Since the liberalization of the Russian economy in the 1990s, the Russian cosmetics market has undergone profound changes and a constant and dynamic growth, with the exception of the brutal recession that followed the 1997-1998 crisis, and the slow-down that followed the 2008-2009 crisis. Estimated at US$ 3.9 billion in 2001, total sales of perfumes and cosmetics accounted for US$ 11.2 billion in 2010 and were expected to reach 13.2 billion in 2011, an increase of 17.8% over the previous year.
"The market is gradually recovering after the crisis, in particular thanks to the strengthening of the rubble, rising incomes and increasing consumer expectation index," said Anna Dycheva-Smirnova, Deputy Managing Director of Reed-SK LLC., the organizer of the Intercharm Moscow.
The pace of growth should be sustained and the market is expected to approach US$ 17 billion in 2014.
In parallel to the development of the market, the distribution was highly restructured in Russia. Open markets, with their amounts of goods of questionable origin, which had become emblematic of the post-communist era now account for only a fraction of the overall distribution of perfumes and cosmetics (8.3%). However the striking phenomenon of the last two years has been the decline of direct sales. If this circuit still accounts for 25.6% of sales, specialty shops have overcome it. This phenomenon is explained by both more efficient distribution channels, which extend their network to better serve the public, and by a shift in consumer preferences towards more upscale goods.
This is accompanied, however, by a significant concentration of distributors, in particular with three major networks that dominate the selective distribution (L’Etoile, Ile de Beauté and Rive Gauche), including Moscow and St. Petersburg, and are extending their network at nationally.
"But there are regional chains that may offer an interesting alternative, with favourable terms," says Anna Dycheva-Smirnova. Indeed, there are more than 25 local channels, operating in a number of regions, with nearly 400 doors for Sangi Stil, the biggest of them. These chains are, however, often less upscale and are more likely to operate in a "drugstore" format, which has emerged as the most dynamic in the country.
Regarding the breakdown by product categories, the Russian market is relatively balanced between four major segments: perfumery, skin care, hair care and decorative cosmetics.
Decorative cosmetics have been particularly dynamic in recent years, with an average annual growth of 5%.
Eventually, as far as major market trends are concerned, one’s can note a growing but still marginal interest for natural cosmetics. Generally speaking, environmental issues remain of low concern for the Russian consumers.