Guiding Lines: Going against the crisis

Retailers are complaining about sharp decreases in turn over and consumer demand and high rental rates. Owners of retail space think retailers don’t have it so bad.

Last December at the Retail-2008 conference, organized by Vedomosti, Stanislav Skachkov, the general director of the Krasny Kub chain of shops, declared: if the proprietors of the shopping centres, where Krasny Kub has shops, will not lower their rental rates, then they will be prepared to close up to a third of their shops.

Vyacheslav Kaminsky, president of DVI investment group, objected to this position and argued that retailers often ask for rates to be lowered unreasonably. Of those that ask for a reduction in rates, not all can prove loss of profit by providing a financial report.

Consultants, in turn, advise retailers to look for ways to keep and develop their businesses. General director of Art Properties consulting company, Natalia Oreshina considers that it is necessary to plan some development, no matter how little, this year. Without it any chain will lose a share of the market, and to restore it will be much more difficult than to maintain it.

Goods for all times

At the beginning of the year it became clear that retail was more likely to survive, than die. For example, in January on Leningradskoye shosse Metropolis shopping centre with an area of 205,000 sq.m and more than 200 shops opened. Footwear and accessories chain Rendezvous has opened a store in the center and according to employees of the company, business is going well. The lines at the cash desk confirm their words. In this shopping center Inditex represents several brands: Zara, Massimo Dutti, Stradivarius, Bershka, Oysho. And one of the founders of UK fashion store UK Style and Magazin Zing, Andrei Kovalev, has opened a second Kix Box store (the first is in Evropeisky shopping center.

Children's goods shops are still in demand. This conclusion has been made by experts at Smart Property during work on the creation of the concept of brand of clothes and headwear for children Malenkiye Stilyagi. "We have monitored the children’s goods market and have come to the conclusion that demand for such goods has practically not fallen," says general director of Smart Property Konstantin Korolev.

Sellers of cosmetics and perfumery are also not doing too badly. Employee of the Russian division of Shiseido (Shiseido Rus) approves that they are continually receiving new parties production and that they are bought up quite quickly.

On the Russian market there is a new cosmetic product from Israel - salt from the Red sea under the brand Korall (Coral). Representative of the company Olga Pantyukhova says they are not afraid of the crisis. The company now has a flagship store in Moscow at 28 Ulitsa Chasovoi, and a shop "in one of the medical centers." The company is negotiating with GUM for space. Pantyukhova says that the company wants to sell its products in exactly these places as they are considered the premium segment. Perfumery and cosmetic chain Arbor Mundi has opened several stores in some retail space that previously belonged to perfumery and cosmetic chain Arbat Prestige, shares managing partner at Blackwood Konstantin Kovalev. This information is confirmed by managing partner of Panorama Estate Omar Gadzhiyev. He says that Arbor Mundi is expanding its presence in the market, and the company already has eight shops in Moscow and the Moscow regions.

Another cosmetic chain Rive Gauche is opening a new 3-storey shop in St. Petersburg measuring 1,417 sq.m and will become the largest in the chain. On the first two floors there will be a hall and bar, and the third will be occupied by 10 cosmetic rooms. The cosmetics segment is in a steadier position than others. Therefore fluctuations from the crisis are not a handicap for the long-term development strategy of players in this segment, sums up Gadzhiyev.

In Moscow, Rive Gauche has a store on Tverskoi Passazh, previously occupied by Arbat Prestige.

Chain of shops Sekundochku, which provides small everyday services, also plans to develop actively in 2009, opening tens of shops every month. The sphere of services is one of the most fast developing branches of the consumer market. If it is threatened with a decrease in growth it is insignificant, experts are assured.

Head of the research department at Knight Frank Natalia Sazonov notes an increase in the number of individual businessmen among the tenants of shopping centers and expansion of the market of subrent of retail areas among new trends of the market.

Proprietors are crying too

According to Natalia Davidenko, head of the brokering services department at Astera, retailers are actively looking for new premises. Discounts on rates now reach 10-40%, landlords are reducing deposits (the maximum is one month), and every possible variant of the payment is offered, etc., shares Davidenko.

Proprietors of narrow specialist shopping centers (such as sports, expensive furniture, etc) and luxury class shopping centers will suffer the most this year and tenants who offer premium class goods will also suffer badly. In such places the process of renting retail premises has slowed down, and developers are forced to reduce rates and change the concept to attract tenants, adds Sazonov.

Always hungry

Representatives of another segment which experts consider risky in the circumstances, similarly, do not agree with this opinion. The Japanese had intended to develop their presence in the Russian fast food market. On January 15, 2008, Interfax reported that Japanese chain of cheap restaurants Yoshinoya Holdings Co intended to open its first restaurant in Russia in March, and referred to head of the company Shudzhi Abe. According to experts, Eastern cuisine, which Yoshinoya is categorised as makes up to 15-20% of the total turnover of restaurants in Moscow. in February the first restaurant in Russia of international franchise chain of bakeries-confectioners Beard Papa opened. The first Beard Papa restaurant opened in Yudzhi Khiroto in 1999 in Osaka.

In the end, it seems that the crisis is not a handicap to the retail market. The big picture is simple: strong players are strengthening their positions, and the weak slowly retreat.