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no.

10/ July/August 2010 the profashional monthly newsletter


monatsnachrichten

The Russian Fashion Retail Market


macro-economics / consumer behaviour/ retail development/ commercial real estate
September 29st , 2010 published by ITMM for IGEDO COMPANY

Issues addressed in this July/August edition 2010

1. Politics and Economics

1.1. Gross Domestic Product might rise by 6,2 percent in 2010


1.2. Industrial production up by 10,2 per cent over second quarter 2010
1.3. Unemployment down by 20 per cent
1.4. Imports back on the growth path
1.5. Capital investments keep increasing: higher yields
1.6. Inflation likely to rise
1.7. Fire devastation may cost Russia US $ 15 bn.
1.8. European clothing suppliers to Russia cut losses by half

2. Consumer Characteristics

2.1. Consumer Demand up by 3,4 per cent over first semester 2010
2.2. Real Income rose by 13,4 per cent until May 2010
2.3. Strong recovery in demand for new automobiles
2.4. Share of private clothing expenditures abroad on the rise

3. Retail Development

3.1. Rents for retail premises to move up in autumn


3.2. ARMANI COLLEZIONI opened mono-brand store in Ekaterinburg
3.3. Growing GINGER teen-wear chain in the regions
3.4. METRO CASH & CARRY taken to court by clothing supplier
3.5. ADIDAS breaks customer relationship with SPORTMASTER and SPORTLAND
3.6. Russian DETI childrenswear chain planning large scale expansion
3.7. STOCKMANN closing down old retail premises in St. Petersburg
3.8. NEW LOOK to sign partnership with DELTA SPORT in Ukraine
3.9. Did heat wave and smog affect retail sales in Moscow?
3.10. PODIUM opening first department store in Moscow
3.11. MANOUKIAN to launch first mono-brand store at GALLERY mall
3.12. TOM TAILOR getting independent from FDLab
3.13. MANGO strengthens market presence in Russia
3.14. Voronezh delaying construction of IKEA's new MEGA Mall
3.15. BOSCO DI CILIEGI likely to sell 45 per cent of stake to GUM
3.16. MARKS & SPENCER anchors at new GAGARINSKY MALL in Moscow

concepted by: published by: as marketing tool for: all rights reserved by:

responsible: Reinhard E. Döpfer, E-Mail: doepfer@itmm-gmbh.de, Tel.: +49 (0)711-933 29 94 44


4. Shopping Mall Development

4.1. Shopping Center JUNE opened in Cherepovets, North-West Region


4.2. OZ-MALL under construction in Krasnodar on 46 hectares
4.3. Owners of EVROPEYSKIY Mall in Moscow investing in PAVELETSKAYA MALL
4.4. Second GOLDEN PARK MALL to open in Novosibirsk
4-5. KOMSOMOL MALL inaugurated in Ekaterinburg
4.6. St. Petersburg in second place of shopping mall implementation in Europe

1) Politics and Economics

1.1. Gross Domestic Product might rise by 6,2 per cent in 2010
September 2010, Bloomberg Corporate Executive Board (CEB) and cisstat

After subsequent higher one digit growth of the Russian Gross Domestic Product
(GDP) over the past ten years, this indicator dipped by 7,9 per cent in 2009. Over
the first quarter of 2010 GDP increased by 2,9 per cent against the same period of
2009. The first semester of this year saw a rise of 4,0 per cent. According to the
chart below, CEB projects a GDP growth for 2010 ranging between 2,9 % (low
estimate), 4,0 (medium estimate) and 6,2% (high estimate) at real terms:

1.2. Industrial production up by 10,2 per cent over 2nd Quarter 2010
September 2010, www.cisstat.com, main macroeconomic indicators

Industrial production increased in Russia at an average rate of 5,3 per cent from
2000 till 2008. In 2009 this indicator declined by 10,8 per cent against 2008.
During the first quarter of this year industrial production attained a growth of 5,8
per cent. From January till June output of the Russian industry recorded an
increase of 10,2 per cent against the first semester of 2009. Agricultural
production faced different results. Whereas turnover rose by 3,6 per cent during
the first quarter of this year, the first six months saw a reduced growth at 2,9 per
cent.

1.3. Unemployment down by 20 per cent


September 2010, cisstat.com

According to ROSSTAT records, unemployment in Russia, which kept rising over


the crisis year 2009 and the first quarter of 2010 to a peak of 2,3 mn people (in
February 2010) started to decline in April 2010. Over the second quarter including
July 2010, the rate of reduction accounted for 20 %. In July there were 1,79 mn
people registered as unemployed against a total of 2,234 mn in March 2010.

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1.4. Imports back on the growth path
September 2010, cisstat.com, first semester key macro indicators

As it is commonly known due to the lack of diversified industry basis, Russia is


highly dependant on imports of both, industrial products and consumer goods.
From 2000 till 2008, imports from third countries, excluding CIS-nations rose at
an average annual rate of 29 per cent . The peak was reached in 2007, when
imports surged by 47 per cent against 2006. In 2008 growth slowed down by 23
per cent against the year before an it plummeted at a rate of 37 per cent in 2009.
The turnaround has been reached over the first quarter of this year, when imports
from third countries rose by 17,2 per cent compared to the first three months of
2009. At the end of the first semester of this year imports picked up at a
cumulated rise of 28, 6 per cent.

1.5. Capital investments keep increasing: higher yields


August 30, 2010, Handelsblatt/Investment Strategies

According to Matthias Siller, manager of Barings Russia Fund, the country is the
cheapest market for investors at a time right now when fundamental economic
data for Russia are commonly considered as very convincing. As Siller says, global
portfolio investors find no way around Russia for getting higher yields than here.
Shocked by the Euro-crisis in May, this year, global institutional investors jumped
on Russian government bonds issued in Roubles and US Dollars, bringing the
investor an annual yield of 5,4 per cent. According to Segei Arsenyev, analyst at
Goldman Sachs, he expects high profit margins from investments in stock of
Russian trading and retail companies selling consumer products as well as raw
materials for industrial use.

1.6. Inflation likely to rise


3rd Quarter 2010, The Global Blue Respective/ Handelsblatt

Although monthly inflation came down from 8 per cent at the beginning of this
year to 3,6 per cent in May, forecasts of the Russian Ministry of Finance aiming at
an average inflation rate of 5 to 6 per cent for 2010, may not come true.
According to the US economist Nourid Roubini, there are a number of indicators
pointing at an overall inflation rate possibly reaching 8 per cent this year. Higher
inflation than originally forecasted by the government may result from strong
rising prices for wheat, other foodstuffs and basic commodities, raw materials,
increase of salaries and wages such as from a declining US $ in combination with
a stronger € and a weaker Russian Rouble.

1.7. Fire devastation may cost Russia US $ 15 bn


August 11, 2010, Stuttgarter Zeitung

It is still premature to assess the economic and social damage caused by the
heat-wave and forest fire devastation which have hit Russia in July and August
2010. Experts speak of a cost burden of around US $ 15 bn resulting from this
catastrophy. Almost any economy sector has been directly or indirectly affected.
Mobile telephone providers were hit extremely hard because their networks
collapsed under destroyed transmission posts, telephone cable and networks.
Water supply was partially interrupted from the breakdown of power pumps.
Consumption of electricity surged because air conditioners operated at their
maximum capacity. In 27 Russian federal regions agriculture faces losses in crops
of wheat and other foodstuffs accounting for 20 percent below average summer
crops results. The government stopped wheat exports on August 5. This decree is
valid until December 31, 2010. Russia is the fourth largest wheat exporter world
wide and expects a negative effect on its balance of trade. According to Vladimir
Milov, former federal energy minister and leader of the liberal opposition party

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claims that the environmental disaster will Russia push back by several months in
its attempt to overcome the global economic and financial crisis. His opinion is
shared by experts saying that the economic recovery will be delayed because
higher cost for anything related to food, energy supplies and telecommunication
will be put on the shoulders of the public, beginning in autumn of this year.

1.8. European clothing suppliers to Russia cut losses by half


September 2010, European Fashion and Textile Export Council (EFTEC)

Exports of textile apparel and accessories from the 27 member states of the
European Union to Russia kept declining by 15 per cent over the first six months
of this year reaching an ex factory value of € 0,958 mn. Last year shipments had
to face a decline of 29 per cent representing a total of € 2.1985,5 mn. This means
that European clothing suppliers to Russia were in a position to cut their losses
almost by half. Over the delivery period of the first quarter of 2010, clothing
exports from the EU to Russia saw a decrease of 20 per cent. The European
Fashion and Textile Export Council (EFTEC), monitoring export development of
European clothing to Russia on a quarterly basis for each member state and for 33
main product categories since 2002, expects a return from "red" to "black" export
figures after the first semester of 2011.

2) Consumer Characteristics

2.1. Consumer Demand up by 3,4 per cent over first semester 2010
September 2010, cisstat

Measured against officially registered retail trade turnover, consumer spending in


Russia at the points of sale rose by 1,3 per cent over the first quarter of 2010 and
by 3,4 per cent during the first semester of this year. From 2002 till 2007,over the
boom phase in Russia retail turnover rose at an average annual rate of 12 percent
The peak was reached in 2007 when retail turnover increased by 16 per cent
against the previous year. In 2008 growth declined to 13 per cent and in 2009
retail turnover plunged by an overall rate of 5,5 per cent. According to Anna
Lebsak-Kleimans, CEO of Fashion Consulting Group (FCG), retail turnover for
textile clothing and accessories reached a value of US $ 27,4 bn in 2008. In 2009
the retail market value declined by 8 per cent to US $ 25,4 bn less a balance of
US $ 2,7 bn for inventories of unsold merchandise. This reduction has brought the
clothing retail turnover to a suggested US $ 22,7 bn in 2009. FCG reckons with a
new growth emerging in 2010 of up to 4 per cent bringing the total to US $ 23,6
bn.

2.2. Real income rose by 13,4 per cent until May 2010
3rd Quarter 2010, The Global Blue Perspectives

According to the World Bank, Russia is experiencing a "bumpy" recovery.


Domestic demand is on the rise and budget execution is better than anticipated
due to higher oil prices at around US $ 78 per barrel. This is much more than the
US $ 57 per barrel, planned by the Russian Ministry of Finance for this year's
budget. In May 2010 inflation was at 3,6 per cent and the real income of the
population increased by 6,2 per cent against the month before. During the first
five months of this year the average salary was up by 13,4 per cent in comparison
with the same period of last year. Employers in Moscow are getting more aware of
the necessity to increase wages and salaries to keep their workforce staying in
their companies.

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2.3. Strong recovery of demand for new automobiles
September 2010, Bloomberg Corporate Executive Board Research

Car sales, an important indicator for consumer sentiment, reached their peak in
Russia in April 2008, when around 300.000 cars were sold. Since then, there was
a constant decline in sales of cars. The bottom line was reached in January 2010,
when just 75.000 cars found customers. At the end of April 2010 car sales
increased by 20 per cent against the same month of last year. In June 2010 car
dealers reported a surge of 57 per cent compared to June 2009.

2.4. Share of private clothing expenditures abroad on the rise


August 2010, Global Blue Perspectives

According to Tatiana Komissarova, Head of Higher School of Economics (HSE),


Moscow, the numbers of Russians who prefer to buy clothes abroad are
"vigorously" growing from a suggested 20 per cent of consumers in 2009 to 30
per cent in 2010. Preferred places for Russians for shopping outside of Russia are
single retail stores, shopping malls and outlet centres. The most popular shopping
destinations for fashion abroad are Italy with an increase of 27 % against last
year, Germany (+22%), Finland (+18%), France (+9%), Austria (+18%) and the
United Kingdom (+11%). As it was stated by CitiBank from a study, 70 per cent of
the payments for fashion abroad are paid by credit cards, owned by a male. Men
more actively buy watches and jewellery costing more than € 1,000 per unit and
often pay for women in luxury fashion stores. Fashion products are the most
popular products to buy. The average Russian consumer has returned to spend
15-17 per cent of monthly income on fashion, compared to 7-9 per cent spent by
average Europeans.

The Russian Federal Tourism Agency confirmed that more than 6,64 mn Russians
headed abroad during the first quarter of 2010, an 11 per cent increase compared
to the first quarter of 2009. According to the Federal Agency of Air Transport, the
highest number of passengers to outside Russia destinations are recorded at
Moscow airports in June 2010 totalling 2,462 mn people, a 23 per cent increase
against June 2009. There are several reasons for the surge of Russians travelling
abroad: the perceived end of the crisis, pent-up demands, the increased value of
the Rouble and easier travel rules. Spain for example now issues six month
multiple visas and Italy and Greece announced similar steps. Turkey for any
Russian and Eastern traveller, is a visa free destination likewise Egypt and the
United Arab Emirates.

3) Retail Development

3.1. Rents for retail premises to move up in autumn


July 6, 2010, shopandmall.ru

According to Elena Afanayeva, head of the commercial real estate agency Prime
Time Reality, she observes an upward trend in lease rates for retail stores which
are estimated to increase by 10 to 15 per cent in autumn 2010. Landlords already
signalled since July to revise rents in shopping centres and malls, in particular, for
which demand at this time of market awakening is feasibly rising. Prospective
tenants are said to be very active in catching the last competitively priced store
facilities. The most attractive objects are still those of the middle market segment
at leases going from € 500 to a maximum of € 2,000 per sq. meter per year.

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3.2. ARMANI COLLEZIONI opened mono-brand store in Ekaterinburg
July 7, 2010, malls.ru

As it was announced by Michail Kuznirovich, majority share holder of BOSCO DI


CILIEGI, the company opened its fifth store for ARMANI COLLEZIONI at the
shopping mall EVROPEYSKIY in the city of Ekaterinburg. The shop composing a
retail space of 170 square meters, offers men's wear together with women's wear
and accessories under this Armani second line brand. It is located in the
neighbourhood of mono-brand stores for ETRO and HUGO BOSS, which also
belongs to the network of luxury brand boutiques owned and managed by Bosco.
A further store under ARMANI COLLEZIONI is operated by BOSCO at Koltzovo,
the airport of Ekaterinburg.

3.3. Growing GINGER teen-wear chain in the regions


July 8, 2010, shopandmall.ru

GINGER is a Russian retail chain selling trendy clothes for children and teenagers
from 7 to 17 years. Up till present the company operates above 20 stores in
regional cities like Ekaterinburg, Vladivostok, Kirov, Murmansk, Nizhnevartovsk,
Zheleznagorsk; Irkurtsk and others as well as in Astana, Kazakhstan. GINGER
announced plans to expand the network by 13 new stores across Russia. The
company further stated that it is in course of trading up its brand to become more
attractive.

3.4. METRO CASH & CARRY taken to court by clothing supplier


July 9, 2010, advertology.ru/RBC Daily

As it was reported by the head of corporate communication of the Russian


subsidiary of German Metro Cash & Carry Group, Oksana Tokareva, the company
was taken to court by one of its largest clothing suppliers, LLC LAMIS, claiming to
recover an amount of RUR 300 mn (€ 77 mn, US 100 mn) for not provided
marketing services. According to the law firm Partnership, representing LLC Lamis
at the Moscow Arbitration Court, the clothing supplier has delivered merchandise
invoiced to Metro for the amount of RUR 1,2 bn. Metro paid RUR 900 mn and
declared the balance of RUR 300 mn as a bonus due by the supplier for marketing
services provided by Metro for Lamis. The company denied that such an
agreement had been concluded with Metro. In this first stage of appeal, the court
decided in favour of Metro. According to Maxim Puras, a partner in the law firm
representing Lamis, a second appeal will be brought forward because there is no
written agreement apart from the order placement ruling the right for bonus
claims in favour of Metro.

3.5. ADIDAS breaks customer relationship with SPORTMASTER and


SPORTLAND
August 2, 2008, malls.ru/Kommersant

A dispute between ADIDAS and its largest Russian wholesale clients,


SPORTMASTER and SPORTLAND on a decrease of discounts on turnover, new
terms for invoice payments such as on adjustments of price reductions for
inventories in favour of ADIDAS has lead to a break in the business relationship
between the supplier and the two large Russian retail chains of sports goods and
apparel. SPORTMASTER declared that the new terms proposed by ADIDAS would
have lead to unprofitable working conditions for the company if they had been
accepted. The break of cooperation does not extend to Russia alone but also to
Ukraine. In turn ADIDAS is said to develop both markets independently, cutting
the wholesale business down and to concentrate expansion on own stores. For this
purpose ADIDAS will open its own Russian distribution subsidiary which will also

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take responsibility for the Belo-Russian market. According to Kommersant ADIDAS
announced to open approximately 15-20 stores in the territory in 2011, all
countries which are part of the new Customs Union which Ukraine is expected to
join in 2011.

3.6. Russian DETI childrenswear chain planning large scale expansion


August 5, 2010, shopandmall.ru/ Retailer.ru/PMR

This St. Petersburg based retail chain of childrenswear and accessories,


specialising in super-and hyper-market formats of stores from 350 to 2,500
square meters has recently opened its largest store of 3,000 square meter retail
space under its brand DETI at Mega –Belaya Datcha in Moscow. In August 2010,
the company has launched a further store of 1.500 square meters at the
Muscovite shopping center KLUCHEVOY. According to Retailer.ru DETI looks at
developing similar such formats in large cities of the regions. The DETI chain
consists of 28 stores in St. Petersburg and 15 in Moscow. There are rumours that
ZDOROVIY MALYSCH another children's goods retail chain also based in St.
Petersburg may go for a merger with DETI. This company operates 55 stores in
St. Petersburg and two in Moscow. Both companies entered the Moscow market
through the opening of stores launched under the name of DETI. Unable to solve
the dispute over who has a stronger claim to the name, Zdoroviy Malysch is
expected to acquire its competitor. Should the merger come to pass, the retailer
will become a serious rival of DETSKIY MIR, the current leader on the Russian
children's goods market. DETI is estimated to be worth US $ 355 mn.

3.7. STOCKMANN closing down old retail premises in St. Petersburg


August 7, 2010, shopandmall.ru/ August 16, 2010, malls.ru

After the opening of the shopping mall STOCKMANN NEVSKY CENTER on Nevsky
Prospect at the end of 2010, the company will most probably shut its traditional
STOCKMANN DEPARTMENT STORE which is also located on Nevsky Prospect. The
old premises were under negotiation between STOCKMANN and H&M as a second
store facility for H&M on Nevsky Prospect, but the parties could not agree in lease
terms, although H&M will move as anchor tenant into the new STOCKMANN
NEVSKY CENTER. At the moment the average rent on Nevsky Prospect is in
between RUR 3.500 and 5.000 (€ 90,-/US $ 117,-) per square meter per month.

According to RIA Novosti, the Russian news agency, Finnish retailer STOCKMANN
recorded sales in 2009, which fell by 16,3 per cent against 2008 to € 212,7 mn.
Over the first six months of 2010 STOCKMANN registered earnings accounting for
€ 97,5 mn compared to € 81,1 mn in the fist semester of last year. The operating
loss declined from € 17,5 mn to € 10,2 mn. As of July 2010 STOCKMANN runs 5
department stores in Moscow and one in St. Petersburg. Besides the department
store business the company operates mono-brand clothing stores under the
brands of Seppala, Lindex and Bestseller which are also controlled by STOCKMANN
in the Ukraine.

3.8. NEW LOOK to sign partnership with DELTA SPORT in Ukraine


August 10, 2010, liveretail.ru

British young fashion retailer NEW LOOK prepares its further expansion in Russia
in co-operation with its master-franchiser DELTA SPORT since the beginning of
2009. At present NEW LOOK covers Russia by a number of 14 stores. According to
the terms of contract DELTA SPORT committed to open a total of 96 NEW LOOK
stores in Russia over a period of 5 years. In July the British extended the co-
operation with DELTA SPORT on the territory of Ukraine. DELTA sold its original
distributionships for SPRINGFIELD, WOMEN'S SECRET (Cortefiel) and COLOURS &

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BEAUTY to Russian MFG Group, which DELTA owned before. According to
Alexander Tomasevic, head of marketing of DELTA, the company will now fully
concentrate on the expansion of NEW LOOK in Russia and Ukraine. Pricewise NEW
LOOK positions itself on a comparative level with PEACOCKS and Inditex's
BERSHKA and STRADIVARIUS. For example, a pair of jeans under the brand of
NEW LOOK retails from RUR 799 to RUR 1.600 (US $ 26,80 to US $ 53, 60), and a
jacket from RUR 999 to RUR 2.500 (US $ 33,50 to US $ 83,80). Experts say that
entering the Ukrainian market at a competitive price level together with a vast
range of collection being speedily updated appears to be very prospective venture
at this time because there is a lot of abandoned retail space now available at
shopping malls in Kiev and in other Ukrainian large cities offering low rent
opportunities. The Ukrainian clothing retail market is expected to recover in the
medium price segment from the crisis in 2011.

3.9. Did heat wave and smog affect retail sales in Moscow?
August 11 2010, malls.ru / ITMM

Retail experts are undecisive whether or not the environmental catastrophy over
July and August affected retail sales in the capital. Some argue that both heat
wave and smog attacks came along during the key Russian holiday season, when
Moscow is usually empty anyway. Others, like the management of EVROPEYSKY
shopping mall in Moscow reported frequency of visitors increased from 4,28 mn
people in June 2010 to 4, 35 mn in July, which is around 1 mn more visitors than
in July 2009. Whereas retailers selling electric home appliances like air
conditioners and fans made a life time fortune in selling such products out, dealers
of consumer goods including fashion recorded a "slight drop" of sales. This was
reported by RBC, a Russian market research news provider.

3.10. Podium opening first department store in Moscow


August 17, 2010, malls.ru/RBC Daily

PODIUM FASHION GROUP, one of the leading Russian retailers selling premium
and avantgarde clothing and footwear in Moscow and the regions, will open its
first large format fashion department store at the renovated historical building of
Hotel Moscow, located at the Manege Square in the centre of the capital. The
store is positioned on the second and the third floor of the building. It comprises a
retail area of 6.600 square meters. "Our new store will present a number of
unique and ambitious brands which have not been sold in Russia before"
announced PODIUM through RBC Daily. PODIUM is the first anchor tenant in the
building providing a total of 12.000 square meters retail space. PODIUM operates
in the Russian fashion market since 1994 and runs 24 multi-brand concept stores
on a total area of 14.000 square meters in Moscow and other selected Russian
large cities. The portfolio of PODIUM comprises more than 350 brands. In addition
to clothing and footwear PODIUM also sells luxury jewellery, watches, home
furnishings, perfumes and cosmetics. The company goes international as well.
Two boutiques selling jewellery were opened in Paris and Courchevel in France.

3.11. MANOUKIAN to launch first mono-brand store at GALLERY MALL


August 17, 2010, liveretail.ru

As it was reported by the real estate broker Jones Lang LaSalle on August 16,
2010, the Californian BCBG Fashion Group, owned by MAX AZRIA, will open a
store on 170 square meters under the brand of MANOUKIAN at the new shopping
mall GALLERY in St. Petersburg, located at the Moscow Railway Station. The new
mall is planned to start operations at the end of 2011. According to Nadejda

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Shpagina, Director General of DIALMA, the franchise partner of MANOUKIAN, the
store will extend on two floors. Jones Lang LaSalle also announced, that three
British fashion brands, WAREHOUSE, FRENCH CONNECTION and RIVER ISLAND
have chosen GALLERY as location for the opening of mono-brand stores. Lease
contracts have been signed by the master franchiser for WAREHOUSE and
FRENCH CONNECTION named CENTERPOINT and SK BREEZE, the developer of
GALLERY. As it was stated by Alexander Golobov, regional development manager
of CENTERPOINT, the two stores will cover a retail space each of around 180
square meters. Maratex, franchise partner for Russia and Ukraine for RIVER
ISLAND, will join the other three brands at GALLERY and will open a store under
this brand on a floor space of 800 square meters. In addition to such brands the
following have concluded lease contracts for GALLERY shopping mall: ESPRIT;
LADY & GENTLEMAN (multi-brand); NEW LOOK; BENETTON; SNOW QUEEN (multi-
brand); MANGO; TATUUM; MOTIVI; TERRANOVA; CALLIOPE; LACOSTE among
others. The price level environment at GALLERY follows the trend in Russia
focusing on "democratic" to upper medium positioned clothing.

3.12. TOM TAILOR getting independent from FDLab


August 18, 2010, malls.ru/Kommersant

As Kommersant writes, "Fashion Distribution Lab (FDLab), one of the largest


apparel distributors in the Russian market is once again reviewing its portfolio of
brands and stops working in building store networks for German TOM TAILOR and
British WAREHOUSE". The separation was concluded in July 2010. TOM TAILOR
will continue to work in the Russian market independently. WAREHOUSE owned by
Aurora Fashions, went under the roof of CENTERPOINT, as new Russian franchise
partner. FDLab confirmed continuation of its partnerships with MARC O'POLO,
COAST, MOA and other foreign brands. The separation from WAREHOUSE for
whom FDLab had opened four stores was reasoned by lacking profitability. In the
case of TOM TAILOR, FDLab claimed that the wholesale business was profitable
but not the feasibility of shop development.

3.13. MANGO strengthens market presence in Russia


August 12, 2010, malls.ru/retailer.ru/shopandmall.ru

Spanish clothing retailer MANGO who operates independently on the Russian


fashion market, is reported by shopandmall to continue concentrating on its own
retail store development but the company will not give up development of
franchising. Until the end of 2010 MANGO will open seven new stores, three of
which to be located in St. Petersburg, two in Moscow and one of each in Voronezh,
Saratov and Ekaterinburg. At the end of July 2010 MANGO counted a network of
64 mono-brand stores all across Russia with a concentration on Moscow and St.
Petersburg. Next year the company implements an expansion plan to open
smaller scale stores of 100 to 150 square metes in mid-sized cities of a population
of 300.000 to 500.000.

3.14. Voronezh delaying construction of IKEA's new MEGA MALL


August 26, shopandmall.ru

According to RBC Daily, over the past 8 months IKEA did not open any new
commercial and entertainment centers under its brand MEGA MALL, due to
bureaucratic interference imposed on IKEA by regional administrations. At this
moment IKEA keeps struggling with the local bureaucracy of Voronezh to obtain
approval for the start of construction of its MEGA MALL project in Voronezh. A
spokesman of IKEA said that the company does not expect the permit until the
end of 2011 due to problem of "internal nature". IKEA faces similar problems for

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the opening of its MEGA MALLS in Samara and Ufa, where constructions are
almost finished but approvals for specific security and technical installations get
delayed since months by the competent authorities of both cities. As it also
became known, IKEA faces problems to agree with building contractors on the
terms of construction for the fourth MEGA MALL in Moscow, close to the Mytishi
subway station.

3.15. BOSCO DI CILIEGI likely to sell 45 per cent of stake to GUM


August 26, 2010, malls.ru

Mikhail Kuznirovich, owner of a controlling stake in BOSCO DI CILIEGI, the


Russian luxury retailer, may sell 45 per cent of his shares in Bosco to JSC GUM
TRADING HOUSE, a company operating GUM SHOPPING MALL, in which
Kuznirovich also holds a majority stake. The deal involves 392.000 shares valued
at RUR 5,5 bn (€ 141 mn /US $ 184 mn). Bosco DI CILIEGI operates around 100
luxury fashion stores in Russia for top brands like ETRO; KENZO; MAX MARA;
MOSCHINO; HUGO BOSS; LA PERLA; ICEBERG; PAUL SMITH; BARBARA BUI and
others including shopping malls like GUM; PETROVSKY PASSAGE; VESNA
SHOPPING CENTER; NOVINSKY PASSAGE in Moscow and mono-brand stores in St.
Petersburg, Samara, Ekaterinburg,, Novosibirsk and Milan (Italy). Other retail
assets of Bosco include ARTICOLI, a perfumery and cosmetics chain, beauty
salons under ARTICOLI SALON SPA; DIOR BEAUTY INSTITUTE, cafes and
restaurants, a dental clinic and a pharmacy. The reason behind this financial
transaction is seen by experts as an attempt to provide cash for Bosco to finance
the chain of OLYMPIC stores together with sourcing and production of OLYMPIC
clothing for which the company took responsibility two years ago in its role to act
as a main sponsor for the Olympic Winter Games in Sochi 2014. Behind
Kuznirovich stands Alpha-Bank, the largest privately held Russian commercial
bank in which he is a minority shareholder.

3.16. MARKS & SPENCER anchors at GAGARINSKY MALL in Moscow


August 30, 2010, malls.ru

British clothing retailer MARKS & SPENCER signed a lease contract with Jones
Lang LaSalle, exclusive brokers for the new upcoming shopping and entertainment
center GAGARINSKY, being under construction on Vavilova Street in Moscow. The
store will comprise 1.310 square meters of a total retail reserved area of 70.000
square meters. According to Jones Lang LaSalle anchor tenants of the new
complex are AUCHAN on 24.000 square meters, SPORTMASTER on 5.300 square
meters, DETSKIY MIR; LADY & GENTELMAN; MANGO; ETAM; ACCESSORIZE;
INTIMISSIMI; CALZEDONIA; ADIDAS; REEBOK; LEVI'S; LEE; WRANGLER;
CROCUS FASHION; NICE CONNECTION; GLORIA JEANS and many other medium
priced brands. Investor in GAGARINSKY is a joint venture between French Auchan
and a Moscow based Machine Tool Plant named Ordzhomikidze, which is quite an
unusal alliance for Russia.

4) Shopping Mall Development

4.1. Shopping Center JUNE opened in Cherepovets, North-West-Region


July 6, 2010, mallhouse.ru

JSC REGION DEVELOPMENT opened its third shopping and entertainment complex
under the name of JUNE in Cherepovets, one of the largest towns in the North-
West region of Russia. This city has a population of 311,869. The center is the
first venue of its kind in Cherepovets. The grand total of the centre comprises
46.000 square meters providing a retail area of 30.000 square meters. Anchor
tenants are LENTA, the Russian grocery hypermarket chain (5.800 m²), seven
cinemas on 2.800 square meters and M.VIDEO, a large Russian retail chain of

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electronics and household appliances on 2.700 square meters. The balance of the
retail space is held by clothing, footwear and sports gear multiples of Russian and
international brands together with cafes and fast food restaurants. JUNE brings
more than 1.000 new jobs to the city of Cherepovets. According to Amiran Z.
Muftozoev, Director General of the developer JSC REGION, this company operates
two more shopping and entertainment centres under the name of JUNE in St.
Petersburg on a gross lease area of 62.000 square meters as well as in
Krasnoyarsk, Siberia, on 75.000 square meters.

4.2. OZ-MALL under construction in Krasnodar on 46 hectares


July 7, 2010, mallhouse.ru

According to Jones Lang LaSalle this real estate broker has taken exclusive lease
promotion rights for a new shopping and entertainment center coming up in
Krasnodar in the South-West of Russia under the name of OZ-MALL. The first part
of the venue is opening in autumn of 2010, the second is to open in March 2011.
OZ-MALL belongs to the largest projects of its kind all across Europe. The total
land area comprises 46 hectares with a gross lease space of 165.000 square
meters. Anchor tenants moving in autumn of this year are German OBI, the DIY-
chain, KIKA, O'Key, the Russian grocery chain and French DECATHLON, the
sports' retailer. Developer of the center is AIM PROPERTY DEVELOPMENT which
plans to continue investing in large scale shopping and entertainment centers in
Russia.

4.3. Owners of EVROPEYSKY MALL in Moscow investing in PAVELETSKAYA


July 8, 2010, malls.ru/RBC daily

As it was reported by RBC Daily, God Nisan and Zarah Iliev, owners of the most
frequented shopping mall EVROPEYSKY in Moscow, have taken a majority control
stake of the Russian investment and industrial group EURASIA. The largest
development project of this group is construction of a multifunctional shopping
and entertainment complex under Paveletskaya Square in Moscow. The total area
of the complex comprises an approximate 120.000 square meters incorporating a
retail area of 35.000 square meters. Begin of construction of the project was
delayed several times but with the new investors the City Government of Moscow
expects construction to take off shortly.

4.4. Second GOLDEN PARK MALL to open in Novosibirsk


August 3, 2010, malls.ru

As it was announced by the developer USPEH in Novosibirsk, the second shopping


and entertainment centre under the name GOLDEN PARK will open on Ocotber 15,
2010, in the West-Siberian capital of Novosibirsk. The gross lease area of the
center covers 30.000 square meters. Anchor tenants are French AUCHAN,
L'ETOILE cosmetics, O'STIN, the young fashion brand belonging to SPORTMASTER
Group and others. O'STIN was created by SPORTMASTER to substitute s'OLIVER
from which SPORTMASTER separated as master franchiser and distributor in 2008.

4.5. KOMSOMOL MALL inaugurated in Ekaterinburg


August 6, 2010, malls.ru

A new shopping and entertainment center has come up in Ekaterinburg, the


capital of the Urals, under the name KOMSOMOL. According to the developer DVI
Group, the center covers 67.000 square meters. 30 retail stores moved in over
the summer months to participate in the official inauguration set on September
11/12 of this year. Anchor tenants are the Russian grocery hypermarket
ROUNDABOUT, M.VIDEO, the consumer electronics and household equipment
chain, SPORTMASTER, L'ETOILE, a large fitness center among other tenants. At

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the end of August 2010 the developer reported a lease contract overage of 80 per
cent of the disposable retail area.

4.6. St. Petersburg in second place of shopping mall implementation in Europe


August 18, 2010, malls.ru

At the end of this year St. Petersburg will reach the second highest level of square
meters provided by shopping centers in the whole of Europe. This was reported by
the Russian news agency Infoline. Whereas at present the total area of shopping
centers in St. Petersburg comprised 1,302 mn. square meters, the openings of the
new shopping and entertainment centers GALLERY, SUMMER and STOCKMANN
NEVSKY CENTER will add some 500.000 square meters providing a total of 1,8 mn
square meters. Moscow holds 2,648 mn square meters and the capital will soon
reach 3 mn square meters, the largest accumulation in Europe. St. Petersburg is
to surpass cities like Stockholm (1,344 mn square meters) or Berlin (1,466 mn
square meters). The top ten in Europe further includes Milan, Barcelona, Warsaw,
London, Rome and Prague.

Stuttgart/ Düsseldorf/Moscow
September 29, 2010

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