Foreign retailers with ambitions to set up shop in the promising Russian market face tough times. According to Vitaliy Podolskyi, CFO of Russia’s largest retailer Pyaterochka, Russia is a too fragmented market that it is nearly impossible to get started there. “The only feasible route to market entry is an acquisition, but the top three retailers in Russia only have six per cent of the market”, he said yesterday during an investors’ meeting in St. Petersburg.

According to Podolskiy, investment levels needed for a profitable business are too high for foreign retailers. “To make a profit as a retailer, a certain scale of business is needed. The Russian market is too fragmented and needs to consolidate first. That process is happening right now. The market is still dominated by traditional stores and open air markets. In the coming years the number of supermarkets will increase rapidly.”

Discounter Pyaterochka became Russia’s leading retailer after merging with supermarket retailer Perekriostok earlier this year. Last August 25 Moody’s Investors Service downgraded the newly merged retailer due to its difficult financial situation and the strong competitition in Russia’s retail sector. At that time Podolskiy reacted disappointed but determined to grow the retailer’s business.