Walmart is very cautious about entry to Russia, but is potentially missing out on vast profits in a country that is home to a population of 140 million.
Walmart has possibly missed on 30% worth of growth that is currently being enjoyed by Russian retailers.
Consumers in Russian cities have basically embraced the western model or retail nowadays, but this is not yet the case in more remote areas.
This is not likely to change quickly as infrastructure is not in place for such an expansion. This is leading to intensified competition in the urban areas, which means that the longer companies like WalMart leave it to make their entry, the harder it will be to make an impact.
“Now there is more risk, but more return,” said Alexei Krivoshapko, director at Prosperity Capital Management, one of the biggest investors in Russian stocks with $4 billion under management. “Later there will be lower returns, more cash for entry, but less risk because it will be about buying a mature business.”
WalMart could also see competition from other foreign retailers if it tries to buy a local player in Russia, with accession to the World Trade Organization in 2012 making Russia’s import-heavy retail sector even more appealing for international players by simplifying the import process.
Source: Freshplaza