A huge consumer spending boom, especially in the big cities, means opportunities for Irish retailers, writes Conor Sweeney, in Moscow

In Russia the shopping frenzy comes a little later than in the rest of Europe, with New Year's Eve still firmly established as the crucial moment for exchanging gifts between families and friends.

It's one of the few remnants of communist times that still exists in the increasingly consumer-driven society.

Despite the recurrent image in the West, the days are long gone of queues and shortages. Nowadays, there's a massive consumer spending boom, especially in the big cities such as Moscow and St Petersburg, as well as other regions stretching right the way across Siberia. Familiar retail brands such as Marks & Spencer are entering the Russian market, while others, such as Zara and Benetton, are well entrenched.

In fact, much of what's happening in Russia may not just be catching up, but in fact may have surpassed the kind of spending patterns familiar in Ireland and most of western Europe.

Every week, there are new shopping centres opening both in the cities and in the suburbs, almost all far bigger than even the largest centres in Ireland, where planning restrictions apply. Ikea may soon be coming to Ireland, but in Russia, it's already opened eight vast homecare centres, with large supermarkets and clothes shops all located on the same out-of-town sites.

"It's leapfrogged Ireland," says Michael Madden, the chief executive of Renaissance Capital Consumer Finance, one of the major financiers of the huge retail expansion.

"They're probably spending more because their disposable income is higher, although their basic salaries are lower. Most people here don't have large debts, they don't have huge utility bills, they don't have mortgages," he explained.

Judging by the huge number of shoe, clothes and perfume shops around Moscow, where retail rents are the same if not higher, than in western Europe, there's a lot of money being spent.

"The amount of money women are spending on cosmetics is incredible - they are all impulse buyers and they're attracted to brands. The Irish consumer is thinking more about tomorrow, but Russians are only thinking about today," he says.

Statistically, Russia's economy has been going through an incredible consumer boom for the past seven years, averaging growth of 7 per cent, which has made up for the seven years of steady decline through the late 1990s.

It's estimated that no matter what happens to energy exports, the consumer economy will continue to rise sharply. The latest projections forecast that all food and non-food spending by Russians will double between now and 2010 to €450 billion.

Although the food retail sector may be close to saturation, there are still opportunities for Irish firms, suggests Madden, originally from Co Tipperary. "They haven't missed the boat, there's lot of room for small niche players, without a doubt," he says. Instead of attempting to break into the crowded Moscow market, firms might first look at one of the other 11 regional cities where the population is over a million people, he suggests.

Russia's overall population, though in decline, now stands at 142 million.

There's also been a spate of negative reports about Russia from international organisations such as the OECD and the World Bank, which both fear the economy has become too dependant on the energy sector. Largely discounting the significance of the consumer boom, both bodies have this month issued reports warning that other traditional heavy industries in Russia, such as the car and aviation sectors, appear to be in terminal decline.

Apart from spy stories, there's also been a relentless focus on stories about corruption and state intervention in Russia. However, Madden discounts some of these fears about corruption. Although it exists, he agrees, it's also present in every country, including Ireland and Britain. "Does it exist? Absolutely, so you should of course choose your partners wisely. It is a fact of life, be aware of it. Large multinational companies use it as an excuse not to do business here, but there's a lot of successful businesses that have come here." Amongst the recent good news stories is the Swiss confectionery firm Nestlé, which has invested heavily in the Russian market.

The same bright picture was suggested by Yaroslav Lissovolik, chief economist at United Financial Group, who lived in the US for some years, before returning to Russia two years ago.

He points to the sudden boom in consumer lending as evidence of the growing confidence that the economy won't suddenly take a downturn, although he also accepts a slowdown could come in the longer term.

"But this consumer boom still has a lot of juice and could still unfold very widely in other regions that have not been as lucky with this consumer boom so far as Moscow," he says.

"If you look at how the composition of consumer spending has changed from year to year, generally the share of food spending has declined, while clothes, cars, financial and other services are growing in terms of their weight in the consumer basket," he explains. "The big story right now is housing construction, it will be the main engine of economic growth in the medium to longer term. We had growth rates in construction of 24 per cent nationally."

In fact, it's believed the overall population of the capital could be dramatically higher than the official records suggest, perhaps as high as 16 million. Russia's second city, St Petersburg, is also the fourth largest in Europe, with Paris and London vying for second and third place.

But Lissovolik remains a little more modest when it comes to overall spending power, which he believes has still to fully catch up on western Europe. "When it comes to Moscow, we're not quite there yet with western Europe, but compared to eastern Europe, we're now above or on a par," he said.