“Against the general background, our strategy can be called aggressive, but this is the only chance to build processes aimed not only at compression, but also at development...”, says Sergei Sarkisov, co-owner of the Econika shoe chain. The rebranding of the Econika retail chain coincided with the crisis in the country's economy. However, the company has not abandoned the idea of updating. The retailer is ready to spend about 500 million rubles on opening rebranded showrooms in the next three years. Sergey Sarkisov spoke about this, as well as about the company’s plans, in an exclusive interview with SR.
Sergey Sarkisov- Vice President of the Novard Group of Companies, one of the founders and shareholder of the group, oversees the footwear department. Education: in 1992 graduated from the State Academy named after. Ordzhonikidze (now State University of Management), in 2004 received an MBA degree from the Institute of Business and Business Administration of the Academy of National Economy under the Government of the Russian Federation with a specialization in Strategic Management. He has been working in the Novard group since its founding (1989), ensured the stable growth of the Econika shoe store chain and the expansion of its geography, the increase in the number of regular customers and their loyalty to the network and the product; improving product quality; improvement of the business process automation system. Supervises innovative projects within the shoe industry, such as an online store, rebranding, network rebranding, and the launch of new business projects Porta9 and Portal. In his work, Sergey places special emphasis on the introduction of innovative ideas and technological innovations, and pays special attention to the issue of the company’s performance. Member of the board of the National Association of Network Retailers.
"Econika"- a fashion chain that creates collections of shoes and accessories for women, has been operating on the market since 1992. It has about 150 branded showrooms throughout Russia, Belarus and the Republic of Kazakhstan. The brand’s collection includes three brands: the basic line ekonika premium Alla Pugachova and ekonika 2 (ekonika in a square) - a new trend line, includes models with the brightest and freshest fashion details. Revenue in 2015 amounted to 5.2 billion rubles.
Ten years ago, the rebranding of Econika already made a lot of noise, as the English word “casket” first appeared in our lexicon. Both last time and this time, you turned to the services of a British agency. Why?
The interior of stores needs to be updated every seven to ten years, but the whole question is who and what is meant by these updates. A narrow approach is when we are talking only about updating the interior, a broad approach is when a company thinks about updating the brand, that is, about how it wants to communicate with its consumer.
As a result of rebranding, the essence and content of the brand are filled with a new meaning, then this meaning is transferred to both the store space and the service, and additional requirements for personnel are born. There is a kind of restart of the company taking into account new circumstances, processes, factors. There are enough agencies on the Russian market that are ready to help with updating the interior design, but there are few who offer an integrated approach to changing the brand. In addition, foreign experience in branding, marketing and retail was important to us.
Indeed, we carried out the first rebranding with an English agency. In fact, this time we wanted to look at other countries, so we first turned to the American market. We hired a consultant who searched for agencies for us, studied company profiles, and in the end we retained three agencies, whose specialists visited us and made presentations for us on their approach to brand renewal. Thanks to this process, we understood in which direction we needed to move, but, unfortunately, we did not agree on the price with our American colleagues. So we had to turn our attention back to the English market and again chose a UK agency.
How much time did you spend searching for an agency and developing a new concept?
The development of a new brand concept and retail design took about a year and a half - work began at the end of 2013, and the renovation of the first store took place in mid-2015, that is, at the final stage of this project we entered a bright phase of crisis. But there was no turning back for us; changes were necessary. With any concept, consumers at some point become tired, the company, as they say, becomes blinded, or the project generally becomes obsolete.
At the same time, we understood that a crisis could be a favorable time for changes; for example, we had the opportunity to change store locations to more successful ones. We open all new salons with a new concept.
How was the update process?
To begin with, we decided to update three stores and see how it goes, and when we saw the sales figures, all doubts disappeared from us. We realized that we are returning pre-crisis traffic! The attention of visitors was attracted by the updated display case, and the time they spent in our stores also increased. We also noted that the same collection looks different in different concepts. Conversion increased and sales increased. The growth ranges for traffic are from 7% to 26%, for conversion – from 1% to 44%, growth in pairs – from 4% to 25%, these are the lower and upper limits of growth using the example of 25 real stores.
It is clear that with the currency jump, all shoe companies transferred part of the devaluation to the retail price, but real sales prices did not double, since not everyone decided to work with the same margin. There are those who try to maintain a margin, but already in the first months of sales they begin to set 10-20% discounts, that is, real sales still end up at a lower price.
It is not known which approach is better. But we do not include pre-crisis margins in our prices at the beginning of the season; we are faced with the task of maintaining or increasing the share of those people who make purchases at the beginning of the season, without additional elements of sales promotion, and not just during promotions, and rebranding helps solve this tasks. Of course, we see that consumers have a rational motive, so we must stand out, including with the product. To do this, we have released a collection with our own prints, we are launching collaborations with Alena Akhmadulina and Evelina Khromchenko, this is also an opportunity to attract new clients.
Now we are quite flexible in our approach to prices, understanding that the downside of sales is the consumer’s capabilities. In the past, it seemed like most people responded to discounts. But during this crisis, the entire market began to offer them, and people began to change their consumption model, they evaluate the product differently, and still choose the price-quality ratio, focusing not on the size of the discount, but on the final price.
It turns out that, unlike most retailers who, in a crisis, choose a strategy of cutting costs and austerity, costs, on the contrary, are increasing?
The need to optimize costs has not passed us by either. But any optimization is good in moderation. If you cross a certain line, the company begins to lose potential revenue. Even during a crisis, it is important to think about opportunities to increase profitability.
It is possible that, against the general background, our strategy can be called aggressive, but in fact this is the only chance to build processes aimed not only at compression, but also at development, because we understand that the crisis is not eternal. We began to more focusedly direct available resources to strengthening the brand in the market.
What exactly did the reduction affect?
First of all, all retailers began to work with three main cost items - rent, personnel and marketing. At the end of 2014, the first half of 2015, and even until the end of last year, the entire market worked with the optimization of rental costs. Many retailers had part of their lease agreements denominated in foreign currency. Naturally, we worked not only in terms of the currency component, but also in the ruble component, because any rent had to correspond to income with a declining margin. By the end of 2015, we rebranded 11 points, the rebranding plan for 2016 is 22 stores, for 2017 - 23 or 25, new openings are underway at the same time - during the crisis in Moscow we entered the Atrium shopping center, opened in the Ocean shopping center , in the Aviapark shopping center, entered the Samara MEGA...
At one time, street retail was actively developing in Russia, and then shopping centers began to develop. What should be the ratio of street stores and retail outlets in shopping centers for shoe retail?
In my opinion, the idea that street retail is dead for the fashion segment is a persistent misconception. We have “street” format stores, which in terms of revenue are not inferior to, and sometimes even surpass, stores in good shopping centers. And we are still looking for sites for retail placement on the shopping streets of Moscow, it’s just that the corridor that interests us is quite narrow, these are specific streets and specific buildings.
How quickly do investments in rebranding pay off?
Investments in updating one point amount to about 6-7 million rubles. We attribute investments in interior renovation to depreciation. The only decision we made during the crisis, but it is temporary, is that our depreciation rate is now not five years, but seven. Thus, we have reduced the burden on the company’s indicators, because if this is considered an expense, then profit decreases by this amount.
Judging by the numbers, do you see an increase in sales in 2015-2016?
This concerns ruble turnover (revenue growth in 2016 was +10%), and in pairs we had a slight drop both last year and this year. But this is a consequence, among other things, of optimizing the network - reducing the number of stores that are not suitable for rebranding. This is a conscious step on our part.
In terms of the number of retail stores: before the crisis, at the peak, we had 165 stores, now there are 142, and at the same time, ruble turnover is growing. It is important that we are losing more in terms of the number of points than in the number of square meters, because we are rebranding and expanding the area. Previously, the sales area of our store could be 80 square meters. meters. Now the optimal retail area is 120 meters, the total area, accordingly, can reach 150-200 square meters. meters.
Part of our rebranding concerned product policy - we abandoned the multi-brand and went towards a mono-brand. Before this, we had already abandoned the men's part of the collection, and declared ourselves the first retail chain for women.
Now we have our first experience of cooperation with Evelina Khromchenko. Our capsule collections, such as “Mother-Daughter”, resonate with our consumers. In addition, this year we launched the “Mother-Daughter” capsule together with Barbie. Now our assortment includes ekonika shoes, the trendy part of the collection called ekonika2 (ekonika squared), the premium Alla Pugachova line and limited capsule collections.
You said that when rebranding, the feeling of your own brand changes. What has changed?
We have changed the main ideological content of our brand, partly this is reflected in the company logo. Today our logo is a circle, the inner meaning that lies in it - “Econika” is a community of friends.”
In order to come to the idea of community, we still have a lot of work to do, because the strength of a brand lies in a close, sustainable connection with its consumers. The idea is reflected in the interior of the stores - now it resembles a stylish apartment of a friend.
What did interaction with American designers give you? Maybe there is some kind of retail western network you look up to?
We constantly monitor changes in the retail market; naturally, in the process of working on rebranding, the team visited different cities around the world and absorbed some ideas. An inspiring example for us was the &Other Stores chain, where we liked not only the interior, but also the service. Naturally, we avoid direct copying, but we take interesting ideas and concepts into account. There is an entire Soho district in New York, where there are a huge number of interesting retail concepts.
What are Econika's plans for the next 5-10 years?
Become the best place of choice for your customers! (laughs). Okay, I'll say a few words about strategy. Our core competencies lie in two areas: first, we are retail professionals, second, we are product professionals, and we operate in the fashion and lifestyle market. There is a certain challenge in becoming a global player and entering the markets of other countries with your products, but we do not yet know of successful examples of such a strategy on the part of Russian companies. Therefore, I think we will focus on development in the domestic market. In foreign markets we will test the demand for our product through online sales. The concept of fashion and healthy lifestyle has recently become very popular and allows us to develop in other segments in the field of fashion, so that we can develop new retail projects, perhaps not only in shoes, taking into account our core competencies.
Rebranding price: The cost of opening one Econika salon in a new concept is about 6-7 million rubles The costs of developing and launching the new Econika brand amounted to about 400 thousand US dollars. The company is ready to spend about 500 million rubles
Interviewed by Marina Shumilina
Showing some customers the door can increase sales and build loyalty among key audiences. The Econika company came to this conclusion when they stopped selling men's shoes.
Text: Nikolay Grishin
“Why don’t you like men so much? Econika was the only store where I bought shoes,” user igwt complains on the shoe company’s website. “There is no dislike - it is impossible to please everyone equally at once,” replies the forum moderator.
This discrimination has purely marketing reasons. As follows from the results of a study conducted by Econika, the stronger sex has only one key motive for buying a new pair of shoes - “wearing out the old one.” Women’s motivation is much richer and more varied: from “I buy things from a new collection” to “I cure stress by shopping.” As a result, women buy shoes two to three times more often than men. In addition, according to Andrei Berezhny, CEO of Ralf Ringer, in 35% of cases the final decision on choosing men's shoes is also made by women.
It is not surprising that almost all major players in the Russian shoe market have placed their bets on women. In "Tsentrobuvi", "Monarch", "Tervolina", Carlo Pazolini, Alba and "Westfalika" about 70-80% of the assortment is occupied by women's shoes. The men's range is dominated only by Ecco and Ralf Ringer. But at the same time, until recently, none of the networks dared to rely on women alone: who would voluntarily give up part of the revenue? Econika was the first to take the controversial step and, it seems, made the right decision.
Ladies club
The Econika chain was founded in 1992 and now has 135 stores. The company's revenue over the past year compared to 2009 increased by 30%, to $105 million. According to Esper Group, the volume of the Russian footwear market in 2010 grew by 18%, to 12.6 billion euros. For comparison: the market leader, Centrobuvi, has more than 400 stores, revenue is estimated at $800 million. Econika is part of the Novard group, headed by Andrei Iliopulo. In addition to the shoe business, the group is engaged in the development of residential and commercial real estate, as well as the sale of industrial and construction equipment.
In 2005, the chain rebranded: it renovated stores, purchased new retail equipment, and began using aroma marketing (aromatization of air to stimulate sales). “It became clear that part of our assortment was not suitable for the updated stores,” recalls Sergei Sarkisov, vice president and co-owner of Novard, who oversees Ekonika. Then the chain abandoned shoes cheaper than 2.5 thousand rubles, focusing on the price segment of 2.5-4.5 thousand rubles. “It was scary: during all the surveys, people said that the key factor in choosing a shoe store for them was the breadth of assortment. But we decided that a narrower price positioning was necessary,” recalls Sarkisov. The experiment ultimately turned out to be successful: in the rebranded stores, comparable sales (excluding recently opened outlets) increased by 20-30% during the year, while the market grew by 10%.
After rebranding, Sarkisov thought about eliminating the men’s assortment, which accounted for about 30% of the chain’s revenue: “You walk into the store and understand that in terms of interior, assortment, merchandising, it was made for women, and this line needed to be strengthened.” However, men's shoes are a related product for women's. “It often happens like this: a customer chooses shoes for herself and remembers that her husband’s shoes are worn out. And she takes him a pair, even without trying them on,” says Anton Titov, owner of the Obuv Rossii company. However, in his opinion, such spontaneous purchases often happen in the low price segment, but in the middle price segment, where Econika operates, this happens less often.
In addition, the men's range is more profitable from a production point of view. For the most part, men are conservatives, which means they need to update their lineup less often. Econika, like most Russian shoe retailers, independently develops new collections, and outsources them to factories in Southeast Asia, Brazil and Italy. Savings on design can reach 15-20%.
97 million pairs of shoes were produced in 2010, according to Rosstat, by Russian manufacturers. A year earlier - only 57 million pairs
Foci of resistance
The company decided to abandon the men's collection and focus on the female audience in 2008. But the plans were hindered by the crisis: in the face of a 20% drop in demand, Econika had no time for experiments. Nevertheless, the men's assortment was nevertheless reduced from 30% to 20%.
The next step in 2009 was the abandonment of the men's assortment in seven Moscow and regional stores. In two of them, sales fell slightly over the year, but in five they remained at the same level. The attempt was considered successful. “We realized that if further continuation of the experiment ends in failure, then it will not cost us that much,” says Sarkisov. In November 2010, Econika declared itself the first specialized women's shoe chain and completely abandoned the men's range.
“It’s a very dubious and incomprehensible decision to me. If you look at the policies of global brands, their owners are trying to make a universal offer. Traditionally, men’s Hugo Boss starts selling women’s clothing, women’s Prada produces collections for men,” says Andrei Berezhnoy. His company, Ralf Ringer, until recently specialized only in men's shoes, but two years ago it began selling women's shoes as well. Now 26 of 82 Ralf Ringer stores have a women's collection, in which the share of sales of women's shoes has increased from 10% to 35%. “Men rarely buy shoes alone, and if women also come into our stores, why not try to make an offer for them too. Someday we’ll get to children’s shoes,” says Berezhnoy.
Sarkisov’s idea met with resistance within the company. Store managers and some franchisees feared that the reduction in assortment would lead to a drop in sales. Letters were sent to managers with sales statistics for the first specialized stores, and a transition period was introduced for franchisees - the opportunity to refuse the men's assortment not immediately, but during 2011. So you can still find men's shoes in ten Econika stores.
Judging by the first results, the idea worked. The assortment of shoes at Econika has decreased from 750 to 650 pairs in each store. However, revenue per square meter increased: in the first half of 2010 it amounted to $9 thousand per month in Moscow and $6.4 thousand in the regions, in 2011 - $9.9 thousand and $7 thousand, respectively.
Without men
In some of the freed-up retail space, Econika exhibited accessories: bags, gloves, belts and leather jewelry. According to Anton Titov, if the average market margin for shoes is 100-120% (excluding sales), then for related products it easily approaches 300%. Now this direction has become the most dynamically growing in Econika - sales of accessories in June 2011 compared to June 2010 increased in physical terms by 33% in Moscow and by 51% in the regions. If previously they brought the network 1-2% of revenue, now it is about 3%.
Accessories are a marginal product, but at the same time oversized. Warehouses have freed up space for a larger stock of the most popular sizes of women's shoes. “The conversion has increased: we began to ‘catch’ those women who previously could not find the right size,” says Sarkisov.
In addition, Econika focused on optimizing its key product range. The company sells shoes under the brands Alla Pugachova, Riarosa, Riarosa Classic and De"Marche. Each brand has its own style and positioning. For example, Alla Pugachova is an extravagant brand from the upper middle price segment, and De"Marche is cheaper youth shoes from the original materials.
However, previously franchisees and customers complained that Econika's brands overlapped greatly in many models - the company sold similar shoes under different brands. “We understood that the model range needed to be changed somehow, but within the company we could not clearly classify and distinguish between different styles,” says Sarkisov. He found a designer in the USA (Sergei is afraid to reveal her name so as not to be taken away by competitors), who conducted an audit of the entire model range and identified intersecting style solutions. The company stopped producing duplicate models. As a result, as Sarkisov assures, each brand has “its own face.” In the near future, Econika expects to further reduce the range of shoes to 550 items, but to more carefully study the style of all models.
“Econika has chosen the right strategy - you cannot create an ideal store for both men and women at the same time. The target audiences in our market are too different,” says Anton Titov. Next year he plans to launch a chain of women's shoes, Emilia Estra, which is currently sold in his Westfalika department stores.
“All large chains have comparable prices, similar model ranges and design of sales floors. Now, when competing for buyers in the shoe market, we need to move away from rational motives to emotional ones,” Sarkisov is sure. And little things affect emotions. Recently, the company commissioned a study from GfK-Rus to find out how the fair sex sees the ideal of shoe retail.
It turned out, for example, that women do not like it when sellers give out underwear for trying on - it would be more pleasant for customers to take them from the shelf themselves. Many people lack a clearly designated fitting area in stores, as, for example, in clothing stores.
In the next three years, Econika is going to carry out another rebranding of the chain in order to take into account all the wishes of customers. However, doing so will likely be more difficult than closing stores to male customers.
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Corporate culture in the franchising system
The corporate culture of each company is formed taking into account the characteristics of its business. The main difference between the corporate culture of companies involved in franchising (purchasing the rights to operate under someone else's well-promoted brand) is that their corporate standards must be more stringent.
Franchising - transmission of values
The franchisee (the company that buys the right to use the brand) is your partner, and, naturally, you are interested in mutually beneficial cooperation with him. One of your main tasks in this case is to convince a potential partner that he is dealing with professionals, and the standards that you teach him will work and will bring him profit.
If the technique of working with partners could be accurately analyzed and predicted, the corporate culture of the franchisee would not be so important. But at all stages of working with partners, you have to deal with living people, each of whom is individual in nature and has their own experience. This is where the human factor comes into play. The franchisor transforms the corporate culture of the partner company and invites it to start doing business differently. To do this, it is necessary that partner managers not only master standard sales techniques, but also be worthy bearers of the corporate culture of the parent company.
In order for a franchising partner to be able to work fully, comply with company standards, etc., he must be “imbued” with the corporate culture of the company. One of the most important tasks of the franchisor is to unite enterprises not only organizationally, but also at the level of common goals, values, traditions and ideas. Therefore, he must make every effort to convey his corporate culture to the franchisees. For example, every year during the MosShoes exhibition, EKONIKA holds a seminar for franchisees.
Already at the first stages of interaction with company representatives (the brand owner), the franchisee partner gets acquainted with the company’s mission, corporate standards, corporate style, and company representatives, in turn, decide whether the potential franchisee partner is able to adapt their corporate culture to new goals.
The corporate culture of the franchise network maintains the stability of the team. Each franchisee is responsible for the brand under which he operates, so maximum attention is paid to training partners. Let's look at all this using the example of the EKONIKA company.
Franchisor-franchisee-client
The corporate code of the EKONIKA-Obuv company contains several basic principles:
1.1Development of a branded network
According to the company's mission, the strategic goal is to develop a branded network of stores connected by a common concept in the Russian and CIS markets. Particular attention is paid to creating networks of branded stores in the regions.
1.2.Development of employee potential
Employees are the company's core value. The company's success in competition depends on their level of qualifications. The corporate culture of a franchise network solves the problem of attracting and retaining employees. EKONIKA has a special procedure for introducing a new employee into the company (including the presentation of a booklet for a newcomer), during which the franchisee standard is transferred to him.
What does working with employees involve?
There is a personnel training system (both centralized and on-the-job training).
The structure of personnel growth opportunities is the same for everyone: every employee of the company can achieve any career heights - everything depends only on him.
EKONIKA partners and employees who have worked in the network for more than five years are awarded a company badge.
The company network holds competitions annually. The best salon, sales consultant, manager and franchising partner are awarded (with "Nika" statuettes).
From time to time, company managers perform the duties of sales consultants in the best salon of the branded network for one day.
2. The value of each of our partners and clients
2.1.Partners
The company that provides its brand is responsible for ensuring that its franchisee partners meet all its standards. After signing the contract, EKONIKA partners receive a “Practical Guide to Working as a Sales Consultant in a Branded Network,” specially developed for the sales staff of the EKONIKA-Style branded network.
The Corporate Code states: it is necessary to constantly study the needs of partners, take into account the characteristics of regional markets - all this is necessary in order to help them meet the high requirements of the company.
Example: previously, equipment for EKONIKA stores was produced in Italy, and it cost approximately $30 thousand. For stores in the regions, this turned out to be too expensive, so the company found another partner. Currently, franchisees use the services of a Russian factory, which produces for them the same equipment, but at a cost of $8 thousand.
2.2.Clients
Everything in the branded network - from the convenience of the salon's location to the art of consulting - is subordinated to the interests of the client. It is for the comfort of the client that corporate standards exist; Compliance with them helps to create a culture of service in the regions.
Example: a few months after the opening of the EKONIKA brand store in Kemerovo, all nearby stores (even those that sold something other than shoes) made renovations, introduced uniforms for salespeople and trained staff.
Long-term relationships provide the greatest value to both clients and companies. Therefore, EKONIKA has a special program across its entire franchise network aimed at working with regular customers. Becoming a regular customer or partner means receiving undeniable advantages and benefits.
3. Features of working with franchisees
Each employee must be responsible for the results of their work, since any mistake damages the reputation of the entire network. Carrying out joint charity events across the entire corporate network also has unifying significance. An example of the latest action (carried out jointly with the Russian Ministry of Emergency Situations): "ECONIKA - Help for children."
Unity principle
For the effective operation of a corporate network, an important role is played by formation of corporate spirit. What is being done for this?
Firstly, a corporate newspaper is published, which is received by all partners in the regions.
Secondly, joint corporate events are regularly held (New Year's Eve, celebration of the company's birthday, anniversaries of branded salons, etc.), in which franchisees participate. "ECONIKA" has its own anthem, flag and dance.
Thirdly, various Olympiads and competitions are regularly held.
1. Competition for the best slogan for a branded network, the best business idea, etc.
2. Competition for the best comic poem about the company "EKONIKA-Obuv".
3. Olympiads for employees’ children and children’s drawing competitions.
4. Annual mini-football championships (the winners go on vacation abroad).
5. KVN: representatives of the Moscow network and franchisees compete once a year.
In addition, the EKONIKA company sponsors beauty contests in the regions.
Report as part of the round table "Investment attractiveness and corporate reputation of a company", organized by the Vedomosti newspaper on September 6, 2001.
The main features of corporate culture in franchising conditions:
2) determination of uniform standards for working with clients;
3) the same range of products;
4) a single style of interior design for offices and salons, a single uniform for staff;
5) adherence to a uniform pricing policy (as far as possible in different regions);
6) organizing events to strengthen the corporate culture of the franchise network.
What do the franchisor company’s specialists do?
Provide methodological, legal and consulting support to franchisees;
Train staff in the psychology of communicating with clients and the art of counseling;
Talk about fashion trends;
The company's training manager conducts sales training in the regions, adapted to the specifics of selling branded shoes.
Add a comment
“We don’t want to go either towards luxury or towards discounter”
During the crisis, half of Russians reduced their spending on shoes. In January-August 2009, according to Discovery Research Group, per capita shoe consumption fell by 20%. In 2008 it was 2.6 pairs per person. The decline in demand is noticeable in all segments, however, not all players suffered equally: the market is experiencing a flow of buyers from one chain to another. Vice President of the Econika Corporation SERGEY SARGISOV told RBC daily correspondent MARGARITA PARFENENKOVA how to retain customers during a crisis.
- Traditionally, retailers' sales increase towards the New Year. Have these trends continued this year?
- This year the sales dynamics are very uneven. If last year sales for the New Year holidays were increasing, then this year both we and our colleagues in the market had a worse September than last year, growth began in October and early November, but current sales again show negative dynamics compared to last year, especially in those regions where winter has not yet manifested itself.
- Is the situation the same in all segments?
- The high and luxury segments suffered the most. Apparently, there is an influx of buyers in the lower segment. In the middle segment, the impact of the crisis is moderate, but the condition of the players varies depending on who approached the beginning of the crisis with what baggage. Not everyone equally assessed its impact on sales volumes in physical terms. Those who expected a drop in demand by 30-40%, and those who relied on last year's reserves, were mistaken.
- How has consumer behavior changed?
- Most consumers, despite making more rational purchases, remain in their usual consumption zone, in their price niche. The overall reduction in consumption in pairs, according to my estimates, is no more than 20-25%. Those chains that relied on the same price-quality ratio and offered fresh collections suffered almost no damage. Those who relied on last year's assortment are experiencing a shortage of new supply, and they are unable to maintain either sales volumes or customer loyalty. Therefore, there is a redistribution of consumers between players in the same segment.
- Can you give an example of which networks are experiencing such problems today?
- At the beginning of the crisis it was “Mattino” and “Tervolina”. But the situation is gradually improving.
- What is happening now with the boutiques of famous Western brands?
- In the luxury and high segment - a drop in sales volumes. Some small players are leaving the market, while others are gradually losing their working capital. Some have tried to adapt and align sales and costs, sometimes by reducing the volume of business. From March to July, quite a lot of stores were closed, in different segments. This can be seen at least by the way retail space was vacated. Now the dynamics of closures have slowed down.
- Have sales decreased at Ekonika?
- On the contrary, we are seeing an influx of buyers from other shoe chains into our stores. For ten months of this year, compared to the same period last year, ruble revenue increased by 14%. In physical terms, sales decreased by 2%.
- What was the dynamics of sales growth before the crisis?
- We then compared currency indicators, since the exchange rate was stable. The growth was 25-30% in dollars.
- How many stores are open this year?
- If we compare October of this year with October last year, our growth occurred mainly due to directly managed stores from 68 to 76 points of sale. At the same time, we closed two underperforming stores. The franchise network has decreased slightly. In total, we currently have 108 stores, including franchising. By the end of the year we plan to open three more directly managed stores.
- In which regions are you developing now?
- The largest number of Econika stores are concentrated in Moscow - 36 and St. Petersburg - 13. In cities with small populations, the presence is ensured through franchising. Our previous strategic plans assumed that we would primarily develop in cities with a population of over a million. The crisis did not qualitatively affect these plans; only the speed of opening decreased. We are now in the planning process for the next year, during which we want to open, depending on the availability of high-quality sites, 13-15 new facilities.
- Is it easier now to find new areas for your stores?
- Quality - no. There was a period from March to July when many offers of quality sites appeared on the market, but they were quickly filled. And low-quality ones are still being given up.
- Do you have plans to launch new formats or buy competitors?
- At one time, we clearly decided that we were not relying on quantitative indicators, but on the qualitative growth of the network. We are still looking at other segments, mainly those neighboring us, and under certain favorable circumstances we do not exclude possible transactions or the launch of a new project. However, the emergence of new projects or major mergers and acquisitions can be expected no earlier than two to three years from now. There may be small purchases in the next year or two: in past years we bought businesses from several of our former franchise partners.
- What acquisition targets are you interested in?
- If the situation is favorable and we see a small regional network, we will move towards purchases. It is more difficult to carry out a transaction with a network comparable to ours, since there are now problems with access to financing. And our policy is such that we retain 100 percent control, that is, uniting with someone is not our way. Therefore, a more suitable option is to buy a network using a long-term and cheap source of financing.
- And which segment in this case interests you more?
- This will be the same niche in which we are located now, that is, average and average plus. We don’t want to go either towards luxury or towards a discounter. Some small players are leaving the market, while others are gradually losing their working capital