According to Kommersant, the Russian retail network VkusVill plans to open a store in Almaty, its first store abroad. While the food retailer is investing tens of millions of rubles in the new store, experts are skeptical about the idea and warn that the network should navigate some difficulties it may face in Kazakhstan.
VkusVill has been exporting its products to 125 stores in Kazakhstan since summer 2023. The retailer relies on this scheme in many countries, like the UAE and China.
As VkusVill representatives told Kommersant, the company noticed great interest in the company’s concept and product in Kazakhstan. This is why the Russian brand has decided to expand its business in the neighboring market and has already opened a warehouse and an office in Kazakhstan.
Even though the retailer hasn’t revealed any financial details about its project in Kazakhstan, head of the Infoline-Analytics agency Mikhail Burmistrov believes that the company might have invested several tens of millions of rubles into such a big project. For instance, its new store alone may have cost 5 to 7 million rubles ($53,550 to $74,970).
Although the company is quite serious about its plans in Kazakhstan, the expert thinks it may face some difficulties in Kazakhstan. For example, food production capacity in the country is limited. Therefore, Kazakhstani products will account for just 35% of the assortment.
Another problem associated with entering the Kazakhstani market is the lower income of average Kazakhstanis, says Irina Bolotova, a partner in Pro.Story, a service for organizing retail store layout. She also believes that food retailers should reconsider their assortment matrix before entering any foreign market to ensure it meets the expectations of local customers. And this is not an easy task.
So far, the cheapest foreign networks are the most successful in Kazakhstan. Russian FixPrice came to the country in 2019, and it already runs 200 stores throughout Kazakhstan. Two other discounters from Russia – Svetofor and Dobrotsentr – have followed the same strategy.
X5 Retail Group, the largest Russian FMCG retailer didn’t make it in Kazakhstan. The network opened its brand «Pyaterochka» in 2004 on the franchise agreement but closed the business in 2007 breaking its contract with a Kazakhstani franchisee.
Turkish Ramstore accounted for the best result among foreign retailers as this network had successfully operated in Kazakhstan for 22 years. However, in 2020, the company closed its supermarkets without any explanation for the move.
On March 6, 2024, the South Korean retailer CU opened its first food store in Almaty. The company plans to open about 500 more stores all over the country within the next five years. However, local experts are skeptical about these ambitious plans.
