Anatoly Levshin and Yuri Rodzaevsky, owners of the retail chain German shoes Caprice: “The market situation is more or less favorable, and people are already used to new prices”

“The monobrand format doesn’t work today”, “It is necessary to approach retail development very carefully”, “If the crown has grown, it’s a disaster” ... Talk with the general director of the Caprice German shoes chain store Anatoly Levshin and his business partner Yuri Rodzaevsky can be carried away quotes for a retail business textbook. The Shoes Report correspondent talked with the most experienced players in Russian shoe retail about the ups and downs in the business, the crisis and future development plans.

Anatoly Petrovich, how many stores are in your network now?

Anatoly Levshin: Four, the largest of which are this store on Semyonovskaya Street and the store near the Universitet metro station, in the Tramplin Shopping Center (23 Lomonosovskaya Street). This is our first store, which opened four years ago. If you've noticed, we're a multi-brand store. The single-brand format doesn't work right now. I can't even name a brand that could be successful in that format. We work with Wortmann Group brands, 50% of which are Caprice, but we also carry more expensive footwear, such as Peter Kaiser, HÖGL, Lloyd's, Pikolinos, and Ara.

Here, on Semenovskaya, we have a store - 400 square. meters, nowadays such a large shoe store is a rarity ... After all, it needs to be filled and filled up correctly - present the model range, order a “size” so that any customer can find his own model in it. Naturally, we are considering development proposals, and we have never hidden this, but it is important that new points are no worse than long-running ones - otherwise, why open them? The money that you invest in opening an unsuccessful point will never return!

German shoes Caprice

That is, you are careful about network expansion?

Anatoly Levshin: I believe retail development needs to be approached with great caution, especially since rent isn't going down in good locations... There are no vacancies at Semenovsky, and in the 20 years we've been here, there never have been. We're a small shoe chain, and that's where things get tricky. When you have four stores, opening a bad one is a big risk, as it accounts for 25% of your total turnover. If the chain is larger, the risk of opening an additional store is correspondingly lower. But retail needs to be manageable; it requires efficiency and the ability to quickly make changes to operations as the situation demands. We know where everything is in each of our stores, and we go to work every day. We're currently putting together our spring/summer 2017 collection, which is a very important factor.

How does a buyer behave in a crisis? Is it moving into a lower segment?

Anatoly Levshin: Of course, some people are saving. But you know, there are those who have been wearing Peter Kaiser for years, and they remain loyal to the brand.

For example, Zenden strives to create the broadest possible network across the country. Meanwhile, we see retailers with large networks, such as CenterObuv and Carlo Pazolini, ultimately failing...

Anatoly Levshin: Think about it, not a single empire has survived! Managing large-scale projects is difficult. Again, a chain needs to be manageable. We have plenty of negative examples of large-scale retail development – ​​City Obuv, CenterObuv, Monarch…

Yuri Rodzaevsky: The problem is that lending in Russia is very expensive, which makes large retailers extremely precarious. A business is sustainable if you operate with your own money. But developing a large retail chain here is impossible—another crisis hits, and the companies go bankrupt.

Anatoly Levshin: Yuri and I have been working together in the market for 20 years. We're passionate about our business; we were there at the very beginning. In the 1990s, we owned K+C, and we were the first to introduce a new retail format with a wide selection to the Russian market. Our business was very successful back then. I was in retail, Yuri was in wholesale. Can you imagine: our store on Prospekt Mira alone sold 1000-2000 pairs a day! In March 2000, the line to get into the store on Prospekt Mira lasted six hours.

Why was there such a stir? I remember that you had a good collection ...

Anatoly Levshin: The collection had everything imaginable, even American brands... By the way, we had a youth section, including Hush Puppies, Shoes, and Kickers. But our youth wasn't ready for that back then. Demand for youth collections was weak. I think we were a bit hasty with the opening, especially on Semyonovskaya, since in the '90s, that was a factory district... But our classics were selling well back then. We had 15 salespeople and interns working at the Semyonovskaya store at all times. There were no other similar chains in Moscow or anywhere else in Russia. We had a great team, each one was an individual. It just happened—the people, the times, the formats. You couldn't put it together today, you know? Back in 1998—I think there was a crisis—we were giving our salespeople $100 bonuses!

Yuri Rodzaevsky: Back then, during the crisis, everyone was down, but we, on the contrary, were growing. We even opened currency exchange offices in stores to keep up with customers.

Anatoly Levshin: We had a currency exchange desk in every store, except for the one on Semyonovskaya Street. People would come in, exchange money, and buy something right there. Today, we meet with partners from Omsk, Tomsk, Kachinsk, Chita, Chelyabinsk, and Moscow—with chain stores that have been in the market for 15 years—and they remember, "We used to come to you and steal your ideas." Of course, back then, Russia was either struggling with the Soviet-era formats that were dying out, or with single-brand stores that didn't last long and disappeared. We were the first to offer a fairly wide selection, which is why the chain developed. At some point, we began to expand rapidly—opening stores on Zemlyanoy Val, Kutuzovsky Prospekt, and Leninsky Prospekt. While we had seven stores, the chain was manageable, and everything was fine, but when we opened an eighth or ninth, everything went wrong.

German shoes Caprice

We left K + S in 2000, but we had other stores - German Shoes. Yuri on Semenovskaya had his own - Eurostyle with an assortment of 1,500 models. And other people came to K + S, another team, the store turned into Zh, but that was already without us.

Yuri Rodzaevsky: "Z" was a parachute project, a network rescue project. It was an attempt to reorient ourselves toward low-cost Chinese companies.

And what kind of problems were in “K + S”, why did everything go wrong?

Anatoly Levshin:  This is all because of ambition, too often began to open new points, there were extra investments, and it was necessary to count money.

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Yuri Rodzaevsky: You could say I felt dizzy from success.

Anatoly Levshin: Yes, if a crown develops, it's a disaster; not everyone can cope with it. And if you've flown high, the fall will be painful.

Yuri Rodzaevsky: Incidentally, the "Zh" chain's strategy was flawed from the very beginning; they relied on developing stand-alone stores and street retail. That was a mistake. After all, it was in the 2000s that shopping malls really took off.

Anatoly Levshin: Yes, back then we should have done the exact opposite – opened in shopping centers. Besides, avenues were still "working" back then. Stores on avenues like Kutuzovsky and Leninsky should have been left in place. The Garden Ring, by the way, never worked – we had stores on Sadovo-Kudrinskaya, Zemlyanoy, and Smolensky – all of them were unsuccessful. If "Zh" had left its stores on avenues and gone into shopping centers, it would have been successful.

Yuri Rodzaevsky: It turned out that competitors entered the shopping centers, and "Zh" lost its position. Rendez-vous and "City Shoes" were just starting to develop at that time. "City," by the way, also failed; the chain was poorly managed and focused on an overly cheap selection, which led to overstocking. Strategic mistakes were made one after another, and eventually, everything folded.

I know there are still KC Shoes stores in different cities …

Anatoly Levshin: This is the retail of our previous partners. KS Shoes is located in Yaroslavl, in Siberia – in Kemerovo, and in Yekaterinburg. They bought shoes from us, and their sign is still there from that time. In 1998, many invested in retail real estate, acquiring stores themselves, and as a result, they now feel more confident, as they can be more flexible with their pricing.

During your work in the shoe market, you have experienced several crises, is the current crisis different from the previous ones?

Yuri Rodzaevsky: What distinguishes this crisis from previous ones is that consumption didn't fall significantly back then, whereas in this one, many people stopped buying. But as consumer activity declined, many players left the market. And so, as consumption declined, so did supply. Therefore, those who were able to work flexibly responded to the situation promptly, managed to hold on, and are now feeling more or less okay.

By the end of the year, is the consumption situation gradually leveling out?

Yuri Rodzaevsky: Yes, it's leveling out a bit now—the euro is no longer 85 or 90 rubles, but 70-72 rubles. So the situation is actually more or less favorable, and people have already gotten used to the new prices. Supply and demand have balanced out, and many centers are empty. We currently have a ton of offers from landlords.

Do you think there is a future for shoe retail franchising?

Yuri Rodzaevsky: As long as loan rates remain at these levels, it's very difficult. Because franchises are taken by people just starting a business, and they have zero margin of safety. And the franchise seller doesn't have much of a margin either. If something goes wrong for the franchisee, their problems boomerang on the franchise owner, and they're forced to take the remaining funds. And what will they do with them? As the remaining funds accumulate, loan defaults follow, and then it all starts. How many times have we tried this? They start offering a franchise, only to suddenly cut back on the offer, or change the terms. They raise the lump sum payment... But that's not how you grow a business!

Now many Western experts say that retailers should send funds for development on the Internet, as buyers often begin to get acquainted with shoes on the Web. How about development on the Internet?

Anatoly Levshin: Honestly, we're still operating the old-fashioned way. But that's forgivable, because our network is small, and there's no pressing need for an online presence yet.

Yuri Rodzaevsky: Moreover, there are statistics showing that online stores offer around a 40% return rate. After all, shoes are a product that requires trying on. Although some online shoe stores now provide precise measurements for each model (length and width), so you can compare them with your own measurements remotely... Of course, this will become more sophisticated over time.

Do you have any business development plans - do you want to keep what you have, or are you planning any kind of growth?

Anatoly Levshin: Of course, we're focused on growth. If everything goes as planned, we'll open another store in Moscow this year. But it's important to have everything planned out, and it's too early to reveal any details.

Interviewed by Marina Shumilina