E-Commerce and its impact on real estate business

1. RUSSIAN RETAIL
E-COMMERCE
AND
SHOPPING CENTERS MONTH DAY, YEAR (12PT, ALL CAPS)

2. GLOBAL ONLINE
MARKET
4% of total retail trade

3. 2CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
GROWTH IN THE GLOBAL MARKET
Online powers ahead
• Online retailing has been growing at an average
of over 18% pa globally over the last three years
compared to sales through other channels at just
1.3% pa.
• Online market share has risen to 4% from 2.2%
five years ago.
• What’s more, this has been a global
phenomenon, with all corners of the world
increasingly wired for sales.
• Market share is highest in North America (6%)
and Western Europe (4.7%) followed by Asia
Pacific (3.6%).
• Recent growth (2009-12) has been strongest in
Asia (33.3%), Latin America (21%) and Eastern
Europe (17%).
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
4,5%
0%
10%
20%
30%
40%
50%
60%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
MarketShare
AnnualGrowth
Global Online Retail Sales Growth
Internet sales growth
Share of total sales
0%
5%
10%
15%
20%
25%
0%
1%
2%
3%
4%
5%
6%
7%
MarketShare(2012)
AnnualGrowth(2009to2012
pa)
RegionalTrends
Recent
Growth
Source: Cushman & Wakefield, Euromonitor

4. RUSSIAN MARKET
€10 000 000 000
Annual volume of online transactions
2% of total retail trade

5. 4CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
Online sales by market
MARKET SIZE
Online Sales per Capita
€0
€100
€200
€300
€400
€500
€600
€700
€800
Norway
Finland
UK
Denmark
USA
Ireland
SouthKorea
Switzerland
Sweden
Luxembourg
France
Japan
Germany
Austria
Netherlands
Belgium
Australia
CzechRep
NewZealand
Canada
Taiwan
Singapore
HongKong
Slovakia
Poland
Italy
Hungary
Russia
Argentina
Chile
Israel
Brazil
Portugal
Spain
China
Onlinesalespercapita,Euro2012
• Average Russian citizen
spends EUR70 per year
online
• Active online shoppers
spend up to $4000 per year
Source: Cushman & Wakefield, Euromonitor

6. 5CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
0%
2%
4%
6%
8%
10%
12%
14%
SouthKorea
UK
Finland
Ireland
Denmark
USA
Norway
CzechRep
Germany
France
Poland
Sweden
Netherlands
China
Slovakia
Japan
Switzerland
Austria
Taiwan
Brazil
Belgium
Singapore
Luxembourg
Hungary
Argentina
Russia
Chile
Australia
NewZealand
HongKong
Israel
Canada
Italy
Portugal
Spain
,
Share of online retail in total sales
ONLINE MARKET PENETRATION
• Online retail sales in Russia
grow at rate 20-30% per
year
• Online market penetration
is expected to grow from 2
in 2012 to 4.5 in 2015
Source: Cushman & Wakefield, Euromonitor

7. CONSUMERS
22 million
Online Shoppers
30% Annual growth

8. 7CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
Content and
tickets
40%
Electronics
26%
Clothing and
footwear
8%
Auto parts
6%
Furniture and
houseware
4%
Kid's goods
3%
Cosmetics
2%
Books and CDs
2%
Food
2%
Other
7%
Other
60%
2012 online sales structure
MARKET STRUCTURE
• Average Russian citizen
spends EUR70 per year
online
• Active online shoppers
spend up to $4000 per year
Source: Cushman and Wakefield, DataInsight

9. 8CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
Restrictions
PAYMENT METHODS
Primary means of payment • Russian economy is still cash
based
• 74% of Russians possess
bank cards
• Only 40% of those use bank
cards for retail purchases
58
49
32
23
12
11
Cash on Delivery
Web money
Bank card
Bank transfer
SMS payment
Terminal
Source: Morgan Stanley research, DataInsight

10. 9CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
Restrictions
DELIVERY MEANS
• Cross region deliveries are
limited because of poor
postal service
• Own courier delivery is the
most common practicу for
online stores of all sizes
• Share of pick up points and
store pick up is increasing.
Courier
Russian Post
Pick up
points
Pick up at
store
Other
Source: Morgan Stanley research, DataInsight

11. 10CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
Restrictions and opportunities
RUSSIAN SPECIFIC
• 40% of online shoppers line
in Moscow and St.
Petersburg
• 10% of total online
purchases are cross board
transactions
• Travel Tickets is the largest
online retail segment
• Each year several million
people make their first
online transaction
• Major growth comes from
regions

12. ONLINE RETAIL SCENE
25 000
Online Stores

13. 12CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
Top 10 online retailers cover 20% of whole market
RUSSIAN ONLINE RETAIL SCENE
• 10% of online purchases are
done abroad
• In the USA top 10 online
retailers cover 52% of the
market
2012 Sales, million EURO
292
277
235
182
144
130
129
118
115
113
102
85
Ulmart.ru
Exist.ru
Svyaznoy.ru
Ozon.ru
Kupivip.ru
Holodilnik.ru
Wildberries.ru
Sotamarket.ru
Biglion.ru
Mvideo.ru
Utkonos.ru
Citylink.ru
Source: DigitalGuru

14. E-COMMERCE AND
SHOPPING CENTERS
Top performing sectors
It took decades to create decent offline retail infrastructure.
Online has a long way to go

15. 14CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
SHOPPING CENTERS
Market share
12%
14%
16%
17%
19%
21%
23%
26%
26%
27%
30%
31%
33%
35%
Russia
Belgium
Germany
Italy
Netherlands
Czech Republic
United Kingdom
Finland
Sweeden
Spain
France
Ireland
Poland
Slovakia
Share of shopping centers sales in total sales in country
•In Russia shopping centers still
play weak role in country’s
retail scene
•By 2015 market share will
reach 15%
•By 2020 shopping centers may
cover ¼ of the total retail
market.
Source: Cushman and Wakefield, ICSC

16. 15CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
SHOPPING CENTERS
Market share
•Russia is the biggest retail
market in Europe
•Both shopping centers and
online retail has significant
upside
•We expect shopping center and
E-commerce business to double
within this decade.
0 50 100 150 200 250 300 350 400 450 500
Russia
France
Germany
United…
Italy
Spain
Netherlands
Poland
Belgium
Sweeden
Finland
Czech…
Ireland
Slovakia
Shopping centres sales, bn EUR 2012 Online sales, bn Eur Conventional sales
Retail market size and structure in Europe, billion EUR
Source: Cushman and Wakefield, ICSC, GFK

17. 16CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
SHOPPING CENTERS VS. E-COMMERCE
Outlook
•E-commerce and shopping
centers will be fastest growing
sectors in Russian retail
•While in the short term online
sector will outperform all other
forms in growth rate it will
most likely hit the glass ceiling
within 3-5 years.
•In the longer term shopping
centers business has very
strong potential.
•Multi channel retail will be the
key to success by bringing
together best of both worlds.
Shopping centers and E-commerce markets volumes forecast
0
100
200
300
400
500
600
2012 F 2015 F 2020
Shopping centers sales, bn EUR
Online sales,bn EUR
Conventional Retail, bn EUR

18. 17CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
LOGISTICS FOR E-COMMERCE
Infrastructure
•Moscow will remain a major logistics
hub in Russia
•Conventional and multy channel
retailers will dominate on warehouse
market
•Share of internet shops in warehouse
space will be similar to their share in
retail turnover
Warehouse are occupied by retailers and internet shops
Actuals Forecast
0
2 000 000
4 000 000
6 000 000
8 000 000
10 000 000
12 000 000
14 000 000
16 000 000
18 000 000
20 000 000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Moscow - Retail Regions - Retail
Moscow - E-commerce Regions - E-Commerce
Moscow - Other Regions - Other

19. 18CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
STORE NETWORKS:
•Despite the growth of online, current trends continue to
highlight the importance of property to retailers where it is
in the right location and of the right size, quality and price.
•Poor infrastructure will limit growth of online retail, leading
to slowdown of growth rate. It is unlikely that online trade
share in Russia will reach 10% before 2020.
•Retailers may have to reshape their strategies in order to
benefit from higher growth in online.
•Some retailers are opting for fewer but larger stores while
others are seeking more but smaller stores and there is
as yet no right answer on the optimum store network or
units.
IMPLICATIONS IN THE REAL ESTATE WORLD
Online sales by market

20. 19CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
COST IMPLICATIONS:
•Online trading will add to retailer costs, putting
downward pressure on other areas of cost such as real
estate.
•With a major role for stores to play for brands, luxury
retail and flagships, the value proposition for the best
space will rise.
•The growth of “click and collect” and “showrooming”
also underlines the ongoing importance of physical
stores, but the increasing emphasis on logistics
highlights how “value” is changing along the supply
chain.
•This will be reflected in property demand and pricing
and while in-demand locations will see rents rise,
weaker locations, serving more as collection and
storage nodes, will see rents fall.
IMPLICATIONS IN THE REAL ESTATE WORLD

21. 20CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
PROPERTY IN A MULTICHANNEL WORLD:
•The successful combination of on and off line
worlds will be a powerful source of competitive
advantage to the best retailers and retailing
centres.
•The online world will provide the intelligence to
support changes such as personalization and
greater customer service while real estate will
provide accessibility, as usual, but will also
contribute more to brand profile and the ability to
deliver a real experience – a factor which can’t
easily be replicated online.
POTENTIAL REAL ESTATE WINNERS

22. 21CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
DOMINANT DESTINATIONS:
•Hence, although the growth of online retail will be
negative for parts of the property market, large regional
shopping centres and core in-town markets have
considerable potential to emerge as winners from multi-
channel retailing.
•They tend to be areas of high traffic, with a confluence of
transport links and parking and are a key hub for
consumers to meet, enjoy a richer experience and access
supporting uses such as leisure and food.
•There is also scope for managers to offer new services
such as delivery and hence shopping centres should be a
vital part of the e-tail infrastructure platform.
POTENTIAL REAL ESTATE WINNERS

23. POOR INFRASTRUCTURE
Restricts online retail development in Russia

24. 23CUSHMAN & WAKEFIELD
RETAIL IN RUSSIA
E-COMMERCE VS.
SHOPPING CENTERS
•Just as the internet has transformed how we communicate
and share, it is now transforming how we work, how we play
and how we shop.
•Whether a retailer or property owner, this is a clear threat
to those who cannot adapt but it is also a source of
opportunity, opening up new markets and speeding the
globalization of retail.
•While a worldwide phenomenon, online retail is not the
same in all areas however. Local, cultural, regulatory and
infrastructure issues impact on both physical and online
retailing.
•According to our analysis the UK is the most developed
online market, followed by the USA, Germany, France, the
Netherlands, South Korea, Japan, Switzerland and the Nordic
markets.
•While currently dominated by mature markets, thanks to
differing cultural and technology drivers, online retailing will
change the global geography of retail with some emerging
markets set to advance more rapidly, particularly in Asia.
THE LEADING ONLINE RETAIL MARKETS
-A C&W Ranking of Scale & Potential
(1 is best) Market Size Infrastructure Overall
United Kingdom 2 9 1
USA 1 15 2
Germany 4 14 3
France 3 16 4
Netherlands 9 5 5
Korea 7 12 6
Japan 5 17 7
Switzerland 14 4 8
Finland 20 3 9
Sweden 16 6 10
Denmark 15 7 11
Canada 13 10 12
Norway 18 11 13
Australia 12 19 14
Belgium 19 20 15
Taiwan 25 13 16
Hong Kong 35 2 17
China 6 31 18
Singapore 40 1 19
Austria 26 18 20
Brazil 11 27 21
Italy 10 28 22
Ireland 23 23 23
Luxembourg 37 8 24
New Zealand 30 21 25
Russia 8 41 26
Turkey 21 33 27
Poland 17 37 28
Spain 27 29 29
Chile 31 26 30

25. www.cushmanwakefield.com
MAXIM KARBASSNIKOFF
Partner, Head of Retail Department
+7 495 799 9888 ext. 599879
maxim.karbasnikoff@eur.cushwake.com
DENIS SOKOLOV
Partner, Head of Department
Research
+7 495 799 9888 ext. 599891
denis.sokolov@eur.cushwake.com
EKATERINA ZEMSKAYA
Partner, Head of Retail Agency, Retail
Department
+7 495 799 9888 ext. 599877
ekaterina.zemskaya@eur.cushwake.com
LADA BELAICHUK
Associate Director, Deputy Head
Research
+7 495 799 9888 ext. 599892
lada.belaychuk@eur.cushwake.com
ANDREY SHUVALOV
Associate, Retail Department
+7 495 799 9888 ext. 596160
andrey.shuvalov@eur.cushwake.com
EVGENY POPOV
Associate, Head of Department
Development Consultancy
+7 495 799 9888 ext. 596187
evgeny.popov@eur.cushwake.com