Russian Prime Minister Vladimir Putin told his country's Parliament a few weeks ago that he would like to see 70 percent of the population practicing some kind of sport by the year 2015, as is the case in many Western European countries. He said that there are now more than 26 million Russians visiting gyms and practicing different kinds of sports in a rather regular manner, up from nearly two million in 2008, and that their number should grow to more than 42 million in four years' time.

The highly popular prime minister and former president, who has been skiing and participating in other sports himself, pointed out that the federal government helped to finance some 300 new sports facilities in the country last year, including multi-sport halls and football pitches.

Combined with the country's recent economic recovery, the continued development of the sports infrastructure and of sporty lifestyles - also in connection with the fact that Russia will host the Winter Olympic Games in 2014 and the Fifa World Cup in 2018 – should help boost the Russian sporting goods market.

The market is recovering strongly, judging from Adidas' 44 percent jump in its Russia revenues and its 37 percent increase in comparable store sales during the first quarter of this year. According to the RAPSI, the country's sporting goods industry association, the market dropped steeply because of the recent financial crisis, but it should go up by between 5 and 7 percent overall this year, reaching a value of $5.2-5.6 billion including more than $1 billion in sales through the so-called “uncivilized market” of fakes and parallel imports. The association estimates that the market grew in terms of rubles by 22 percent in 2007 and by 8 percent in 2008, and then fell by 10 percent in 2009 before rebounding by 5 percent in 2010. In terms of dollars, the market fell by more than 30 percent during the financial crisis, returning to the level of 2006, with a higher proportion of “uncivilized” sales

The increase of the market in terms of volume will be lower. In fact, industry officials expect to see prices of sports clothing and footwear go up by about 15 percent in 2010 under the impact of the depreciation of the ruble and rising input costs. In the past three seasons, the prices of these items have been declining by more than 10 percent a year because of promotions, while the prices charged for skis and other types of sports equipment have been rising slightly. Anyhow, Russian consumers have become more price-oriented and more rational in their purchasing decisions.

The recovery is running in parallel with the expansion of the major retail chains that have survived the recent crisis. Most of them don't like to divulge too much information, but we understand that the biggest Russian sports retailer, Sportmaster, has about 200 corporate stores and 120 more franchised shops run under the Sportlandia banner by retail partners in Russia, Ukraine, Belarus and Kazakhstan. It is estimated to have reached a turnover of more than $1 billion, placing it among the ten largest sporting goods retailers in the world. Sportlandia used to work with Sport 2000 International, but the deal is off.

In a paper published by the World Federation of the Sporting Goods Industry in its Handbook, Leonid Strakhov, chief executive of Sportmaster, said it prepared itself for the growing competition in advance, extending its low and medium-priced price offerings. Sportmaster finished the 2008 and 2009 calendar years with substantial profits and continued with its development program.

Sportmaster is also a major wholesaler and has exclusive agreements with several important brands. The most recent ones were signed with Kappa and Fila, as we have already reported. Another big Russian retailer which is also involved in wholesale activities, specializing in winter and extreme sports, Trial-Sport, had about 90 stores at last count, generating annual sales estimated at $70 million; Intersport together its with franchise partners has 70 outlets (see previous article); Top League owns 60 of them.

Meanwhile, the Adidas Group, which claims a 60 percent share in the better segment of the Russian sports apparel and footwear market, is rolling out its own ambitious development of company-owned stores in Russia and the CIS, which generated 75 percent of its turnover there in 2010. A few months ago, they were a total of 739 outlets (Adidas 517, Reebok 194, Rockport 28), and they are expected to grow to 1,000 by 2015. In this region, Adidas has been working with more than 250 retailers.

However, last summer Adidas ended its relationship with its two main retail partners in Russia, Sportmaster and Intersport, and started investing more in its own retail development. The move was reportedly accompanied by a big price promotion. Naturally, Intersport International and Kesko, which now controls the Russia Intersport operation (see previous article), will try to do whatever they can to regain Adidas's presence in the Intersport stores.

There has been a dramatic change in the sporting good retail landscape in the last five years or so. Sportmaster, Sportlandia and Top League doubled in size, and Trial-Sport even tripled. During this period, a smaller chain operating in the Moscow and St. Petersburg areas, Profi Sport, tripled the number of its stores to 25. Décathlon consolidated its position in the market, trading in a satisfactory manner and building up to a network of eight mega-stores, although its cost-saving policies recently led its employees to form a union to defend their rights.

On the other hand, some other less important retail chains have shrunk in size or simply disappeared, due to the recent financial crisis. Some companies with low margins were ruined, while some other survivors shifted from development to trial and floundered under the weight of their debts.

The modernization of the Russian retail landscape and its concentration around the major players is bound to continue. According to Dmitry Perepechaev, a director of the marketing department at Top League, the Russian sporting goods market still allows for stronger players to grow and find their niche and audience. He said that Top League is planning to open 10 new stores this year and extend the chain up to 160 branches by 2016. After a 15 percent drop in 2009, Top League has recovered and now estimates that its revenues will revert back to the level of 2008, when the company generated a turnover of $100 million. During the recent period of economic instability, the retailer focused on cost optimization and reorganized its management structure, which improved profitability significantly.

Strakhov feels that the recovery of the market will be slow and accompanied by dramatic changes in market structure and the policies of the key players. He told a Russian newspaper, Kommersant, in a recent interview that long-term success will only come from highly qualified executives who are able to arrange a balanced development for their companies.