Russian DIY market will recover at moderate pace in coming years

More information on this topic is presented in the PMR report:

According to PMR’s new report, “DIY market in Russia 2017. Market analysis and development forecasts for 2017-2022” the DIY retail market in Russia was worth RUB 760bn (€10.3bn) in 2016, down by nearly 1% compared to 2015. The main reason behind DIY market’s decrease, was the lower inflation, which in 2016 did not make up enough for the market’s decline in volume terms, as it did in previous years. Also, real disposable incomes continued to fall, causing a significant drop in consumer demand. Russians were not willing to make big purchases and made only minor repairs to their homes rather than major changes.

The decline in market’s value observed in 2016 is expected to be only a temporary situation, and, in 2017, the market will return to growth, according to our forecasts. However, the market will recover at a moderate pace in the subsequent years and the growth rates will not be as high as before the crisis. Thus the Russian DIY retail market will increase yearly by about 5%, on average, by the end of 2022. Inflation will not be the main driver of market growth and a certain improvement in consumer sentiment will result in positive changes in consumer demand.

It is worth noting, that the DIY retail market, which refers to the value of products allowing independent home improvements, renovations, gardening, or home decorations sold on this market, purchased by individual clients only, accounted for 44% of the total DIY market value. This share is forecasted to grow in the coming years, as a result of faster increase of retail sales fuelled by renovations and the revival in residential construction market.

The largest player on the Russian DIY market in terms of revenues is France-based Leroy Merlin, with estimated total market share of nearly 11%. Considering Leroy Merlin’s active expansion plans (200 stores by 2024), as well as its leading position in terms of online sales, its status as the leader of the Russian DIY market will not be threatened in the coming years. The French retailer – which has added more than 10 new stores in 2017 to date – is also poised to overtake Stroitelny dvor as the number one player by store count.

It is noteworthy, however, that the list of the leading DIY players in Russia changed in 2016, due to the stronger position of the domestic Petrovich. Although in the last few years three international chains led the country’s DIY market, Petrovich overtook third-placed Castorama by sales revenues last year.

The Russian DIY retail market is rapidly consolidating, with the big players steadily increasing their market share at the expense of smaller ones. The combined market share of the top five DIY chains was 18% in 2016, up by nearly 5 p.p. compared with 2013. And the figure is expected to grow in the coming years, mainly due to further expansion of the major chains and weaker players leaving the market as a result of the fierce competition. In 2016-2017, such prominent players as Metrika, Arsenal Trade and Domocenter disappeared from the market.

Another notable trend on the Russian DIY market is that more and more players are investing in online stores, encouraged by the growing popularity of online and omnichannel sales. Of the top players, Leroy Merlin, OBI, K-Rauta, Petrovich, Baucentr, Maxidom, and Castorama have all launched online stores (Castorama did so in 2017). In addition, online retailers from other sectors are adding DIY goods to their product offer. There is also growth potential for smaller-format stores on the Russian DIY market. They are not only suitable for smaller cities or towns, or shopping centres, but also represent a reasonable step for retailers intending to invest in internet sales on a major scale. Thus, Petrovich, for example, has already launched smaller hybrid stores combining offline and online elements, in addition to its traditional small-format outlets. Stroitely dvor and Vimos are also developing chains of smaller stores, and OBI and Leroy Merlin have similar plans. 

Moreover, during the crisis, consumer demand in Russia has shifted towards medium- and low-price segment products, and customers have become very sensitive to various promotions. In addition, customers now more frequently choose domestically produced goods, whose prices are more stable and in most cases much lower. Thus, DIY chains, especially the largest players, recently have been actively growing the share of goods of products made in Russia in their assortments. The retailers have also continued to increase the share of low-price segment products, develop loyalty programmes, and significantly activated promotional activities. Furthermore, the popularity of private labels on the Russian DIY market is still growing and a number of factors support this trend, not only the economic crisis.

More information on this topic is presented in the PMR report:
DIY market in Russia 2017. Market analysis and development forecasts for 2017-2022