Obuv Rossii Group of Companies expanded the Westfalika Medical line up to 1,5 SKU by 60 times, adding hand creams, face scrubs and accessories to the assortment. The new cosmetic line of hand care products includes five types of creams.
“In my opinion, this is a very controversial decision,” says Narek Avagyan, an analyst at AForex financial company. First, he explains, the cosmetics market is extremely elastic and highly dependent on consumer sentiment, which is influenced by many factors, and has recently been influenced very negatively (the consumer confidence index in Russia, according to Rosstat, remains below 10%).
Secondly, due to the predominance of imported products in the domestic cosmetic market, the purchase price of this product largely depends on the ruble exchange rate, which in recent months has been under serious pressure and devalued by more than 12% against the dollar, and therefore purchase prices will be high , which will reduce the profitability of sales. Thirdly, inflationary expectations have increased due to the same devaluation, which will also actually reduce sales profitability and make similar products less competitive in price.
Finally, fourthly, this type of product is non-core for the company and therefore, in general, the marketing strategy in this area is generally incomprehensible in this case. “Perhaps such a move by the company is intended for some medium term, but for the next two or three quarters, I do not expect a significant improvement in the situation with consumer demand. In general, I assess this news as neutral for Obuv Rossii itself, however, I repeat, I think that the initiative is very controversial, ”the expert concludes.
Today, the direction of related products in Obuv Rossii stores is represented by bags, leather goods, shoe care products, hosiery and foot care products - more than 1000 SKUs in total. In 2013, sales of related products in Obuv Rossii chains amounted to 865 million rubles, which is 2,7 times more than in 2012. In 2014, the company plans to increase sales by 70% - up to 1,5 billion rubles, and increase the share of related products in revenue to 20%.