Retail restrictiveness analysis in Emerging Europe

CIVITTA was invited to conduct an assessment of retail restrictiveness level in Emerging Europe in light of the planned tightening of regulations. Review the complete report here.

Research study across the Emerging Europe states and conclusions on the comparative level of restrictiveness

In recent years, the European Commission has called attention to the excessive level of the retail regulation in the Member States by initiating the studies of the retail regulation across the EU. At the legislative level, it has advocated setting out best practices for facilitating the retail establishment and reducing operational restrictions in the Single Market. However, the studies and measures were solely focused on the EU, and other European countries were not analysed.

While Western Europe countries are liberalising their retail sector, some of the Eastern European states are moving in the reverse direction. For instance, Poland imposed a ban on trade and activities related to trade on Sundays and public holidays and introduced the retail tax depending on the turnover. Meanwhile, the competent authorities in Russia, Belarus and Serbia also consider tightening regulation.

A quantitative study based on the established methodologies

The methodology of the European Commission has been leveraged as a basis for the study. For the purpose of extending the scope to the Emerging Europe countries, the methodology has been supplemented with additional sub-indicators. The updated methodology is leveraged to demonstrate the various levels of restrictiveness for different regulatory aspects. The indicator serves as a practical tool for shedding light on how the level of retail regulations in a given country is compared to its counterparts.

The retail regulation benchmark focuses on Emerging Europe countries, notably, Poland, Lithuania, Latvia, Estonia, Ukraine, Russia, Belarus, Moldova, Serbia and Romania. Besides, for the sake of the comparison, a group of flagship EU countries with the highly restrictive retail sector (Spain, Italy and Germany) was included in the study.

Our study has revealed that Belarus, Italy and Russia have the most severe restrictions for the establishment and operations of retailers. Belarus is characterized by the strictest operation and anti-competitive regulation and above average limitations for outlet establishment (number of permits, or the length of the procedure, transparency of procedures) also adds to the picture. When it comes to Italy, a weak position in the ranking stems mainly from high bureaucracy during the establishment process, primarily the size thresholds, the requirements for economic data and the legislation specific to location.

On the contrary, Latvia, Lithuania and Estonia have distinguished themselves by offering better conditions for retailers. Particularly, Latvia has ranked the best, which is attributed to one of the simplest and time-efficient procedures of a retail outlet establishment.

Numerous studies have a correlation between retail establishment restrictions and price level. Considering this, the countries of the region with the highest RRI (primarily, Russia and Belarus) should carefully monitor the risks of price increase in the event of further regulation tightening.