Stores are closing and shopping malls are losing visitors – this is the format of retail business in Russia today. International brands continue to exit the market rapidly.
According to the latest research by consulting companies, by the end of 2022, 30% of the buildings in Moscow shopping centers are likely to be vacant.
New brands have not yet replaced the closed sales points. This is because of the high cost of renting space that only large companies can afford. A businessman who develops a brand alone cannot pay such large sums. But weepers – completely.
So who will replace H&M or Zara? The latest estimates say these will likely be brands from Mongolia, China and India.
Here’s what we know about the future of malls and stores that we’ll be dressing up soon.
cannot be sold
Due to the closure of stores, retail space owners began to lose their profits and came to the conclusion that it was much more profitable to sell the business. You can see advertisements for the sale of shopping centers on many sites, including Avito.
For example, in Moscow, a shopping and entertainment center in Trubnaya is currently offered for sale for 10 billion rubles. Also, the specific address is not disclosed. “Address and photo are contingent,” the seller writes.
Petersburg, they propose to buy 50 thousand square meters for several billion (at the time of publication of the material, the announcement was removed. note. ed.).). Of the advantages – in a large hypermarket, in a federal fast food chain, in a federal chain of electronics stores.
Both Moscow and St. Entrepreneurs from St. Petersburg and provincial cities are saying goodbye to their jobs. For example, in Kaluga one of the largest shopping centers is put up for auction. The initial rate is 3 billion rubles. Facilities with an area of 31 thousand square meters. m sells the bank’s non-core assets “Trust”.
Another shopping complex is sold in Surgut for 550 million rubles: Otkritie Bank offers businessmen to buy Vivaldi Plaza. The same bank previously sold shopping centers in Tambov, Syktyvkar and Krasnoyarsk.
“Owners are getting rid of assets for various reasons: the business is not paying, besides it is difficult to find a networked Russian business to replace the departing foreign company,” explains Pavel Korotin, Head of the Korotin Consulting and Development Group.
Pavel adds that today it is more profitable to sell shopping centers for demolition. The plots on the site where the shopping malls are currently located are especially attractive for businessmen dealing with real estate. Also, the trend is mainly observed in the suburbs and regions. “Apartment buildings are mostly built on the site of shopping malls,” continues Pavel Korotin.
In such a situation, mall owners have a way out: to wait until new tenants appear, and this process can be delayed.
India-China
Clothes from China, Mongolia, India are our future. At least, that’s what people who are associated with the development of shopping centers say. In July, Moscow hosted a conference on commercial cooperation in the field of light industry and consumer goods. And at this event, there were many Chinese representatives who reassured everyone present that all deals will be signed soon, and buyers will be forced to fall in love with everything Chinese.
The same will be true for clothing brands from India and Mongolia.
“We are negotiating. Before that, there were products from India and China in Russian shopping centers, but under the brands Zara, H&M and others, ”says Vasil Gazizulin, co-founder of the marketplaces Topfranchise.ru / Topfranchise.com.
He says that many brands preparing to come to Russia from India and China make clothes for the same H&M. However, over time they have improved in marketing and are now ready to present their own brands to the world – the quality, according to the manufacturers of these brands, is no worse than that of companies leaving the Russian market.
“For example, it happened with smartphones: at first it was only Chinese factories that worked for Apple, Samsung, then they learned everything and Xiaomi, Huawei appeared. Everything is the same in clothes, no one stands still. Companies from India, China and Bangladesh – all claim to be full-fledged brands in the future,” explains Vasil Gazizulin.
Stores will be not just mass-market, but luxury as well. One of the brands suitable for this segment is Louis Philippe.
Louis Philippe is a premium menswear brand from India that is part of Aditya Birla Group, India’s largest multinational conglomerate with stores in 24 countries. In 2019, the profit of the holding was $48.3 million. Aditya Birla Group is India’s third largest private conglomerate after Tata Group with a profit of just over $110 million and Reliance Industries with a profit of $90 million.
The Louis Philippe brand is the largest in the market in India. However, if we translate the prices of things into rubles, then their cost is not so high and clearly does not apply to premium goods. So, one of the T-shirts costs 560 rupees, that is, about 7 US dollars or 427 rubles (at the exchange rate of 08/11/2022 – editor’s note). Too democratic for a “luxury” brand. True, it is not yet known what their price will be in Russia, given the logistics costs and value-added tax.
“Things bought from Indian stores will certainly not cost more than the leaving mass market,” says Vasil Gazizulin.
If agreements are signed with Indian companies, brand stores will be located not only in the capital, but also in all shopping centers.
“We understand that if an Indian brand really wants to come to Russia, we will not notice how it happens. We will get used to these names as we are used to Mango, Zara and other stores. Everything will be fast enough, basically because my team and I are currently only communicating with top Indian brands that are basically on par with H&M in terms of capitalization. These brands are huge, they understand the marketing budget and promotion in the Russian market,” explains Vasil Gazizulin.
True, negotiations are still ongoing and, according to experts, may take a year or more. At this time, malls will still be empty.
The situation is prolonged due to the fault of both sides – both the Indian and Chinese brands spying on our businessmen, and the shopping malls that take a long time to choose the stores they want to see.
everything according to the law
Some big brand owners stepped in and bought their stores or sold them to another company.
“Many top managers who manage Russian stores have great credibility with the suppliers of these brands. When the center orders to close a store in Russia, as a rule, store owners demand a legal exit from the market, preserving assortment and business. Behind such a story is often enterprise, not cunning. This means that the businessman is not only interested in customers, but also in his employees,” explains Vasil Gazizulin.
Thus, the stores of the Polish LPP SA (brands Reserved, Cropp, House, Mohito and Sinsay) were acquired by a Chinese consortium, which allowed to keep all the stores, assortment, business in Russia, but led to a name change. Now Left – RE, Cropp – CR, Sinsay – CUH, House – XC.
Another example is L’Occitane. The French brand now exists under the name “L’Occitane” and has a separate legal personality. The product range has remained the same, new products will continue to arrive on store shelves as before.
However, not all foreign companies agreed with businessmen and left their stores in Russia, albeit under different names. Still, most of them closed their outlets. What’s next? It is not clear how the situation will develop as there is no clear decision from partners from India and China. According to experts, a decision will have to wait about a year, unless the mall decides to liquidate during this time.
Source: People Talk
