"Against the general background, our strategy can be called aggressive, but this is the only chance to build processes aimed not only at compression, but also at development ...", - says Sergei Sarkisov, co-owner of the Econika shoe chain. The rebranding of the Econika retail chain coincided with the crisis in the country's economy. However, the company hasn't given up on the idea of an upgrade. The retailer is ready to spend about 500 million rubles on the opening of the rebranded stores in the next three years. About this, as well as about the company's plans ... Sergei Sarkisov spoke in an exclusive interview with SR. # PERSONA #
Ten years ago, rebranding of Econika already made a lot of noise, so the English word cascade first appeared in our vocabulary. Both last time and this time, you turned to the services of a British agency. Why?
The interior of the shops needs to be updated every seven to ten years, but the whole question is who understands what and what these updates mean. A narrow approach is when we talk only about updating the interior, a wide one - when a company thinks about updating a brand, that is, about how it wants to communicate with its consumer.
As a result of rebranding, the essence and content of the brand are filled with new meaning, then this meaning is transferred to the store space and service, additional requirements for staff are born. A kind of restart of the company takes place, taking into account new circumstances, processes, factors. There are enough agencies on the Russian market that are ready to help with the updating of interior design, but few who offer an integrated approach to changing the brand. In addition, foreign experience in branding, marketing and retail was important to us.
Indeed, we conducted the first rebranding with an English agency. In fact, this time I wanted to look at other countries, so first we turned to the American market. We hired a consultant who searched for agencies for us, studied company profiles, and in the final, left three agencies whose experts visited us and made presentations of their approach to brand renewal for us. Thanks to this process, we realized in which direction we need to move, but, unfortunately, we did not agree on the price with our American colleagues. Therefore, we had to pay attention to the English market again, and again we chose an agency from the UK.
How much time did you spend searching for an agency and developing a new concept?
The development of a new brand concept and retail design took about a year and a half - they began to work at the end of 2013, and the first store was updated in the middle of 2015, that is, at the final stage of this project, we entered a bright phase of the crisis. But we no longer had a way back; changes were necessary. From any concept, consumers once become tired, the company, as they say, is blurred, or the project is generally morally obsolete.
At the same time, we understood that the crisis could turn out to be a favorable time for changes, for example, we had the opportunity to change store locations to more successful ones. We open all new salons in a new concept.
How did the update process go?
To begin with, we decided to update three stores and see how it goes, and when we saw the sales figures, we no longer had any doubts. We realized that we are returning pre-crisis traffic! The attention of visitors was attracted by the updated showcase, and the time they spent in our stores also increased. We noted that the same collection in different concepts looks different. Conversion increased, sales increased. The growth ranges for traffic are from 7% to 26%, for conversion - from 1% to 44%, the increase in pairs - from 4% to 25%, these are the lower and upper limits of the growth for 25 real stores.
It is clear that with the currency leap, all shoe companies shifted part of the devaluation to the retail price, but real sales prices did not double, since not everyone decided to work with the previous margin. There are those who are trying to maintain a margin, but already in the first months of sales they begin to establish 10-20% discounts, that is, real sales in the end still go at a lower price.
Which approach is better is not known. But we do not include in our prices at the beginning of the season the pre-crisis margin, we are faced with the task of maintaining or increasing the share of those people who make purchases at the beginning of the season, without additional elements of sales promotion, and not only during the period of promotions, and rebranding contributes to solving this tasks. Of course, we see that consumers have a rational motive, so we must stand out, including the product. To this end, we have released a collection with our own prints, we are launching collaborations with Alena Akhmadulina and Evelina Khromchenko, this is also an opportunity to attract new customers.
Now we are quite flexible in approaching the price, realizing that the downside of sales is the consumer's capabilities. It used to seem like most people react to discounts. But during this crisis, the whole market began to offer them, and people began to change the consumption model, they evaluate the product differently, and still choose the price-quality ratio, focusing not on the size of the discount, but on the final price.
It turns out that you, unlike most retailers who choose a strategy of cost reduction and austerity during the crisis, do costs increase, on the contrary?
The need to optimize costs and we are not spared. But any optimization is good in moderation. If you cross a certain line, the company begins to lose potential revenue. Even in times of crisis, it is important to think about opportunities to increase profitability.
It is possible that, against the general background, our strategy can be called aggressive, but in reality this is the only chance to build processes aimed not only at compression, but also at development, because we understand that the crisis is not forever. We began to focus our resources more focused on strengthening the brand in the market.
And what exactly did the reduction affect?
First of all, all retailers began to work with three main cost items - rental, staff and marketing. At the end of the 2014 year, the first half of the 2015 year, and even until the end of last year, the entire market worked with the optimization of rental costs. For many retailers, some leases were denominated in foreign currency. Naturally, they worked not only in terms of the currency component, but also in terms of the ruble component, because any lease should have corresponded to income with a decreasing margin. By the end of the 2015 year, we rebranded 11 points, the rebranding plan for 2016 year was 22 stores, for 2017 year 23 or 25, new discoveries were going on at the same time - we entered the Atrium shopping center in Moscow, opened at the Ocean shopping center , in the shopping center "Aviapark", entered the Samara MEGA ...
At one time, street retail was actively developing in Russia, and then shopping centers went. What should be the ratio of street shops to retail outlets in shoe retail malls?
In my opinion, the idea that street retail has died for the fashion segment is a persistent fallacy. We have street-format shops that are not inferior in terms of revenue, and sometimes even outperform stores in good shopping centers. And we are still looking for sites for retail on the shopping streets of Moscow, just the corridor that interests us is rather narrow, these are concrete streets and concrete houses.
How quickly do investments in rebranding pay off?
Investments in updating one point are about 6-7 million rubles. Investments in interior renovation we attribute to depreciation. The only decision we made during the crisis, but it’s temporary, is that our depreciation rate is now not five years, but seven. Thus, we have reduced the burden on the company's performance, because if it goes as an expense, then this amount decreases profit.
Judging by the numbers, in the 2015-2016 years, do you have sales growth?
This applies to the ruble turnover (revenue growth in 2016 + 10%), and in pairs we have a slight drop both in the past and this year. But this is a consequence, including network optimization - a reduction in the number of stores that are not suitable for rebranding. This is a conscious step on our part.
In terms of the number of retail outlets: before the crisis, at its peak, we had 165 stores, now we have 142, and at the same time, ruble turnover is growing. It is important that we are losing more in the number of points than in the number of square meters, because we are rebranding with the expansion of areas. Previously, the sales area of our store could be 80 square meters. meters. Now the optimal retail space is 120 meters, the total area, respectively, can reach 150-200 sq. meters.
Part of our rebranding touched on the product policy - we abandoned the multi-brand and went towards the single-brand. Before that, we had already abandoned the male part of the collection, and declared ourselves the first retail chain for women.
Now we have the first experience of cooperation with Evelina Khromtchenko. Our capsule collections, such as Mother Daughter, resonate with our consumers. In addition, this year we launched the Mom-Daughter capsule together with Barbie. Now our assortment includes ekonika shoes, the trendy part of the collection called ekonika2 (ekonika squared), the Alla Pugachova premium line and limited capsule collections.
You said that when rebranding, the feeling of your own brand changes. What changed?
We have changed the main ideological content of our brand; this is partially reflected in the company logo. Today our logo is a circle, the inner meaning that lies in it - "Econika" is a community of friends. "
In order to arrive at the idea of a community, we still have a lot to do, because the strength of the brand is in a tight, sustainable connection with our consumers. The idea is reflected in the interior of the shops - now it resembles a stylish apartment of a friend.
What gave you an interaction with American designers, maybe there’s some kind of retail western the network you are following?
We are constantly monitoring the changes in the retail market, it is natural that in the process of working on the rebranding, the team visited different cities of the world and absorbed some ideas. An inspiring example for us was the & Other Stores chain, where we liked not only the interior, but also the service. Naturally, we avoid direct copying, but take note of interesting ideas and concepts. There is an entire Soho area in New York that has a ton of interesting retail concepts.
What are Econika’s plans for the next 5-10 years?
Become the best place of choice for your customers! (laughs). Well, I’ll say a few words about the strategy. Our main competencies lie in two areas: the first - we are professionals in the retail trade, the second - we are professionals in the field of creating a product, and we work in the market of fashion and lifestyle. There is a certain challenge in becoming a global player and entering the markets of other countries with our products, but we still do not know any successful examples of such a strategy from Russian companies. Therefore, I think we will focus on development in the domestic market. In foreign markets we will test the demand for our product through online sales. The concept of fashion and a healthy lifestyle has recently become very popular and allows us to develop in other segments in the field of fashion, so that we can develop new retail projects, possibly not only in shoes, taking into account our core competencies.
Price of rebranding: The cost of opening one Econika salon in the new concept is about 6-7 million rubles. The costs of developing and launching the new Econika brand amounted to about 400 thousands US dollars. The company is ready to spend about opening rebranded salons in the next three years. 500 млн rubles.
Interviewed by Marina Shumilina
Econika - a fashion chain that creates collections of shoes and accessories for women, has been on the market since 1992. There are about 150 brand salons throughout Russia, Belarus and the Republic of Kazakhstan. The brand's collection includes three trademarks: ekonika premium base line Alla Pugachova and ekonika2 (ekonika squared) - a new trend line, includes models with bright and the latest fashion details. Revenues in 2015 amounted to 5,2 billion rubles.
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