Obuv Rossii’s development strategy is supported by the positive dynamics of the shoe market. According to the forcast of Discovery Research Group the market in the coming 3-5 years would grow on average by 4-5% in volume terms and by 6-8% in value. In addition, the mid-price segment where the Group operates will grow (in 2017, its share grew by 3%). Consumption will also grow. The level of consolidation on the footwear market is low; the share of the three largest players in the mid-price segment is only 4.7%. All this creates the conditions for active growth, increasing presence of the Group in the regions and its active participation in the consolidation of the market.
Business strategy of the Company is based on diversification: the development of several brands that are targeted at different groups of people within one price segment. Obuv Rossii is one of a few companies on the Russian footwear market that has successfully implemented this strategy.
Since the beginning of 2006, when the Company, in addition to its core Westfalika network, began to develop a new retail brand of Peshekhod, Obuv Rossii has followed the diversification strategy. Today the company operates five retail networks, each having its unique positioning and a target group. By implementing this strategy, Obuv Rossii has achieved significant results: it has occupied a leadership position in the mid-price segment of the market according to the number of its stores, having become one of the two largest shoe chains in Russia1
The fashion market is a market of non-standard products. Each retail chain (brand) offers collections for different categories of customers who prefer different styles. Each brand collections differ in style, design and perception of buyers.
To reach a large audience of buyers and take a big market share, global retailers develop several networks with different positioning, each having its own concept and regular buyers. For example, Inditex, the world’s largest fashion company, develops nine brands of retail networks. The major shoe companies, such as Belle (China), Deichmann (Germany), CCC Group (Poland), follow the diversification strategy, which allowed them to take a leadership position on their national markets.
In the medium term, Obuv Rossii intends to develop five retail chains within the Group and increase its presence in the regions where its retail is yet poorly represented. This is, first of all, the western part of Russia. The Group will give priority to opening their own stores.
Diversification of the stock variety and services is one of the key components of Group’s strategy. The Company develops the total look concept when the stock (shoes, bags, accessories) is produced with the same colours, according to a single design solution, of similar materials. Such approach makes it possible to stimulate complex purchases when the customer purchases a whole set of products for the season at once.
According to the results of 2017, the share of related products in retail revenues of the Company amounted to 31%. However, there is still potential for further growth by means of expanding the stock variety and introduction of new product categories. For example, in 2017, the Company introduced a new line of middle layer clothing. This category showed a high percentage of sales, so already in the spring-summer season of 2018, the line was expanded 7 times. Additional services also help enhance the complexity of purchases and increase the average ticket. Therefore, the average ticket on instalments is on average twice the average ticket when the purchase is made the traditional way. Therefore, the Company will continue to develop additional services, expanding the list of services available for buyers.
In the past two years, Russian footwear production has been demonstrating positive dynamics. Prospects of production development are linked to the development of specific niches, such as working and corporate footwear, as well as casual style shoes. In addition, opportunities for further growth of production are connected with the automation of production processes, which makes it possible to raise labour productivity. During the previous two years, Obuv Rossii reequipped its production facilities, expanded the cutting and sewing shop having bought some modern automated sewing systems, and launched a line for the production of special purpose shoes. Thereby, the Company has formed the basis for further increase in production output using the existing capacities. Obuv Rossii will develop the corporate footwear line. Now the Company cooperates with the enterprises of financial and food sectors; it will also expand the range of shoes made using polymer materials, casual style footwear produced with the help of the moulding technology. The casual segment has been showing growth during the last two years in connection with increased demand from buyers. Therefore, this line is promising.
According to forecasts of the GfK research firm, the main trend, which will determine the development of retail in the near future, is the shopping experience and the creation of a unique customer experience. Given these trends, Obuv Rossii develops omni-channel sales, an innovative loyalty program (Arifmetika) and introduces new services2. Obuv Rossii makes a bet on the development of their own online stores, different channels of communication with its buyers including social networking and mobile.
As for the Arifmetika innovative program, it will help expand the set of available services. This approach allows the Company to build lasting relationships with customers: according to the results of 2017, the number of Group loyalty card holders increased by 25% to a total of 1.95 million persons; now 60% of purchases in retail chains of Obuv Rossii are made with the use of loyalty cards.
The fact that Obuv Rossii controls all stages of product creation, from its design to its selling to the end customer is the Company’s competitive advantage. One of the areas for improvement is the introduction of new unique lines of footwear and related products. The Company has its own design center; it also develops and introduces new materials and technologies for the production of footwear. As consumer trends change, Obuv Rossii will further expand its stock variety of more fashionable shoes with interesting design, as well as collections of the casual sport style shoes. In addition, the Company plans to improve its IT infrastructure. At the end of 2016, Obuv Rossii started to implement a project of regional data centers creation. The first one of them began to operate in Khabarovsk at the end of 2016; in 2018, a data center will be launched in Moscow. This will allow the Company to increase the mobility, flexibility and resiliency of the existing IT system and, therefore, to improve the quality and the speed of business process management, of the introduction of new services for customers, etc.
In this strategy, the Company bets on brands. The Company develops its entire stock under its own brands. The Group launches branded marketing campaigns, using all channels of communication, including digital ones. At present, Obuv Rossii is actively developing representation of its brands in social networks, including Instagram feeds. When promoting itself, the Company emphasises targeted and personalized communication: a multifunctional customer information centre was created in the structure of the Group to actively communicate with customers. Such an integrated approach, when the Company uses various promotion tools and channels, allows Obuv Rossii to improve recognition of its brands and develop customer loyalty.
Obuv Rossii will continue to use such a tool as cooperation with celebrities for the purposes of promotion. This allows the company to achieve quickly the recognition of brands in new regions, which is important as the network dynamically grows, and to form a big group of loyal buyers.
1 according to Discovery Research Group as of 31.12.2017.
