Alexey Kistenev, president of the Partnership of Retail Shoe Companies, predicts the onset of a local retail crisis in April 2014. What are the reasons for concern and what should the store owner do?
“The shoe business in Russia is gradually coming to the“ gas station effect ”- nothing superfluous, everything has been calculated, the focus is on low costs and high profits. In Europe, the situation is somewhat different, since there is a strong influence of working owners of premises. For example, in the Serbian city of Novy Sad, entire shopping streets are owned by private owners who do not "pay rent" to anyone, and whose shops operate beyond any competition. With their low margins, the owners of the premises completely ruin the rental business, at the same time canceling the mathematical approach to entrepreneurship as the only condition for success. But this model is for a big village. It does not work for us, since the monopoly of our landlords is not limited by anything. Commercial real estate in Russia is profitable to own and lease. It is very profitable for us to be a rentier, earning at the expense of those who produce something. Shopping centers grow like mushrooms after the rain, and sellers learn to do business not by selling quality shoes and working with a buyer, but by balancing rental rates and income. In Internet commerce, this feudal rent is less developed, although there is too large a segment of non-production costs.
What is the result? Those who sell expensive shoes barely make ends meet. Selling a quality product becomes unprofitable, and the business is gradually moving into the low-cost segment. Yes, and why invent something? An example of a popular fast food chain shows: the combination of “a sandwich with crap and a holiday every day” works “perfectly”. As a result, manufacturers begin to work to a lesser extent on models, trying to reduce the cost of production due to design; all polls started casting. The situation is reminiscent of the 93 year when shoes were assembled in parts: the lining was made of synthetics, the toe was made of leather, the bootleg was made of artificial leather, the edge was made of natural fur, and all this was the result of mathematical calculations. The retail business also has to rely on mathematics, and not on working with goods. Only low-cost and highly profitable points are successful. The first roles in business are taken by gloomy managers - “cost killers”.
Of course, it cannot go on like this all the time - the lines should converge at one point. I expect that in the spring of 2014, in April, a local crisis will overtake trade. Its signs are already visible today in consumer behavior. We began to buy comfortable, sock, non-marking, dark. This always happens: we go into the crisis in black, and we go out of the crisis in bright and color. In connection with the recession awaiting us, the store owner has two options. The first is to lie low and wait, and the second is to rebuild your business model: lose all excess ballast, spend at least on promotion, since it will give a maximum of 15% of profit, purchase a comfortable, suitable product for all from inexpensive materials and decent accessories, calculate everything risks and costs, and rely only on mathematical formulas for doing business. This is the only way to survive the spring. "
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