Post-crisis 2010
13.11.2010 5564

Post-crisis 2010

Shoppers reached for the shops. But is it worth hoping for a market recovery? In what numbers will it be expressed?

Experts evaluate the possibilities of market recovery in different ways. According to Oleg Bakun, CEO of Core Competences, the Russian economy can develop according to three main scenarios: moderately conservative (lateral trend of the economy for three to four years), pessimistic (intensification of the crisis by 2012) and optimistic (weak growth since late 2010 - beginning of 2011). Despite GDP growth since the beginning of 2010, trade and investment in fixed assets have not yet emerged from the recession. Inflation at the beginning of 2010 reached 2,4% (for comparison, at the beginning of 2009, this figure was 1,2%). According to the forecast of Core Competences, from the II quarter it is possible to increase the cost of credit resources, reduce the profitability of trading operations and intensify the struggle for consumers against the backdrop of a slowdown in purchasing activity. Bankruptcy of companies that could not save their consumers will continue.

In a crisis, investor requirements have changed. “You need to buy something that can be profitably sold in the future, and not something that is cheap,” says Oleg Bakun. “However, there are practically no investors ready to play the long one: direct investment fund strategies are shifting towards portfolio investors.”

Many companies have overestimated their capabilities and underestimated the existing risks. According to Core Competences, 85% of Russian firms are divorced from customers. Among the companies that overestimated the capitalization are regional players, who have dozens of illiquid stores in their assets.

“It all depends on competencies,” says Ralf Ringer CEO Andrei Berezhnoy. “If a company has world-class competencies, it wins.” The goal of Ralf Ringer, a shoe retail operator, was to increase sales in a situation of declining consumer demand. According to Andrei Berezhnoy, shoe retail faced a classic margin crisis at the beginning of 2007, when it was necessary to choose: either achieve a margin component growth from 60 to 100%, or move to a different price category. In 2009, amid falling demand and lack of working capital in retail, Ralf Ringer relied on an increase in the share of retail (opening 1,2 thousand format retail outlets in 2010-2012), an increase in the share of margin (up to 110%), fixed ruble prices, assortment optimization (in 2010, the production of women's shoes was launched). The increase in sales in 2010 compared to 2009 (in pairs, winter - autumn) amounted to 20% (a year earlier - 9%). One of the key strategies is team building. It is necessary to retain, train and motivate staff.

Will the money go to retail? In 2009, total incomes of the population grew nominally (+ 4% in rubles), but Russians, unlike Europeans, are conservative - 17–20% of revenues are saved annually, which ultimately led to an increase in deposits and the withdrawal of money from consumption (according to Prosperity Capital Management). The expected growth in the segment of non-food products in 2010-2011 will be - 12% (-2% in 2009).

Who will give their money to consumers who decide to spend it on shoes? According to a study by Online Market Intelligence (OMI), the top three brands include Ecco, Salamander, and Adidas. The survey was conducted among men and women 18–55 years old, living in cities with a population of one million people.

Brands trusted by Russians

OMI Rank Brand name In% of the number of respondents
1 Here 24,7
2 salamander 17,2
3 Adidas 15,0
4 Ralf 9,5
5 Nike 7,7
6 Tervolina 6,7
7 Carnaby 5,6
8 Carlo pazolini 5,4
9 Reebok 4,9
10 Puma 2,8
Customers flocked to stores. But is there any hope for a market recovery? In what numbers will it be ...
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