Andrey Berezhnoy: "The shoe retail crisis is systemic in nature"

At the Adam Smith conference, RALF RINGER CEO Andrey Berezhnoy stated that the crisis in footwear retail was predetermined and systemic. SR decided to clarify some details.

— Andrey Alexandrovich, is the margin crisis a crisis of greed?

- No, no, no, by no means. The crisis of margin is a crisis of three components. It was formed due to the fact that the retail offer was excessive, the supply of square meters was excessive, and the price tag was really overpriced. How can events develop further in such a situation? Prices are rising, sales are falling, prices have to be raised even more (to compensate for the decrease in revenue due to falling sales), sales (due to rising prices) are falling even more. Dead end! Plus, the situation was aggravated by the fact that in many cities all stores sell about the same thing, which means that you can only manage the price tag.

— Why did we end up in a situation where retail supply has become excessive?

- There are many reasons. Why is it so in shoes? Perhaps because shoes in Soviet times were the most scarce goods. My dad during the Olympics in 1980 traveled from Zaporozhye to Moscow, returning, he said that in Moscow there is everything except shoes and books. In Zaporozhye itself, we had only one (!) Shoe store in the 50 microdistrict, although there were three bookstores (and books in the USSR were also in short supply). Maybe due to the fact that there was a special shortage in shoes, everyone was lazy here.

In the 2000's, shoe trade was highly marginal - this is the second reason for the surplus that has appeared. And finally, the absence of large federal players in the market could not reduce competition. Apparently, this will happen now.

— But many people stubbornly say that major players cannot appear in the shoe trade.

- They can. Sooner or later, the market is systematized. As in Germany - there are chain stores and monobrands.

— And how to overcome the margin crisis?

- Either through an increase in circulation for the model, or through another assortment (most likely, of lower quality, and hence lower cost). The third way is also obvious - improving the service, but for some reason it is rarely used. Our retail does not work with the buyer!

How does retail work? She has a limited circle of suppliers that depend on her. And there is a large circle of buyers who are not dependent on it. Wanted - bought, did not want to - went to another store. It is quite difficult to achieve customer confidence, their loyalty. Therefore, instead of thoughtfully setting up work with the buyer as a source of revenue, retailers prefer to press suppliers. And we need cooperation.

We have now started a dialogue with Sportmaster, there are constructive people, qualified retailers. They understand what they need, they clearly know the threshold price, they choose the styles correctly. Everything is reasonable. If we can prove to them that we are qualified manufacturers, then we can work together. But we are ready to work with all retailers on this principle.

So far it turns out differently: “You have 130 stores. We are ready for you to sew shoes exactly no more expensive than the Chinese. Let's negotiate. ” But in response, we hear: "We do not buy more 800 pairs per model." It turns out six pairs per store. One size range! What is it like?

- That is, we run into the fact that sellers do not count.

“Yes, and that too.” The real problem we are facing. Last fall, we made a new Louis style: a good rubber sole, a good upper, and a reinforced concrete classic. Without much risk, three models were sent away. Our regular regional partner, a cool retailer, has chosen one model out of three. Ordered 280 models. On October 4, there were 2 pairs left in the store. All sold out. Everyone is happy. I look at the order for spring. The same model - the same 280 pairs. Why?

Let's argue purely logically: if at the beginning of October everything was already sold at the store, how much could the owner sell in November and what was her lost profit? This is a classic style, most likely it will live a long time, and you have the spring season on the nose, which is always good in terms of sales of classics. But do you order as much as you sold? Why?!

Perhaps the sellers reason on the principle: "Well, Ralph won't sell, something else will sell." But then another question arises: have you calculated the margin? How much are you taking off this shoe? In October, it cost 2800 rubles in retail, this is not a cheap thing. And from each shoe, the store owner received 1500 rubles in profit. With other models the same? I'm not sure.

— And there are such examples...

- …a bunch of. You need to understand that not all problems can be solved by working with efficiency and cost, not all processes can be algorithmized - this applies to production and retail. Just shoe retail, like clothing, is a tricky thing.

— What’s difficult?

- Complex in terms of determining the range, price management, determining the number of pairs per model. And it’s especially difficult now, when the end customer throws from side to side. When the leaders of one of the retail chains sit and puzzle over what to buy: because the shoes diverge for 2600 rubles, and for 1200. Both that and that is on sale. God knows. The attitude to the product has not yet settled down. However, I am sure that over time my personal experience in consumption will accumulate: when, on the one hand, some types of a person’s product will completely satisfy, while others will disappoint enough times. Then the person will say: “I do not want more experiments”, and the market will become calmer.

— How can suppliers and retailers find common ground now?

- Analysis and cooperation are the basic values ​​for this relationship. But! .. In order for me, as a manufacturer, to make you the best offer, I need an analysis of sales in your store for all the brands that you have - model, marginal. And for some reason, Russian sellers stubbornly believe that we need this data in order to almost enslave it. However, one cannot live long on deceit and pressure. A tool to increase the effectiveness of retail and in general the main tool for developing the business of the future is cooperation.

You are tough. With you difficult to cooperate ...

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- I agree. But the rigidity in my understanding is a clearly fixed agreement with a clear implementation !!!

Otherwise, this is what happens. A partner is contacting us with a request to give him an exclusive in several cities. OK, I prepare and show him my idea of ​​what an agreement on exclusive rights is, with the goals, objectives and obligations of the parties. A man reads and says: “Oh, it’s difficult for me. Let me just sell you, and I will order more next season. ” It’s also impossible. If we really want to agree on something, let's agree on this clearly and in writing.

Yes, we were tough. Well, how can convincing people to comply with the rules without rigidity, which really proved the ability to earn high income ?!

In some cases, we still remain tough. We, for example, do not accept used marriage from dealers. And this is not a question of money. This is a worldview value. Because we believe that the “end customer – retailer” relationship is as commercial as ours. And if the retailer does not defend its interests, but takes any claim back and redirects it to us, then this will be ineffective. It is clear that if we say that we made some radical mistake in the design, then the company goes to recall such a product.

The second element of a tough position: we believe that the responsibility for the results of retail sales is the responsibility of the retailer. Why in the bad season they turn to us with the question: “Could you lower the price of shoes?” After all, in a good season no one offers us: “Would you like to get 20% more?”

It is your task to know what price tag customers are guided by, how to sell it to these people, through a large retail store or through direct marketing.

If the retailer says that his task is to arrange deliveries on time, to control the cash register and personnel, everything else depends on the supplier, excellent, we agree on this option. Tell me, what is our area in the store, and we will control what we delivered, at what price and how we set it. Are you satisfied with the revenue per square meter? Yes. All bye. We do the rest. But in this case, the process has certain costs, which means that part of the margin will be ours.

My idea: in a bad season, the retailer may turn to the company with the proposal: "Let's hold joint promotions to increase sales, get rid of balances."

- What , no initiative?

- Not yet. While we initiate cooperative cooperation, only we. A customer from Orenburg is calling: “I have no sales and big balances.” We looked, the place is good. They suggested: “It’s summer, nothing will change from the fact that you will be sitting on these leftovers, declare the lowest price in the city, return the capital, come out clean, updated. And then you will begin to work quietly. ” In the end, they reached an understandable agreement and developed a step-by-step plan.

Another question is that retail is not able to organizationally and financially support the volume of orders that it expects. Therefore, we must sit down at the negotiating table: I have such and such problems because of you, and I have such problems because of you. And we can solve them this way and that. As a manufacturer, I have difficulties due to the fact that you are putting on a shelf a known competing product. And with your own hands you make a copy of our model in China. Come on, you won’t do this. And the retailer replied: OK, just come on, you, in turn, will not do this and that. And then two results should appear - the retailer’s revenue will increase. Because he wants to collect the maximum possible crop from this territory. And I want to collect the maximum possible yield for my brand from its traffic. This is cooperation.

— In your opinion, this search for cooperation does not exist now.

- Massive - no. Indeed, not everyone wants to be transparent and open, in muddy water, too, cool to catch a fish. In clear water, other rules apply.

— If the sellers don’t make contact , what will you do?

- We will do everything. To audit the retail network, look for new partners, develop our own retail. However, the first step will be an attempt to negotiate with existing dealers and offer them deeper cooperation. If you answer the question, what is better - to find a new dealer or to agree with the one that already exists, then we think it is better to agree. Still, predictability of human behavior, predictability of relationships is also capital.

— What can you dream about now?

- The crisis has an element of accumulated fatigue, unjustified expectations. Therefore, one can dream of preserving the strategic values ​​of a company, a brand.

If we take the high-price segment, it was all built on the principle of “everything is expensive and cool with us”. The question is, do you need it “cool” right now. Maybe just good enough?

If consumer value, the basis for making decisions is that “I don’t think that shoes cheaper than 10 thousand rubles per pair can be good”, and we have heard such things from officials more than once, then it would be better if this value changed.

— How can we instill in citizens a love for Russian products?

- This is a difficult national task. But our strategy is far from the one that could solve it. Gas in exchange for food is a bad system. The whole country cannot live on gas production and trade. It is clear that customs duties are not the only way to regulate our relations with imports, but raising them at least can be a promise that we do not need so many imported products ...

... when I want to buy something or order a service, I try to do it near the house, where I live. Of course, I can find dry cleaning on the way, but I prefer to come home and find it in my neighborhood. Because I believe that if there is a dry cleaning service near my house, which is also paid by me, it will be better. I try to keep my world around me like that. And on a countrywide scale, it also needs to be supported, perhaps in the same way ...

... the current generation must invest something in the future, the purchase of a domestic product is investment in the future. If you are going to live in Russia, if you plan to have your children and grandchildren live here, then you will have to make some sacrifices in personal consumption, this is a kind of payment to future generations.