Mega branded malls, operated by Ikea Shopping Centres Russia and anchored by Ikea stores, are providing growth opportunities for western retailers seeking expansion in a fast growing Russian market, according to the furniture retailer.
In the last 12 months over 20 international retailers have entered Russia via its 14 Mega shopping centres, while a further 15 have expanded from Moscow and St Petersburg into Mega Centres in Russia’s main regional cities known as the Millionniki with over 1m inhabitants.
International retailers are using Mega Centres as a safe launch pad to enter Russia for the first time, said Ikea Shopping Centres Russia. North Face, Samsung, Jack Wolfskin, Inglot, La Senza, Intertop, List, Victoria’s Secret B&B, Bobbi Brown and more, have all entered Russia via Mega in the last 12 months.
River Island, Starbucks, Inglot, Burger King, Mothercare, Mamas and Papas, Mango and Cook House are some of the brands that have expanded into the Russian Millionniki cities through Mega Shopping Centres. Besides Moscow and St.Petersburg, Mega Centres are located in Kazan, Ekaterinburg, Nizhny Novgorod, Novosibirsk, Rostov-on-Don, Krasnodar, Omsk, Ufa and Samara.
Russia’s retail market is reported to be Europe’s largest consumer market with an annual retail turnover of RUB 19.1 trln (€466bn). It showed a significant growth rate of 7.2% in 2011 versus 6.3% in 2010.
In December 2012, Ikea Shopping Centres Russia, will mark 10 years since the opening of its first Mega Centre in Moscow. According to the company, it has attracted a raft of western tenants to its malls by providing a safe entry platform into the country. This trend is set to continue with retail sales turnover increasing by an 19% in 2012 and footfall improving from 227m visitors in 2011 to 254m in 2012, a growth of 12%, Ikea Shopping Centres Russia said.
“Russia is an expansive market and is not feeling the global economic slowdown to the same extent as Western Europe,” said Magnus D’Oldenburg head of centre management at Ikea Shopping Centres Russia.
“Consumer appetites, as well as GDP growth of over 4% in 2011 are also attractive to retailers seeking rates of expansion that are difficult to achieve in saturated western markets. Interestingly, more tenants are taking advantage of Mega’s presence in Russia’s regional cities, which offer considerable growth opportunities,” he said.
“Our strategy is to provide an attractive shopping experience by offering world renowned brands to our customers who place importance on good quality and reasonably priced products. Fashion, lifestyle, sports and electronics brands are particularly popular with Russian consumers, so we are seeing significant enquiries from them. Keeping a strong, fresh tenant mix from a variety of sectors creates the best offer for consumers, thereby enhancing sales for all our tenants,” said D’Oldenburg.
For example, at Mega Khimki in Moscow main retail categories are split as follows, 49% clothing, 11% entertainment, 9% electronics, 8% children’s goods, 9% restaurants and 4% shoes and bags. Tenants from across the world create a vibrant shopping experience with 13% from the USA, 6% from Germany, 5% from France, 4% from the UK, 4% from Spain, 4% from Turkey and 3% from Poland.
D’Oldenburg said many western retailers do not want to miss out on Russia’s growth opportunities, but can be put off by perceived difficulties of entering the market. He said a key reason Ikea Shopping Centre Russia’s shopping centres excel is because the super-regional malls provide a familiar environment for foreign retailers in which the legal and cultural barriers to entry have already been safely negotiated. In addition, each Mega Centre benefits from an Ikea store as a powerful, long term anchor, together with a food hyper market and a DIY store, D’Oldenburg added.
“Our tenants appreciate the transparency relating to processes and policies when they come to a Mega Centre. We’ve been involved in the B2B market and the B2C market in Russia for many years and we pass our local market knowledge onto our tenants to support them. This, with a combination of commercially attractive, family friendly, safe and carefully managed retail environments with strong anchors is testament to Mega’s success over the last 10 years,” said D’Oldenburg.
D’Oldenburg said Ikea Shopping Centres Russia is working to ensure it stays one of the most innovative shopping centre operators in Russia.
Over a year ago, it has introduced a loyalty programme called Megacard. Megarcard is a banking product, based on the MasterCard payment system. It allows holders to accumulate bonus points for every purchase made almost anywhere in the world. Accumulated bonus points can be used to pay for purchases at the programme’s partner stores in any Mega shopping centre throughout Russia.
“Ikea stores and Inditex Group Russia, which develops brands such as Zara, Pull&Bear, Bershka and Oysho have recently joined us in the scheme. Today 110 brands are taking part in the programme and over 300,000 cards have been issued, with a total turnover of over 3.5bn roubles on the cards. There is no other loyalty scheme like Megacard anywhere in the world and it was created based on our experience in Russia, and the needs and preferences of our customers and tenants,” said D’Oldenburg.