June 19, 2002 - June 21, 2002 On June 19-22, 2002 an International Forum “Trade World” was conducted in one of the best Moscow exhibition grounds – “Gostiny Dvor”. Once again, it brought together all who are not indifferent to the destiny of the domestic trade, ranging from retailers from all over Russia and European countries to companies and organizations playing an important role in creating a civilized, effective and competitive market in Russia. The Forum was organized by RF Ministry for Economic Development and Trade, National Trade Association and Moscow International Business Association. The II International Exhibition Forum “Trade World” indeed became a grandiose and outstanding event in the life of the capital and the whole country. It combined two large-scale exhibitions: “Trade World” and “Restaurant World”, five international conferences as well as a series of master classes and professional seminars dedicated to most important issues of Russian retail trade and public catering sectors, and a more effective introduction of advanced technologies of trade and business. Famous analysts of the domestic market, representatives of largest chains and restaurants participated in discussions.
The opening ceremony was attended by Vadim Zuykov, President of the National Trade Association. Galina Fonareva, Head of Department at the State Trade Inspectorate delivered a welcoming speech on behalf of the RF Ministry of Economic Development and Trade. A short address to forum participants was made by Burak Aidyn, Marketing Director of “Ramstore” chain. Anatoliy Kochetkov, Deputy Head of Committee on Consumer Market and Services made an address on behalf of Yuri Luzhkov, Moscow Mayor and President of Moscow International Business Association. The opening ceremony for the II International Exhibition Forum “Trade World” was completed by Pierre Ganier, President of French Cooking School “Le Cordon Bleu”.
Heads of famous companies, such as “Krasny Kub”, “Ekonika-obuv”, “Aromatny Mir”, “Crocus International”, “M.Video”, “Sedmoy Kontinent”, IKEA, “Formula Kino Management” and “Brothers and Company” took the floor during the Forum’s International Conferences.
The subject of sales stimulation in the retail sector was addressed by Bernd Hallir (Germany), General Director of the European Institute of Trade, heads of leading domestic companies, such as “Vitrina A”, “V-ratio”, Russian Association for Sales Stimulation, “Philip Morris Sales and Marketing”
A no less important and interesting feature of the Forum was the seminars attended by heads of famous regional retail chains, such as “Lenta Cash&carry” and “Pyaterochka” from St. Petersburg, “Kupets” from Yekaterinburg, “Kora” from Kemerovo.
Over the three days, more than 10,000 visitors and 23 official delegations from various regions and cities of the Russian Federation attended the Forum. In total, the event attracted more than 1,000 companies from 12 countries. The exhibition housed over 100 exhibitors including domestic retailers as well as companies and organizations engaged in fitting Russian retail trade sector with shop equipment and relevant systems.
During the “Trade World” Forum, the professional “Man of the Trade” and “Golden Scales” awarding ceremonies were held.
The “Man of the Trade” award was presented for a second successive year. It is the top prize awarded by National Trade Association and “Trade News” magazine for outstanding achievements and personal contribution in the domestic trading sector. Like the year before, prominent heads of wholesale and retail enterprises and state officials were among those who received awards for their enthusiastic activities in promotion of trade in Russia.
The “Golden Scales” award that was instituted three years ago by National Trade Association became the highest national professional award for remarkable achievements in fitting domestic retailers. The prize is presented annually on the results of a nation-wide “All for Trade in the XXI Century” rating of Russian and Western companies working on the domestic market for shop equipment and auxiliary systems.
The “Trade World” Forum seminars held on June 19 were devoted to issues of establishment and management of various stores. Representatives of i2 CIS and EXE Technologies spoke of logistics optimization and management for various retail chains, while Vladimir Karnaukhov, General Director of “Sedmoy Kontinent” chain, spoke of various aspects of supermarket operation, supporting his arguments with some interesting facts from the life of domestic civilized trade. According to him, in recent years it has taken much longer time to bring a store up to the planned level of sales. The “post-crisis” payback period of a “Sedmoy Kontinent” store averaged 1.5 years, whereas presently it takes a store 3.3 years to pay back. Mr. Karnaukhov also noted the weakness of domestic retail market compared to western companies that are capable of dumping. He also referred to another trend in retail market development that was later confirmed by most speakers - the growing domination of retailers in the manufacturer – supplier – retailer chain who dictate strict terms to manufacturers. Mr. Karnaukhov disclosed his plans for chain expansion. In 2002, “Sedmoy Kontinent” will go in for three new types of stores, giving birth to “Sedmoy Kontinent – Express” Discounters with goods stock totaling 8,000 items, “De luxe” stores with a large amount of fresh products and an original design, and trading centers at the cost of $ 10-12 million for which Moscow Administration has already provided 20 construction sites. According to top managers of “Sedmoy Kontinent”, Moscow market is capable to sustain 80 stores of this type.
The next speaker – Vitaliy Podshivalov, Director of “Service Plus” company - suggested creation of two structures in contrast to distribution centers being actively set up by all leading retail chains. These are the logistics center responsible for supplies and the management center dealing with pricing policy, goods stock and discount system management. In Mr. Podshivalov’s opinion, the main objectives of trading process automation are analysis of the consumer goods basket, search for goods with identical bar-codes and different names, monitoring shelf life, and selection of suppliers.
“’Ramstore’ adaptation to Russia was not a difficult task, since our economies are very much alike”, confidently stated Burak Aidyn, Marketing Manager of “Ramstore” chain. “ In Turkey, we also have to deal with crises”. In his speech about operating the hypermarket, Burak Aidyn named corruption, complicated legislative, taxation and certification systems among obstacles to business development in Russia. All this results in additional expenses that result in growing prices and reduced purchasing capacity. Thus customs duties may, for instance, amount to 30% of the goods price.
Sergey Lepkovitch, General Director of “Pyaterochka” chain, described specifics of discounter operation. Focusing on Western experience, the speaker described activities of high-frequency terminals in Germany that had been studied by company employees. However, in his opinion, the German form of discounter is not acceptable in Russia. Later in the year, “Pyaterochka” plans to expand the stock of goods to list 4000 items, including its private labels.
The day ended with a seminar dedicated to supermarket operation on the Russian market. During the seminar, Yuri Yakovtchik, General Director of “Paterson” chain, described the concepts of expansion of goods stock through own production. This is not Private Label but a ready-for-use product. In his opinion, own production at the store premises may double the trade turnover. “We have stores with up to 300 items of own ready-for-use and semi-finished products. Own production allows flexibility in meeting customers’ demands, decreases logistics expenses which justifies the cost of premises and personnel labor. One of the major aspects of supermarket operation is keeping the balance between the stock of goods and storage expenditures. Speaking of retail trade problems, Mr. Yakovtchik placed emphasis on security. 0.5-3% of “Paterson” chain turnover gets wasted through the fault of shop assistants. According to him, suppliers seldom consolidate their software with that of a store. As a result, 3-10% of income is spent to cover logistics expenditures due to faults in electronic documentation. “Despite this, last year witnessed a significant improvement in the work of the wholesale sector” said Mr. Yakovtchik. “Suppliers either get out of business or consolidate. Last year, 20% of our suppliers left the business or consolidated”.
Natalya Arefyeva, Head of Department for Bread-making Equipment at “Trade Design” Company, spoke of the integrated fitting of trading enterprises and methods of raising their turnover like selling their own product brands, setting up mini production facilities and catering enterprises at the premises of the trading complex. In the speaker’s opinion, these three methods may be combined in the concept of a new store format incorporating trade, services and “show”. As an illustration of a “show” technique, she described the work of a bakery “behind the glass” when a product is being turned out before the customers’ very eyes. A customer thus spends more time in a trading complex watching the production process. Moreover, Natalya Arefyeva believes that this approach enhances customers’ confidence in the quality of the product.
Seminars that took place on the second day of the Forum were dedicated in general to retail trade in regions.
Oleg Khabibulin, General Director of Yekaterinburg “Kupets” retail chain, analyzed the changes in Yekaterinburg retail sector for the year that passed between the two “Trade World” Forums. In his opinion, despite the Finance Ministry statistics showing an overall income increase by 5-10% in the year 2001, in 2002 there was a clear tendency towards reduction in income growth rates due to restructuring of housing and communal services system and the fact that consumer price growth rates outrun those of manufacturer prices. “According to Uralbusinessconsulting news agency, said Mr. Khabibulin, consumer prices increased by 7.3% whereas manufacturer prices rose only by 4.4%”. Nevertheless, the speaker noted that the total Sverdlovsk region retail turnover for the first quarter 2002 is 17% higher than that of the corresponding period last year. The General Director of Yekaterinburg “Kupets” retail chain named lack of capital assets among most serious problems facing the Yekaterinburg retail sector. “To establish a new store, you have got nothing to do but construct it” said Mr. Khabibulin. “Unfair competition is another thing that makes you feel wary. Last year, two stores in Yekaterinburg were set on the fire, with criminal attempts directed against their founders. Quite often, state authorities act as tools in hands of unprincipled businessmen.”
Dmitriy Zverev, Commercial Director of “Kristall Servis” Company, speaking next, described specifics of retail trade in North Western region, proclaiming St.Petersburg as the most attractive Russian city for investors.
Sergey Romanov, Director of Kemerovo “Kora” retail chain, called lower purchasing capacity in regions compared to that of the Central Region a negative factor in supermarket chain development. “The average monthly per capita income in Kemerevo amounts to 2,700 rubles, which is several times less than the average income in Moscow. Moreover, another important aspect of working in regions is a forcedly low extra charge. We are hard-pressed by large nearby cities, for example, by Novosibirsk. Our region is used for “discharging” products. Large wholesalers dictate their terms to us. Even the largest Kemerovo supermarkets cannot afford an extra charge above 25%”. With a touch of cynicism, Mr. Romanov admits that the majority of staff are far from being intelligent and apt at training. In his opinion, the only way to solve the problem is careful selection of top and middle managerial staff.
The next speaker, Dmitriy Galaktionov from “ASTOR VTs”, addressed the issue of introducing automated control systems at regional retail enterprises.
Other speakers talking about the specifics of establishment of regional retail enterprises included Oleg Zherebtsov, General Director of St. Petersburg Company “Lenta cash & carry”, Alexander Krasnov, Executive Director of Kazan “Bakhetle” supermarket, and Roman Zinovyev, Deputy General Director of “Nesterovsky” discounter chain.
Speakers from regions agreed that practically all regional retailers are subsidiaries of wholesale companies or large-scale manufacturers. Retail business is never developed as an individual business sector.
On the closing day, the“POS-marketing in retail enterprise management” conference was held, its leading motive being an already indisputable statement that, under a growing competition between retail enterprises, correct laying out, utilization of POS materials, BTL advertising actions give an advantage and, consequently, a significant increase in sales.
Bern Halier, General Director of the European Institute of Trade, was probably the most emotional speaker. Helping himself with an eloquent gesticulation, Mr. Halier said that the main error of domestic retail is that stores belonging to the same chain may differ drastically in image and trading floor space. “If I were director of “Sedmoy Kontinent” chain, I would have set up 50 stores of identical image and trading space so as to avoid a situation when one store has an enormous live fish section whereas another may have none at all. I would also have developed a franchising system”.
Oleg Tchernozub, General Director of consulting company V-Ratio, spoke about surveys helping to locate the “customer gravitation area”. The location of a store, according to him, is the vital factor of its successful operation.
Vadim Kulikov, General Director of “Vitrina A” advertising group, described in his address how a combination of various communication types in the trade area may raise the sales turnover: “When we are planning communication activities, we should realize that verbal communication plays the most important role in Russia. Customers grimacing beside a product can also be considered a kind of verbal communication. 80% of the non-verbal means of communication are visual – these include components of trading equipment, POS-materials helping the customers to make their choice here and now. The clean and neat uniform of shop assistants may also be regarded as POS advertising, like the rustling of packing materials which is especially important for premium products”.
“One should not underestimate the importance of services provided by BTL-agencies,” said Sergey Moiseyev, President of Russian Association for Sales Stimulation in his report concerning the growing Russian BTL market. According to the speaker, BTL in Russia is closer to mathematics and matter-of-fact statistical data, whereas in the West it is closer to advertising.
During the Conference, various methods of retail sales stimulation were analyzed by Alexander Belkin, Executive Director of Bounty Euro RSCG Russia; Eugene Khoroshilov, Training Manager at Philip Morris Sales and Marketing, and Eugene Salikhov, Deputy General Manager for Products and Technologies at IBS company.
Application of the main merchandizing techniques was described by Darya Ivanova, General Director of BTL-agency “Rusinfo”, and Kira and Ruben Kanayan, “Union-Standard Consulting” Company.
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