IKEA Shopping Centres Russia provides international retailers with ‘safe launch platform’
BHS, Marks & Spencer, Debenhams, Zara, Next, Mango and WH Smith are just some of the international brands who have taken space in the MEGA Malls.
IKEA Shopping Centres Russia says it is providing international retailers with ‘significant international expansion opportunities’, offering a ‘safe platform’ into Russia. Armin Michaely, the company’s general director explains what it can offer western retailers in Russia, and discusses the country’s retail market.
Part of the IKEA Group, IKEA Shopping Centres Russia owns and manages shopping centres throughout Russia. Its malls operate under the brand name MEGA, and all have an IKEA furnishing store as a unique anchor tenant. IKEA Shopping Centres Russia is the largest shopping centre operator in Russia, with over 10 years experience of hosting some of North America and Europe’s most prominent retailers.
*They are located in Russia’s 11 largest cities, which all have populations of over one million people, referred to as the “millionniki” cities, of which there are fifteen
*They are visited by more than 260 million people annually, and since the opening of the first MEGA centre in 2003 1.6 trillion people have visited MEGAs
*Each MEGA comprises around 130,000 sq.m (1.4 million sq ft) Gross Leasable Area (GLA) of space with approximately 200 retailers, with 70% being European or North American brands
*Each MEGA is anchored by an IKEA home furnishing store
Fashion retailers, and food and beverage are placed at the “heart” of each mall, while entertainment, kids events, play areas, baby caring rooms, family parking, ice rinks and areas to relax are an important part of the mix.
Providing a ‘Safe Platform’ into Russia for Western Retailers
MEGA shopping centre tenants that have recently entered Russia for the first time, extended their leases or expanded into the millionniki cities include: Debenhams, Zara, Next, Victoria’s Secret Beauty and Accessories, Steve Madden, Jack Wolfskin, Vans, The North Face, Pandora, DKNY, Campo Marzio Design, Desigual and Minelli.
Only this week the company achieved a fashion business success when Mango launched its first Violeta by Mango line store in Russia. Mango’s new plus size line entered the country via IKEA’s MEGA Kazan rather than starting out in Moscow or St Petersburg as most western retailers do when launching a new brand in Russia.
This represents the development of the Russian retail market and shows the confidence Mango has in Russia’s regional cities. Kazan is located 450 miles east of Moscow, and has a population of more than 1.1 million people, making it Russia’s sixth largest city. Often referred to as the country’s third capital it is a major industrial and financial centre.
In addition, last month, British retailer WH Smith opened its first shopping centre store in Russia at Moscow’s MEGA Khimki. Previously it only had stores at Russian train stations.
Reasons for Entering Russia
Russia is a major growth opportunity that many international retailers do not want to miss, but some are put off by the perceived difficulties of entry to the market. IKEA Shopping Centres Russia’s success is built on an established chain of major shopping centres, providing a familiar environment for western retailers in which the legal and cultural barriers to entry have already been safely negotiated.
In addition to MEGA malls being uniquely anchored by an IKEA store, other traffic driving anchors include Auchan the French hypermarket giant, the leading German DIY chain OBI, French home improvement store Leroy Merlin and MediaMarkt the major German consumer electronics retailer. These are combined with a strategic mix of international and national brands including Starbucks, Timberland, Levi’s, Converse, Victoria’s Secret, American Eagle Outfitters, Gap, H&M, Topshop, Zara, Next, Mango, New Yorker, Nike, BHS, Marks & Spencer, Intimissimi, Alba Lacoste, Body Shop, Debenhams, Karen Millen, MAC and many more.
By entering Russia with IKEA Shopping Centres Russia, western retailers can establish themselves in the region with minimal risk and learning curve. This is provided by advice from IKEA Shopping Centres Russia and the knowledge that each MEGA mall offers a critical mass of retailers and leisure operators that draw shoppers in large numbers.
MEGA and Russian Retail Market Statistics
Tenant sales turnover at IKEA Shopping Centres Russia’s chain of 14 MEGA shopping centres increased by an exceptional 10% in 2013, and has grown by 67% over the last five years. Footfall also improved to 261 million in FY 2013 (+3% vs FY2012), while over the last five years footfall has increased by 30%.
Russia is Europe’s largest retail market with an annual retail turnover of 500 bln EUR in 2013 (400 bln GBP). Russian consumers spend significantly more on retail than their European peers. In 2013 retail turnover growth in Russia reached 3.9% YOY, whereas in Europe the average was 1.3% (Turkey 5%, Sweden 2.8%, England 1.8%, Germany 1%, Italy -1%, Spain -2.2%).
Russia is one of the strongest sales markets in Europe and is the number one market for western retailers in Central and Eastern Europe. Moscow, as well as other major Russian cities, is still far from reaching retail saturation point.
Despite the prevalence of retail in Moscow, the ratio of space per 1,000 residents is still less than in the majority of European cities and reached 361 square meters per 1,000 residents in 2013 (total stock in Paris, Stockholm and Prague exceeds 600 sq m per 1,000 inhabitants). This clearly demonstrates that there is huge potential for further retail development.
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