The Kiabi clothing store chain, which, together with Auchan and Leroy Merlin, is part of the holding of the French Mulier family, may launch a franchise in Russia. In theory, this could almost double the number of outlets in the country this year. But due to the crisis, the demand for fashion chain franchises has suffered greatly, and consumers prefer to save on clothes and move to online sites, experts say.
The Kiabi clothing chain, which is part of the Mulier family holding (Auchan, Leroy Merlin, Decathlon, Green Light, Mondial Carpet), plans to develop in Russia through a franchise. This was told by a source of Kommersant in the market. According to him, the company is still developing a franchise model for potential partners. Kiabi did not answer Kommersant’s questions by Tuesday evening.
Kiabi founded in 1978. Specializes in the sale of inexpensive men’s, women’s and children’s clothing. Operates about 500 stores in 18 countries. It has been working in Russia since 2008, includes about 20 points in Moscow, St. Petersburg, Krasnodar, Togliatti, Ufa, Samara, Voronezh and Kazan. In 2020, the revenue of the managing network in the country, LLC Keruska, decreased by 44.2%, to 3.2 billion rubles, the net loss amounted to 667.45 million rubles.
This is not the first attempt of a French brand to develop on the Russian market through franchising, says Olga Sumishevskaya, partner of One Story. According to her, Kiabi actively used this method of expansion in European countries, but in 2009 their only Russian partner in Novosibirsk faced financial problems amid the collapse of the ruble caused by the crisis and eventually stopped its activities. “The chain is positioning itself as a discounter, and in order to stay in its segment in the market with a weak currency, they had to develop and manage the chain on their own,” explains Ms. Sumishevskaya.
According to Mikhail Burmistrov, General Director of Infoline-Analytica, with a high-quality study of the package and attractive conditions, Kiabi will be able to agree on the opening of up to 15 franchise stores this year, and in the medium term reach the opening rate of up to three such points per month. According to Mr. Burmistrov, it is unlikely that Kiabi will be able to find large regional partners; most likely, the company will work with local operators who will develop several stores. According to him, the brand’s pricing policy allows it to compete with online platforms, and with the right choice of location, Kiabi stores can operate both in small cities, where offline retail is not so developed, and in shopping centers in cities with a population of several hundred thousand people.
Anna Rozhdestvenskaya, an expert at the Franshiza.ru portal, calls clothing retail one of the most affected segments of the crisis caused by restrictions due to the COVID-19 pandemic. According to her, the demand for such franchises in the first quarter of this year fell by 32% compared to the same period in 2019. Most clothing chains have switched to a passive development and promotion of franchises, shifting the focus to online distribution channels, the expert points out. S. Oliver and Melon Fashion Group (Zarina, Befree, Love Republic and Sela chains), developing with the help of the franchise, did not provide comments.
Anna Lebsak-Kleimans, CEO of Fashion Consulting Group, recalls that consumers in Russia are cutting down on clothing costs, and many people prefer to buy goods through online platforms, which may negatively affect the profitability of classic outlets. Among the main concerns of investors considering opening a clothing store under a franchise, Ms. Lebsak-Kleimans calls an unpredictable situation with shopping centers due to the pandemic. In her opinion, in the current environment, Kiabi is likely to look for experienced regional partners with a solid range of brands.