Retail and Leisure Services

Besides transportation and telecommunications, services include medical care, education, retail, and leisure. Medical care has already been covered in Chapter 12, and science and education in Chapter 15. Tourism-related leisure services have been covered in Chapter 16. Here I discuss retail and some other leisure services.

The Soviet-era retail sector was dreadful: There were not enough stores, few available goods, and plenty of rude clerks. All stores were state run. Shop clerks were, like everybody else, state employees. Their salaries were fixed. They did not care whether customers liked their service or not, because no alternative stores existed (except the closed shops for the top Communist elite). Being a store clerk was well regarded as a cozy job that gave one easy access to deficit (scarce goods). When scarce goods were available, long queues would form even though prices were low, because there wasn't enough quantity to satisfy the demand. The economic planners never could guess accurately how much of anything was needed, especially with respect to consumer goods. In short, shopping in the Soviet Union was a bleak experience. In one of the funniest cultural portrayals of the period, the late-Soviet comedy Blonde around the Corner featured a grocery store employee (a woman) falling in love with an astrophysicist (a man). This description suggests a considerable economic tension between the two. It existed, but not in the way Westerners would expect: The clerk, not the researcher, was considerably better off in the Soviet Union. When they had their first date at the man's apartment (where else, in the absence of decent restaurants?), the woman suggested making a pizza from “whatever leftovers are in the fridge,” and then discovered that the fridge was empty—so she had to call her brother to deliver a carload of groceries straight from her store.

Not only were goods not necessarily available at the Soviet shops, but entire categories of stores simply did not exist. For example, there were no shopping malls with brand-name stores, because there were no brands; all clothing was made by the state, with minimal differences among the available models. There were no craft stores, no car dealerships, and no home improvement stores. The main retail forms that did exist were these:

  • Specialized food stores, selling baked goods, candy, meat and poultry, or dairy products.
  • General grocery stores, including supermarkets from the 1970s on. These had far fewer goods available than the average U.S. or European supermarket, but they were basically organized according to the familiar self-service model (Dries et al., 2004).
  • Specialized hardware stores, electronic stores, pet stores, or bookstores. These existed in only a handful of places and had few goods on the shelves.
  • Liquor stores.
  • Large department stores. The two most famous were GUM (Hilton, 2004) and TsUM in Moscow.
  • Street kiosks selling newspapers, ice cream, or tobacco products.
  • Second-hand stores, called komissionnye.
  • Farmers' markets. This was the only retail form that allowed negotiation over prices. Only fresh farm produce and small crafts were allowed to be sold in these markets. In addition there were two types of stores not accessible to average citizens:
  • Hard-currency (beriozka) stores, where the fortunate few who could travel abroad were able to spend their earnings. These stores also catered to the handful of foreigners in the country.
  • Distribution centers for nomenklatura party members.

Clearly, Soviet retail needed a major overhaul, which came in the 1990s with the reforms. The first new retail form that emerged in that period was the most archaic one: that of street-corner vendors. Yeltsin issued a decree in January 1992 that allowed “private citizens to sell things in any place of their convenience” without registration, in an attempt to rapidly boost the availability of goods everywhere without the cumbersome government regulations. So millions of common people took to the streets and resold whatever they could find at the state stores with a small markup. Many were elderly women supplementing their meager pensions. The street retailers would sell their wares at more convenient times and locations than the state stores (e.g., near subway station exits during the evening rush hour). Street kiosks proliferated a bit later, selling everything from bubble gum to bread, beer, cigarettes, condoms, and VHS tapes. Many were vandalized by racketeers or by street gangs.

The next stage was the development of large outdoor markets selling not only fresh produce, but also cheap imported goods from other parts of Russia, as well as from Turkey, China, Vietnam, and other countries. The prices at these markets were considerably lower than at stores, reflecting their low overhead.

At about the same time, the first private stores appeared. They were boutiques charging exorbitant prices for brand-name Western luxury goods. Soon thereafter, cheaper private stores opened: bakeries, bookstores, pharmacies, and so on. Many of these were privatized former Soviet establishments, but some were brand-new ventures. Eventually some stores grew larger and spawned chains and franchises. Some evolved into giant retail empires, including Seventh Continent, Perekrestok, and Pyaterochka. They are big in Russia, but not in the global sense. In a recent ranking by Deloitte and Touche, only two Russian retailers made it to the top 250 worldwide: Group X5 (which includes Pyaterochka and Perekrestok) in 191st place, and Euroset (the main cell phone retailer in Russia) in 229th place. Group X5's sales volume was a meager $3.5 billion in 2006, as compared to $348 billion for Walmart, $66 billion for Kroger, and $40 billion for Safeway in the same year.

The French Auchan and German Metro chains are competing with Russian supermarkets now (Roberts, 2005); and Walmart is expected to enter the country in the next few years. Most foreign retailers are from Europe and Asia, not from North America. American retailers were slow in coming. Starbucks, for example, had early plans to enter Russia, but then bailed out; it even lost its trademark registration to a Russian brand squatter, after Starbucks failed to open a single store in 5 years. It finally arrived, however, with a few dozen stores open in 2008. The European and Asian competitors of the U.S. companies were less picky about legal niceties and so managed to fare better. I have already mentioned the triumph of the Swedish furniture retailer IKEA in the Moscow market. One of the main obstacles all foreign chains face, besides local competition, is the lack of large plots of land suitable for big-box construction in the densely packed Russian cities. Most chains chose locations along the periphery, but doing so excludes many potential customers who do not own cars. The most successful future retailers in Russia will have to learn what appeals to the most people, not to the selected clientele of Gucci and Armani boutiques (Karpova et al., 2007). Walmart may be just what Russia needs; however, its global expansion at the moment seems to be focused more on China, a much larger market. In recent years, both domestic and foreign retailers have shown steady improvements in customer service. Many now have loyalty discount cards; virtually all accept bank-issued credit and debit cards for payment; most have regular sales events, free parking, usually free bagging, and (increasingly) consumer credit with favorable interest rates. In short, the shopping experience in the biggest cities in Russia is not much different from that in North America, Europe, or Japan. In the provincial towns, however, relatively little has changed. One may run into an occasional unfriendly shopkeeper, the floors of the store may be dirty, and the range of products on the shelves will be more limited.

The Russian restaurant business is also booming. There are restaurants of every imaginable kind, both foreign and domestic. Of the major U.S. restaurant chains, only McDonald's is well represented, with almost 200 restaurants in 37 cities serving half a million customers per day. Pizza Hut had some early successes, but later faltered. There is no shortage of pizzerias, though, mainly of the domestic variety. Some of the best restaurants in Russia are the creations of Arkady Novikov, chef and entrepreneur, who conceived a few widely popular chains (Yolki-Palki, Kish-Mesh, Little Japan, and others). His main idea was to provide high-quality food with a regional theme—Russian, Central Asian, or East Asian, for example—at reasonable prices (Baker & Glasser, 2005). He also started a number of high-end restaurants (Vanil and Cantinetta Antinori in Moscow, for example), but most people are not likely ever to dine in these places. An average dinner bill at some of the better restaurants in Moscow will set you back about $100, not $15 or $20 as at democratic Yolki-Palki. In recent years the top-rated cuisines have been Japanese, Thai, French, Central Asian, and Mediterranean. Ukrainian, Georgian, and of course Russian foods are also well represented.

Leisure services include all occupations and organizations dealing with leisure activities, from tourism to therapeutic recreation to parks. Generally these are services that people use voluntarily for pleasure, although other motives (e.g., the pursuit of health) may also be involved. Some of the services within this category have already been discussed in Chapters 15 and 16 (arts and tourism, respectively). Here I focus on other types. As Russians' disposable incomes grow, so does the demand for leisure services. As everywhere in the world, the biggest cities have the most creature comforts available to their residents. Moscow, St. Petersburg, Novosibirsk, and 15 or so of the other biggest cities in Russia have virtually every imaginable leisure service available: multiplex cinemas, aqua-parks, disco clubs, dancing halls, bowling alleys, tanning salons, fitness centers, spas, hairdresser shops, tattoo parlors, oxygen therapy bars, and dozens of other types of ventures. Some (e.g., swimming pools, cinemas, and discotheques) had existed in the Soviet period but are now newer, bigger, and better. Others, like aqua-parks, are newly imported concepts.

The majority of leisure services available to city residents cater to the same crowd: young people with extra money, typically between the ages of 18 and 35, and usually either students or professional employees in business or government. This group is supposed to represent the new “Russian middle class,” although the exact definition of this varies. Some high-end establishments (e.g., private clubs) are open to members only and cater to a considerably older, really well-off segment of the population. There are relatively few options available for the elderly, since that segment has small incomes. Facilities for children, on the other hand, are numerous, with playgrounds and children's parks being the two most obvious ones.

Some of the newest forms of entertainment are very expensive. The market demand is growing fast, and the supply does not catch up quickly enough. In a recent marketing survey, an average annual membership in a Moscow fitness club cost $1,600, while one in Japan cost only $500. Only about 1.5% of the Russian population has a membership in any fitness club. Needless to say, for those people it represents a major acquisition, a boost to their self-image.

Although many of the new services are commercialized, most of the municipal services are still free—libraries and city parks, for example. In nice weather, city boulevards are crowded with strolling pedestrians. Older people play chess or dominoes; younger kids play soccer or tag; moms promenade with strollers; young couples hug affectionately. Options in smaller towns and especially villages are more limited. Typically, small cities have at least a city park, a cinema, a theater, and a stadium. Village life is even more basic, with perhaps a single building (the so-called club) dedicated to multiple recreational purposes. In some corners of Russia life has hardly changed at all, with people's main leisure choices limited to TV and gossip about the neighbors.