Last week there was held an impressive forum Fashion Retail, that one more time provoked an exchange of operative information "from the battle field".
There were very few optimistic estimates of what is going on. Everybody is getting ready for the long crisis period and is trying to get adapted to new realities that, obviously, will not disappear as quickly, as it appeared.
Sales volumes - Spring 2009. Based on different estimates, sales volumes decreased by 10-15% up to 80%. It is newcomers and regional retailers who are suffering most of all.
Declarations from market leaders, such as Sela, Mexx, Kira Plastinina about the fact that the turnover has remained at the same level and has even increased in some stores, are taken with some part of scepticism. Edmins, Maratex (brands Esprit, Peacocks, Palmers, Orsay and others) and some other middle and large players report 10-30% sales volume decrease in money equivalent, as well as significant reduction of customer traffic in the stores. This is also confirmed by the company Watcom, specialized at counting customers in the stores. The company’s rating of customers’ activity shows decrease, while the trend does not give any hope for positive changes.
Fashioner opinion: summarizing all the estimates, it is possible to conclude that on average the first half a year results will show sales decrease in fashion retail of not less than 15-30% against the same period in 2008. In the second part of the year the gap is expected to make 20% against the last year results.
Operational indexes. It is somehow necessary to survive. The first wave of cutting down salaries and expenses, as well as battles for better rent rates has passed. There are first results. In regards to rent rates the majority of the companies managed to achieve some progress.
all-round defence of the trade centre developers got ruined under the pressure of fighting to the bitter end retailers. Being incapable to deny the obvious collapse of the market, renters have started practicing different ways of reducing rent payments, such as: rent holidays, percent from turnover etc.
It is much more difficult for the stores, renting 100-200 square meters (as this is the most popular size of a fashion store) to bargain, than for large-format department stores. Somehow, based on the announced figures, it was possible to decrease the rent rates by 15-17% on average.
Companies are getting rid of any ballast: unnecessary employees, non profitable projects, nonspecialized assets. Advertising and IT budgets are being cut. Sweeping character of this kind of measures depends on the condition of the company.
The majority of dealers are facing the problem of overstock. This is not a crucial problem for the stores, while for the manufacturers and owners of private brands this is a reason for panic. They are forced to cut down plans on sewing new collections, to practice short-time shifts, and sometimes even break up the production units completely.
Openings and closings. At the moment the quantity of networks who went away from the market
(whose absence was noticed by the market experts) does not exceed the quantity of new projects. Companies who managed to preserve funds for further development, keep being active. Cutting down expenses for start of business up to 40% and sufficient savings on permanent costs – it is unaffordable to lose such a chance of expanding the market share! There appear new players from abroad, the Russian veterans of the market also launch start up projects. Sela considers present time as the most appropriate one for launching children retail project, CentreObuv is developing its middle-price youth project - stores Centro, Ralf Ringer is planning to develop a network in Saint Petersburg and so on.. Single stores and franchisee are dieing off, networks are regroupping and are looking for new opportunities. There is a slight activity on the investments market. Investment companies are examining the market, hoping to purchase perspective assets at a moderate price.
What to do? There is a feeling that the majority of the companies have already found an answer to this burning question. Some of them chose a tough strategy of survival and "froze" the development, some are squeezing and fighting for the effectiveness. Some are going against the trend, counting on capturing new territories that are being released. However the majority remain in uncertainty.
What to do, if all the measures on cutting down expenses have already been implemented and it is still impossible to get out of non profitability? Hopes on marketing tools, know-how in the sphere of branding, consumer emotions management or IT technologies seem to be a phantom. It may sound really tough, but if there has not been created an effective management system during the past years, it will be very unlikely to sort out such difficult problems in the nearest months and implement changes that require significant financial, human and time resources. Maybe such companies should think over carefully how to minimize the losses and go away from the market.
Conclusion. The market entered a new stage of development and perception of this fact incites to more thought-out, strict and precise actions. There are changes in the behaviour of both companies and consumers. Each party now requires more value for paid money and is right in a certain way. Already this autumn we will witness new dramatic events, will get new experience in order to learn new lessons. We continue, like the chinese, to look for possibilities in the word “crisis”.
