Like Paris’ Galeries Lafayette or Harrods in London, the luxury GUM mall situated in Moscow’s Red Square teems with tourists.
Unlike its London and Parisian contemporaries however, the tourists at GUM are not buying.
The problem is the high price of goods escalated by import duties and value added tax, which makes big-brand goods up to 50% more expensive than they are in France or the UK.
This is a large, but not unsolvable problem from GUM’s owner, the Bosco di Ciliegi Group.
Without the reliable cash derived from tourism that fuels many department stores, Bosco di Ciliegi – named after Chekhov’s “Cherry Orchard” – has begun to look beyond its flagship store, and plans to capture local shoppers in new outlets across Russia.
These include stores planned for Samara, Sochi, St. Petersburg, and Yekaterinburg as “future growth will come from the regions,” notes GUM Chief Executive Officer Teimuraz Guguberidze.
The fashion retail market in Russia expanded 11% last year to about USD 50 billion, with Moscow accounting for USD 6 billion, according to INFOLine.
Expansion into Sochi
Anna Lebsak-Kleimans, Head of the Fashion Consulting Group based in Moscow, says the regional expansion is logical.
She notes that Sochi – home of the upcoming Winter Olympics in February – should have a fashion market growing by as much as 10% per year; twice that of Moscow.
Yet Bosco is not only expanding into the territory; having also signed as the domestic sponsor of the 2014 Winter Olympics.
The agreement, said to be worth over USD 100 million, hopes to make Bosco’s subsidiary Bosco Sport a revered international brand by clothing the Russian Olympic team and the 45,000 staff and volunteers.
Despite having clothed the country’s Olympians for the last ten years, the brand is little known outside Russia.
In amongst its plans for international expansion, the retailer has added pop-up outlets in each Olympic host city since 2006.
The company also plans to swell its 80 stores by a further 40 before the Sochi games, Teimuraz Guguberidze, Bosco’s General Manager, has said.
Using the Olympics to strengthen its market position, it hopes to compete against such brands as Giorgio Armani SpA and Ralph Lauren Corp – the brand outfitting the US Olympic team – both at home and abroad.
Bosco currently boasts total annual sales of about EUR 500 million; with the majority coming from selling international brands such as Alberta Ferretti, MaxMara and Kenzo from stores across Russia.
In 2014, the company hopes that the games will grow its sport clothes sales to a record EUR 100 million.