shopping centers still play weak role in country’s retail scene •By 2015 market share will reach 15% •By 2020 shopping centers may cover ¼ of the total retail market. Source: Cushman and Wakefield, ICSC
  • 16. 15CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS SHOPPING CENTERS Market share •Russia is the biggest retail market in Europe •Both shopping centers and online retail has significant upside •We expect shopping center and E-commerce business to double within this decade. 0 50 100 150 200 250 300 350 400 450 500 Russia France Germany United… Italy Spain Netherlands Poland Belgium Sweeden Finland Czech… Ireland Slovakia Shopping centres sales, bn EUR 2012 Online sales, bn Eur Conventional sales Retail market size and structure in Europe, billion EUR Source: Cushman and Wakefield, ICSC, GFK
  • 17. 16CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS SHOPPING CENTERS VS. E-COMMERCE Outlook •E-commerce and shopping centers will be fastest growing sectors in Russian retail •While in the short term online sector will outperform all other forms in growth rate it will most likely hit the glass ceiling within 3-5 years. •In the longer term shopping centers business has very strong potential. •Multi channel retail will be the key to success by bringing together best of both worlds. Shopping centers and E-commerce markets volumes forecast 0 100 200 300 400 500 600 2012 F 2015 F 2020 Shopping centers sales, bn EUR Online sales,bn EUR Conventional Retail, bn EUR
  • 18. 17CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS LOGISTICS FOR E-COMMERCE Infrastructure •Moscow will remain a major logistics hub in Russia •Conventional and multy channel retailers will dominate on warehouse market •Share of internet shops in warehouse space will be similar to their share in retail turnover Warehouse are occupied by retailers and internet shops Actuals Forecast 0 2 000 000 4 000 000 6 000 000 8 000 000 10 000 000 12 000 000 14 000 000 16 000 000 18 000 000 20 000 000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Moscow - Retail Regions - Retail Moscow - E-commerce Regions - E-Commerce Moscow - Other Regions - Other
  • 19. 18CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS STORE NETWORKS: •Despite the growth of online, current trends continue to highlight the importance of property to retailers where it is in the right location and of the right size, quality and price. •Poor infrastructure will limit growth of online retail, leading to slowdown of growth rate. It is unlikely that online trade share in Russia will reach 10% before 2020. •Retailers may have to reshape their strategies in order to benefit from higher growth in online. •Some retailers are opting for fewer but larger stores while others are seeking more but smaller stores and there is as yet no right answer on the optimum store network or units. IMPLICATIONS IN THE REAL ESTATE WORLD Online sales by market
  • 20. 19CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS COST IMPLICATIONS: •Online trading will add to retailer costs, putting downward pressure on other areas of cost such as real estate. •With a major role for stores to play for brands, luxury retail and flagships, the value proposition for the best space will rise. •The growth of “click and collect” and “showrooming” also underlines the ongoing importance of physical stores, but the increasing emphasis on logistics highlights how “value” is changing along the supply chain. •This will be reflected in property demand and pricing and while in-demand locations will see rents rise, weaker locations, serving more as collection and storage nodes, will see rents fall. IMPLICATIONS IN THE REAL ESTATE WORLD
  • 21. 20CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS PROPERTY IN A MULTICHANNEL WORLD: •The successful combination of on and off line worlds will be a powerful source of competitive advantage to the best retailers and retailing centres. •The online world will provide the intelligence to support changes such as personalization and greater customer service while real estate will provide accessibility, as usual, but will also contribute more to brand profile and the ability to deliver a real experience – a factor which can’t easily be replicated online. POTENTIAL REAL ESTATE WINNERS
  • 22. 21CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS DOMINANT DESTINATIONS: •Hence, although the growth of online retail will be negative for parts of the property market, large regional shopping centres and core in-town markets have considerable potential to emerge as winners from multi- channel retailing. •They tend to be areas of high traffic, with a confluence of transport links and parking and are a key hub for consumers to meet, enjoy a richer experience and access supporting uses such as leisure and food. •There is also scope for managers to offer new services such as delivery and hence shopping centres should be a vital part of the e-tail infrastructure platform. POTENTIAL REAL ESTATE WINNERS
  • 23. POOR INFRASTRUCTURE Restricts online retail development in Russia
  • 24. 23CUSHMAN & WAKEFIELD RETAIL IN RUSSIA E-COMMERCE VS. SHOPPING CENTERS •Just as the internet has transformed how we communicate and share, it is now transforming how we work, how we play and how we shop. •Whether a retailer or property owner, this is a clear threat to those who cannot adapt but it is also a source of opportunity, opening up new markets and speeding the globalization of retail. •While a worldwide phenomenon, online retail is not the same in all areas however. Local, cultural, regulatory and infrastructure issues impact on both physical and online retailing. •According to our analysis the UK is the most developed online market, followed by the USA, Germany, France, the Netherlands, South Korea, Japan, Switzerland and the Nordic markets. •While currently dominated by mature markets, thanks to differing cultural and technology drivers, online retailing will change the global geography of retail with some emerging markets set to advance more rapidly, particularly in Asia. THE LEADING ONLINE RETAIL MARKETS -A C&W Ranking of Scale & Potential (1 is best) Market Size Infrastructure Overall United Kingdom 2 9 1 USA 1 15 2 Germany 4 14 3 France 3 16 4 Netherlands 9 5 5 Korea 7 12 6 Japan 5 17 7 Switzerland 14 4 8 Finland 20 3 9 Sweden 16 6 10 Denmark 15 7 11 Canada 13 10 12 Norway 18 11 13 Australia 12 19 14 Belgium 19 20 15 Taiwan 25 13 16 Hong Kong 35 2 17 China 6 31 18 Singapore 40 1 19 Austria 26 18 20 Brazil 11 27 21 Italy 10 28 22 Ireland 23 23 23 Luxembourg 37 8 24 New Zealand 30 21 25 Russia 8 41 26 Turkey 21 33 27 Poland 17 37 28 Spain 27 29 29 Chile 31 26 30
  • 25. www.cushmanwakefield.com MAXIM KARBASSNIKOFF Partner, Head of Retail Department +7 495 799 9888 ext. 599879 maxim.karbasnikoff@eur.cushwake.com DENIS SOKOLOV Partner, Head of Department Research +7 495 799 9888 ext. 599891 denis.sokolov@eur.cushwake.com EKATERINA ZEMSKAYA Partner, Head of Retail Agency, Retail Department +7 495 799 9888 ext. 599877 ekaterina.zemskaya@eur.cushwake.com LADA BELAICHUK Associate Director, Deputy Head Research +7 495 799 9888 ext. 599892 lada.belaychuk@eur.cushwake.com ANDREY SHUVALOV Associate, Retail Department +7 495 799 9888 ext. 596160 andrey.shuvalov@eur.cushwake.com EVGENY POPOV Associate, Head of Department Development Consultancy +7 495 799 9888 ext. 596187 evgeny.popov@eur.cushwake.com