In Russia, franchising based in 1993 year, when the company Baskin Robbins sold its first franchise. 16 years have passed since that moment and it seemed that all problems are known but, practically, the process of franchising is like an uncertain teenager beginning an adult life. Sale characteristics of franchise of child clothes and footwear were learned by Tatiana Chernishova.
Russian retail of turn of XXI century will be defined on two periods: before crisis and after. So, before the crisis a lot of customers under 4 years old has increased since 2004 year and together with it, demand for child clothes has increased too (38% of child market fall on this age),toys and books. A different matter, that before the crisis, market increased quantitatively not developing qualitatively. For this reason franchising in this segment of economy is the most interesting topic.
Upon average, quantity of offers of franchise increase annually on 10-15%, on one side it complicates the situation on market, raising a level of competition but on another side it simplifies the process changing franchising process into a trial model of business.
“Under the conditions of the crisis interest to franchising always increase. And it happens not only in Russia. It’s world-wide statistic. At the time of economic instability a businessman understands that it’s easier to save business for an employer who is a part of a large chain with well-run business processes and with a famous brand. Such an employer has trainings and consultations from a trained and experienced partner. With that all the participants of franchising chain sincerely are interested in success of each other. It was told us by Ekaterina Soyak, general manager of EMTG Company, which organizes the exhibition of franchising BuyBrand.
Today, capacity of market of child goods is $6-7 milliards annually, $2, 5- 3 milliards of which fall on clothes. Russian market of child goods quickly increases- for last two years the growth was 15- 20% annually. This tendency, according to experts, will be saved in the present year. Market of child clothes is complicated on its own. Many customers prefer not to spend much money on a quickly growing child. The clothes which are worn buy a child only for several months are passed from hand to hand. Even among quite rich people. As a rule, younger children wear clothes which come by inheritance from elder sisters and brothers.
What do we inspire?
According to the representatives of the above listed companies, market of franchising of child clothes, today, is free and it only just begins its formation, however the main players have become evident: Gloria Jean’s & Gee Jay, SELA Kids, ORBY и Born. And there are more retailers. It connects with the fact that this very conception takes many fewer resources. Natalia Chinenova, general manager of SELA Corporation, commented: “Nevertheless there are not enough producers and retailers. The biggest part of child clothes is sold in markets or in shops of the no name type as before”.
Comparing work of Russian and foreign operators in this segment, Olga Kuznetsova, marketing director of “Ricky- Ticky” Company, said that everybody had advantages and disadvantages: Russian chains- disadvantages of production but advantages of prices and deliveries, foreign chains- vice- versa.
Difficulties, exacerbating the problem and preventing development of child franchising, consist in the fact that Russian child franchising is young on its own, that’s why the problems are typical: lack of experience and qualified specialists, crudity of legal framework, a markup, the necessity of constant attracting of customers (it connects with quick growth of children) and high rent rates. Olga Kuznetsova explained: “Most of all shops of child goods are situated on the upmost floors of shopping centers; this fact takes them to the category of objective shops. According to measurements, attendance in multistory shopping centers falls on 50% floor after floor. It means that the rent rate of third floor should be 25% of the rent rate of the first floor. It happens seldom in realty”.
What does happen with franchising now- expansion or fall? Players of market agree: expansion. Besides they marked the fact that child segment against adult almost haven’t harmed: in the first semester of 2009 year, sales in shops of child clothes fell in a less degree than “adult” and in the second semester interest to child goods even increased. Svetlana Buravina, department manager of retail and franchising of “Gulliver” Company, said: “We, the representatives of child franchising, haven’t noticed neither fall of numbers of people which want to open own business not decline in turnover. At this time there is loaded growth of sales. Natalia Chinenova thinks that the present situation with franchising reminds the situation on USA market in 1950 years, when a great number of private entrepreneurs, having lost their work, were looking for a new business.
Interest to franchising, according to managing director of Born Company, Alexander Kashkin, can be explained by three reasons.
Firstly, during the crisis, people think about saving and growth of their capital, because “standard” variants (property, banks and so on) are a real risk.
Secondly, people, under conditions of the financial crisis, economize on child clothes in a less degree than on other goods.
Thirdly, in the beginning of the crisis, prices on rent decreased.
Soundness of franchising of child clothes shops can be proved by the fact that in 2009 year franchises of different companies achieved a success. In the chain “Gulliver”, the numbers of shops in Russian and Kazakhstan increased, the present franchises opened one or two extra shops. Partners at "Gulliver" became more on 16 %, and all of them get support on assortment, financial and credit questions. In company "Ricky-Tikki" franchise also managed to finish the year with its full complement. «Positive dynamic on sales, which in October, 2009 was not more low, and in some regions it was above level of October, 2008, is at the moment observed», – Olga Kuznetsova said. Sales volumes of franchise in Ecco Kids and Born haven't decreased.
Such a positive finish of 2009 year gives the opportunity to make a favorable forecast on 2010 year too. Svetlana Bulavina considered: “Business based on franchising, clearly, will be developing, and there are a really unfilled niche in the area of child goods. And this niche should be taken. With the end of the crisis people will have some savings and numbers of people which want to open own business will increase”, - Svetlana Bulavina considered. According to Natalya Cinenova’s opinion, development of retail and service industry in Russia completely depends on the situation with rent rates. Natalia Borisovne explained: “The Government can help franchising trough development of aid programs for small and medium business”.
Is the format of franchising attractive for first-time entrepreneur? Should he choose this very format or look for alternative forms of business? How much the franchising system is profitable for a young businessman? This way of conducting own business is now actual, as it is the most safe. The franchising which is led by skilled franchiser makes easier some aspects of a beginning businessman’s life, but at the same time it doesn't allow him to relax. Already checked up and fulfilled scheme with comprehensive support at all stages of start of the project is offered to him. Andrei Kashkin advices: “For success of the project, a potential franchise should have patience, persistence and the main thing he should understand the necessity of working on franchiser’s standards”. “How do you think what brand will be more successful on market: a brand which everybody knows or “no name” company? In what cases expenditures connected with development of advertising appeal and policy of positioning on market will be lower? Where will expenses on equipment, remount and light be lower? The answer is simple: in that place there are all the recommendations”- Natalia Chinenova added. According to the director of division of marketing and advertising of “Ecco- Ros” Company, Alexei Volkova, franchising is a “locomotive’ of the brand when a franchise steps in business process in which the most extravagant and difficult for small and medium size business (advertising, help with order compiling order, based on a large analytic work, staff training) a holding company takes upon itself. Svetlana Bulavinova inspired: “If you will relate to your business answerable and choose a right franchise suitable to your region and your money, if you will not boob with the place of trade and will promote brand actively- a success is guaranteed”.
Who are in child franchising?
“Nahalenok”
Russian producer of clothes of medium price segment, targeted audience- is children and teenagers from 6 to 14 years old. The company was founded in 2004 year, a franchising program- in 2006 year.
“Rikki- Tikki”
Founded in 2001 year Russian Company “Rikki- Tikki” took as a basis of work development of branded retail. At that time in the shops of the company there are child and teenagers (from birth to 14 years old) clothes of foreign brands “Coccodrillo” (Poland) and Krikets (Canada). Not a big part of assortment was child sport clothes Nike. In 2004 year the Company opened a design-office for creation of child clothes of own brand “Rikki- Tikki. A release of collections- 4-5 times annually (“school”, “New Year”, “summer holiday” and so on). In the same 2004 year a program of franchising was developed.
SELA Kids
Trademark SELA is one of the first Russian clothes brand, which became international not according to the title but according to the fact of distribution. SELA Corporation was founded in 1991 year in St. Petersburg. In 2008 year it created a new concept SELA Kids which was designed for children from birth to 11 years old. Developed by the Corporation in 1997 year package of documents on development of the retail chain on the base of franchising has howling success up to now, it is applicable to SELA Kids too. SELA Company, annually, navigates the contest “Gold mannequin” for the best franchise in the region.
Born
Russian producer of clothes for children and teenagers has been working since 1998 year, franchising was offered in 2006 year. For four years the numbers of enterprises has increased to 35 objects, 31 from them are franchise. In January- February 2010 year the Company plans to open three other franchising shops
Gulliver
Trading house “Gulliver and Co”, opened in 1997 year, makes not only fluffy toys but sews in owned factory child clothes. Owned brands of the Company: Gulliver (child clothes and toys) and Sonya (dolls with accessories). Clothes of Gulliver brand are designed for children from birth till 12 years old. In every season there are 16 collections. In the plans of the Company there is active development of Gulliver on Russia and Kazakh market.
Unistyle
Opened in April 1999 year, the company Unistyle produces child clothes under Unistyle and ULC brands. The latter appeared in April 2006 year. The company has two garment factories in Ivanovo and Kineshma, and besides a knitting factory “Rekcton”. In May 2007 the first branded shop ULC was opened and in February 2008- the first shop according to franchising system. The number of branded shops is 11.
Orby
Russian Company based in 2003 year. It produces clothes for children from one year till 12 years old. Every seasonal collection is completed by school suits and holiday clothes. Except the main brand the Company developed the second cheap brand BOOM! By Orby, the collections of which are developed two times annually.
Franchising program was started in 2008 year and in 2009 the company offered its potential partners simplified variant of collaboration- Orby light. Today, 38 branded outlets are opened and 7 other prepare for starting.
Ecco Kids
A single representative of foreign retail (in this case- Danish), the company “Ecco Ros” was founded in 1991 year. Child line was created after 17 years. Collections Ecco Kids are designed for growing children and Ecco infants- for babyes. Four shops Ecco Kids were opened in the beginning of 2008 year in Tolyatti and St. Petersburg. Franchising direction on the whole was started in 2001 year, childish- in 2008 year.
In 2010, according to the director of marketing and advertizing department of company "Ekko-grew", Alexei Volkova, the quantity of shops Ecco will increase a minimum by 10 %.
Except the named trademarks some more firms sell franchise, for example, Unique, Pixel, "Karapuz", Wenice Kids. Others, such as «The childhood World» with mark "Etti-Detti", having started franchising system, at once gave up on it , having developed the similar offer, but under other name – a firm format of trade (see article in this number).
Advancing the company, franchisers do accents on different factors of success. Alexander Kashkin from Born says that all technologies and know-how are created especially for the domestic market, and expenses for shop opening under trade mark Born are quite low. Olga Kuznetsova underlines that "Ricky-Tikki" is a multiband in which stability of sales is above, than in a monobrand, it is important that franchises receive a delay on payment of deliveries. Alexey Volkov from "Ekko-Ros" pays attention to great volume of support of the brand. General Director of SELA Natalia Chinenova tells about wide assortment and the flexible price policy for the partners.