Malls equipped with over 250 stores, amusement rides, ice skating rinks, and multi-screen movie theater complexes are not just located in the United States anymore.  Russia is now home to a burgeoning mall market.  Recently, Morgan Stanley paid over a billion dollars for a single mall in St. Petersburg.  Another mall, named Vegas, located in the cucumber fields outside Moscow is larger than the Mall of America minus the amusement park. Moscow is also home to the Mega Tyoply Stan shopping center which can attract in excess of 50 million shoppers annually.  In Russia, malls are still a novelty.  The first “Western style” mall did not open until 2000.  Russians are mesmerized by the fast food, clothes, electronics and entertainment offerings of the mall.  In addition, the warm and cozy interiors attract shoppers during the cold winter months.

The market for malls in the United States is rapidly dwindling as consumers favor lifestyle centers and more convenient shopping formats.  Russians, however, are embracing malls as a source of family entertainment.  As oil exports in Russia are increasing, wages are increasing as well, affording citizens more buying power.  Analysts believe that the growing interest in Russian malls, by both citizens as well as investors, is an indication of a growing middle class in Russia.

The International Council of Shopping Centers says that Moscow now has 82 malls.  Moscow has more floor space in malls than any other European city, with 34 million square feet.  Investors, like Morgan Stanley, are very interested in the growth of malls and the improved economic outlook of Russia.  Russia has a flat 13% income tax rate, most Russians own their own home, and health care is socialized.  Russians, whose wages are increasing, now spend 60% of their pretax dollars on retail purchases (this includes food).  Comparatively, Germans only spend 28% of their pretax dollars at retailers.

Discussion Question:

Why are malls doing so well in Russia?

 

SOURCE: Andrew E. Kramer, New York Times, January 1, 2013