lee cooper russia
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ProjectsTRANSCRIPT
Lee Cooper in Russia
Roseleen Bakshi25th June 2009
Steve Manners, VP Brand DevelopmentLouise French, AVP Marketing & Business DevelopmentSerena Sibbald AV P
Today we will cover….
Hard metrics versus soft dataSelecting channels for Lee Cooper for the middle
market.Which geographies to target? Which players to target for Lee Cooper? Which retailers to target?Timeline
Hard data is bad…
…but it’s not all bad …
Oil revenues make up around a quarter of Russia’s GDP.Current Oil prices levels are lowRussia’s economic recovery will return as oil prices recover.
2007 2008 2009E 2010EGDP (UBS)
8.10% 7.20% 3.50% 4.50%
GDP (Verdict)
8.10% 5.60% -4.50% -2%
Consumer Expenditure (UBS) 12.80% 13.10% 6% 5%
Unemployment Rate (UBS)
11.90% 13.30% 14%
2007 2008 2009E 2010EInterest Rate
(Verdict)10% 12% 13%
Inflation Rate (UBS)
9% 14% 10.90% 8%
…but from the soft data:there is hope
11%13%
18% 19%22% 22% 23% 24% 24%
29% 32%
56%
0%
10%
20%
30%
40%
50%
60%
France
UK
Brazil
US
Canada
Germ
any
53 Country
Average
Italy
Spain
Russia
China
India
Do you think your country will be out of an economic recessionin the next 12 months?Percent saying yes.
Very Strong Growth: >= +5%Growth: between +1 and plus 4%Neutral: between -1 and +1%Negative: between -1% and -4%Very Negative: <= -4%
1
3
5
4
2
Top actions Consumers are taking to save
KPI
Reasons for the Crisis in Russia: Oversupplies of imported Garments during the Boom Phase from 2002 till 2007
Management Defaults hidden by the Boom Phase:
Only 40 % of independent clothing retailers monitor and evaluate through-selling results during and after the end of retail seasons
budget- and portfolio planning still based on emotional rather than rational indicators (vertical against horizontal portfolio planning)
Calculation of retail prices, based on“commonly practiced” mark-ups of in between 2,8 and 3,8 and not by full cost assessments according to western business administration standards
display of merchandise characterised by “more is better” rather than by “less is more”
no awareness for professional visual merchandising and window decoration
shop managers not capable to teach sales personnel in service orientation towards consumer clients
Clothing forecasts have been adjusted downwards
8,730,3 31,9
35,137,9 40,0
12,3 (+41%)17,8 (+45 %)
22,7 (+28%)
30,0 (+33%)
37,9* (+26%)
45,5 (+20%)52,3 (+15%)
57,6 (+10%)60,5 (+5%)
0
10
20
30
40
50
60
70
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
* Source: ITMM GmbH, Stuttgart
1/3
in bn US $ -
…but on a relative basis still look good…
20112007
Per capita consumption of clothing $USCountry
424460Germany
426267Russia
Cost of lease for retail space at Shopping Malls and Trade Centres down by 30-50 % against Spring 2008.
Cost of building materials, shop construction and furnishings depreciating by similar rates.
Salaries and wages put on freeze for 2009 or under negotiation at cuts of 25 %.
Availability of skilled human resources surging at lower salaries.
Lee Cooper can benefit in present crisis
Today we will cover….
Hard metrics versus soft dataSelecting channels for Lee Cooper for the middle
marketWhich geographies to target? Which players to target for Lee Cooper?Which retailers to target?Timeline
Projection on Market Shares of main Clothing Retail Categories in Russia, 2008
YES
YES
NO
NO
Which channels do the middle classes prefer?
Russia’s middle class consumers often frequent modern shopping centers and boutiques:more value focused consumers usually prefer hypermarkets
out-of-town and expanding fast fashion players like Gap, H&M and Inditex. A multitude of street stalls and markets also survive as they are often the cheapest in the clothing sector. 3,000 such markets are active in Russia today, but their number and share of total clothing sales is diminishing.
Source: Verdict Research
Today we will cover….
Hard metrics versus soft dataSelecting channels for Lee Cooper for the middle
marketWhich geographies to target?Which players to target for Lee Cooper?Which retailers to target?Timeline
Seven large Russian Federal Districts to be critically observed
Source:
SiberiaUral
Northwestern Region
CentralRegion
NorthernCaucasus
Volga
Far EastMoscow
SiberiaUral
Northwestern Region
CentralRegion
NorthernCaucasus
Volga
Far EastMoscow
Scoring Regions in regard to the Viability of Fashion Retail Market
Source: UBS
3.38
4.03.29
4.04.0
3.8
4.14
Footnote: 1= very good viability, 6 = very bad viability
3.25
SiberiaUral
Northwestern Region
CentralRegion
NorthernCaucasus
Volga
Far EastMoscow
Regional Retail Market Analysis
Central Region & the Uralsare two Federal Districtswith income per capitathan Russia’s average of$580.
Far East FederalDistrict has thelowest share ofretail sales (4%)in Russia.
The most dynamic developmentof retail sales in 2008 wasdemonstrated by the South, Urals& Volga Districts 34%, 33% and 32%y-o-y , respectively
YES
YES
NO
Today we will cover…
Hard metrics versus soft dataSelecting channels for Lee Cooper for the
middle marketWhich geographies to target? Which players to target for Lee Cooper? Which retailers to target?Timeline
Criteria of Players choice
VF CORPORATION www.vfc.com
VF Corporation makes branded apparel including Jeans wear, intimate apparel, sportswear, outdoor products and workwear.
PORTFOLIOLee, Wrangler, Riders, Rustler, Vanity Fair, Vassarette, Bestform, Lily of
France, Nautica, John Varvatos, JanSport, Eastpak, The North Face, Vans,
Napapijri, Kipling, Lee Sport and Red Kap.
YESWhy?Key supplier of related denim brands in Russia
FIBA HOLDING www.fibaholding.com
Founded in 1987 Fiba Group controls an investment portfolio of high-value brand names in both financial and non-financial lines of business.It has 63 companies in 15 countries with $20 billion total assert & $4 billion total equity.Group's international financial investments have increased by 35% in 2008.
PORTFOLIOFranchising rights of Marks & Spencer Russia in 2005 with 14 stores and 512 employees in Russia.Gap Russia it operates with 3 stores in 2 different locations.Banana Republic stores are expected to open for the 2009 holiday season in Russia.
YESWhy?Key supplier in our target department stores & our target independent stores
Jamil Co. Group
Holding company with international management and international business standards. JamilCo. has been active on the Russian retail market for luxury and casual clothing and accessories of major international brands since 1993.
PORTFOLIOJamilCo Group has represented the Levi’s® brand since 1988, opening the first Levi’s®store Moscow in 1993.Represent Coach brand in Russia.
YESWhy?Key supplier (long established) denim supplier in our target regions
PPE Group – Mail order
Founded in 1999, the PPE Group is today Russia’s leading mail order company, operating across the entire country.
The Otto Group owns 70 percent of the cooperative venture and the PPE Group 30 percent.
PORTFOLIO Mail order
OTTO is aimed at women between the ages of 24 and 45 and families.Bonprix is for the particularly price-conscious customer. Witt International is aimed at an older and established target group, who are looking primarily for quality in their purchases and prefer a classic dress style.
E-commerce & LogisticsThe second company, “Business Service”, is building the required warehouse and logistics center in the town of Tver, along with a call centre for order taking and customer service.
YESWhy?Market leader in mail order / internet in Russia
Today we will cover….
Hard metrics versus soft dataSelecting channels for LeeCooper for the middle
marketWhich geographies to target?Which players to target for Lee Cooper?Which retailers to target?Timeline
Choosing Retailers For Lee Cooper….
Which cities?
Expansion of Trade Centres and Shopping Malls as Key Driving Factors for Allocation of newClothing Retail Stores in the Russian Region over the Period 2002-2008
Source: Russian Federal Service of State Statistics of the Gross Regional Product (GRP, end of 2006),and population (1 January 2007).
>$10'000 >$5'000 >$3'000 >$2'000 >$638.82
Source: USB
Map of Russian subdivisions by GDP (GRP) per capita.
City Population Estimatedin 1.000 Number of Competitors(2006) Retail Stores
of Clothing locatedat commercial centres LEVIS
(2008) STORES
Moscow 10406 10000 26Volgograd 991 620 4
Ekaterinburg 1,308 1,400 3Ufa 1,030 760 3
St. Petersburg 4,581 4,560 2Omsk 1,139 480 2
Samara 1,143 760 2Kazan 1,113 640 1
Chelyabinsk 1,093 700 1Perm 993 600
Novosibirsk 1,387 760Rostov-on-Don 1,055 520Krasnojarsk 921 440
Nishnij-Novogorod 1,284 970Sub Total 15,763 11,620 44
Tumen 542 400Kirov 469 360
Saratov 850 320Kaliningrad 424 360Krasnodar 710 300
Pensa 510 300Magnitogorsk 413 240
Tula 509 200Togliatti 705 200
Subtotal 5,132 2,680
Total 20,895 14,300
…and which retailers?
Expansion of Trade Centres and Shopping Malls as Key Driving Factors for Allocation of newClothing Retail Stores in the Russian Region over the Period 2002-2008
Source:
CITY STOCKMANN TOPSHOP
Moscow 6 5St. Petersburg 1 3
Krasnodar 2Nishnij-Novogorod
EkaterinburgUfa
Total 7 0
Priority 2 1
Number of Denim Brands 10 9
Likely Size of Opportunity for Lee
Cooper HIGH HIGHFinancial Stability STABLE
Established in Russia since 1,989 2,006
SALES 250 M EURO
CITY 5KARMANOV JEAN SMPHONY
Moscow 16 1St. Petersburg 2 1Ekaterinburg 2 1Samara 1Ufa 2 1Nishnij-Novogorod 4Kazan 1
Chelyabinsk 1 1Volgograd
Perm 1 1
Novosibirsk1
Rostov-on-Don 2 1
Omsk 1
Krasnojarsk 1OTHER 10TOTAL 43 9
Priority 1 2Number of Denim Brands 10 25
Likely Size of Opportunity for Lee Cooper HIGH HIGH
Financial Stability NA NA
Established in Russia since NA NASALES NA N A
QUELLE RUSSIA
Number of Denim Brands 12Likely Size of Opportunity
for Lee Cooper HIGH
Financial Stability STABLE
Established in Russia since 2,005SALES (2007) 115BNCUSTOMERS 30M
GROWTH 40% IN 2008SKUs. offering 100,000
PAGES600-page catalogue
INTERNET/CATALOGUE INDEPENDENT MULTI/MONO BRANDS DEPARTMENT STORES
…and which retailers?
Expansion of Trade Centres and Shopping Malls as Key Driving Factors for Allocation of newClothing Retail Stores in the Russian Region over the Period 2002-2008
Source:
CITY STOCKMANN TOPSHOP
Moscow 6 5St. Petersburg 1 3
Krasnodar 2Nishnij-Novogorod
EkaterinburgUfa
Total 7 0
Priority 2 1
Number of Denim Brands 10 9
Likely Size of Opportunity for Lee
Cooper HIGH HIGHFinancial Stability STABLE
Established in Russia since 1,989 2,006
SALES 250 M EURO
CITY 5KARMANOV JEAN SMPHONY
Moscow 16 1St. Petersburg 2 1Ekaterinburg 2 1Samara 1Ufa 2 1Nishnij-Novogorod 4Kazan 1
Chelyabinsk 1 1Volgograd
Perm 1 1
Novosibirsk1
Rostov-on-Don 2 1
Omsk 1
Krasnojarsk 1OTHER 10TOTAL 43 9
Priority 1 2Number of Denim Brands 10 25
Likely Size of Opportunity for Lee Cooper HIGH HIGH
Financial Stability NA NA
Established in Russia since NA NASALES NA N A
QUELLE RUSSIA
Number of Denim Brands 12Likely Size of Opportunity
for Lee Cooper HIGH
Financial Stability STABLE
Established in Russia since 2,005SALES (2007) 115BNCUSTOMERS 30M
GROWTH 40% IN 2008SKUs. offering 100,000
PAGES600-page catalogue
INTERNET/CATALOGUE INDEPENDENT MULTI/MONO BRANDS DEPARTMENT STORES
YES YES YESMay beYES
In Independent Multi-brand 5KARMANOV, JS casual, Fashion Mart is good channel…..
Today we will cover….
Hard metrics versus soft dataSelecting channels for LeeCooper for the middle
marketWhich players to target for Lee Cooper?Which geographies to target? Which retailers to target?Timeline
Retail in Russia Timeline: past, present and future 2000-2012
Source: Verdict Research
Lee Cooper Timeline in Russia A/W 2010
Weekly & Seasonsales analysis
Weekly & Seasonsales analysis
Feedback Loop Feedback Loop
Review marketing & sales strategy AW2010Review marketing & sales strategy AW2010
Support w/ marketing programmes
Support w/ marketing programmes
Brand Knowledge & Training sessionsBrand Knowledge & Training sessions
LaunchLaunch
Present Product A/W 2010Present Product A/W 2010
Initial Meeting w/ PotentialLicenseesInitial Meeting w/ PotentialLicensees
Deal negotiations & sign offDeal negotiations & sign off
Dec ‘09Dec ‘09
Finalization of Licensee Finalization of Licensee
Business plan approval
Business plan approval
Initial meetings onBUSINESS PLAN
Initial meetings onBUSINESS PLAN
Aug ‘10Aug ‘10Feb ‘10Feb ‘10
Lee Cooper Timeline in Russia