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Lee cooper Russia

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Lee cooper Russia

  1. 1. Lee Cooper in Russia Roseleen Bakshi 25th June 2009 Steve Manners, VP Brand Development Louise French, AVP Marketing & Business Development Serena Sibbald AV P
  2. 2. Today we will cover…. Hard metrics versus soft data Selecting channels for Lee Cooper for the middle market. Which geographies to target? Which players to target for Lee Cooper? Which retailers to target? Timeline
  3. 3. Hard data is bad… 2007 GDP (UBS) GDP (Verdict) Consumer Expenditure (UBS) Unemployment Rate (UBS) 2008 2009E 2010E 8.10% 7.20% 3.50% 4.50% 8.10% 5.60% -4.50% -2% 12.80% 13.10% 6% 5% 11.90% 13.30% 14% …but it’s not all bad … 2007 Interest Rate (Verdict) Inflation Rate (UBS) 2008 2009E 10% 12% 13% 9% 14% 2010E 10.90% Oil revenues make up around a quarter of Russia’s GDP. Current Oil prices levels are low Russia’s economic recovery will return as oil prices recover. 8%
  4. 4. …but from the soft data: there is hope KPI Do you think your country will be out of an economic recession in the next 12 months? Percent saying yes. 60% 56% 50% 40% 29% 30% 24% 24% Spain 23% Italy Germany US Canada 18% 20% 22% 19% Brazil 22% 32% 13% 10% 2 3 4 5 Very Strong Growth: >= +5% Growth: between +1 and plus 4% Neutral: between -1 and +1% Negative: between -1% and -4% Very Negative: <= -4% India 1 China Top actions Consumers are taking to save Russia 53 Country Average UK France 0% 11%
  5. 5. Reasons for the Crisis in Russia: Oversupplies of imported Garments during the Boom Phase from 2002 till 2007 Management Defaults hidden by the Boom Phase: Only 40 % of independent clothing retailers monitor and evaluate throughselling results during and after the end of retail seasons budget- and portfolio planning still based on emotional rather than rational indicators (vertical against horizontal portfolio planning) Calculation of retail prices, based on“commonly practiced” mark-ups of in between 2,8 and 3,8 and not by full cost assessments according to western business administration standards display of merchandise characterised by “more is better” rather than by “less is more” no awareness for professional visual merchandising and window decoration shop managers not capable to teach sales personnel in service orientation towards consumer clients
  6. 6. Clothing forecasts have been adjusted downwards 70 57,6 (+10%) in bn US $ - 60 60,5 (+5%) 52,3 (+15%) 45,5 (+20%) 50 1/3 37,9* (+26%) 40 30,0 (+33%) 22,7 (+28%) 30 17,8 (+45 %) 20 30,3 12,3 (+41%) 8,7 31,9 2007 2008 35,1 37,9 40,0 2010 2011 10 0 2002 2003 2004 2005 2006 2009 …but on a relative basis still look good… Country Per capita consumption of clothing $US 2007 2011 Russia 267 426 Germany 460 424 * Source: ITMM GmbH, Stuttgart
  7. 7. Lee Cooper can benefit in present crisis Cost of lease for retail space at Shopping Malls and Trade Centres down by 30-50 % against Spring 2008. Cost of building materials, shop construction and furnishings depreciating by similar rates. Salaries and wages put on freeze for 2009 or under negotiation at cuts of 25 %. Availability of skilled human resources surging at lower salaries.
  8. 8. Today we will cover…. Hard metrics versus soft data Selecting channels for Lee Cooper for the middle market Which geographies to target? Which players to target for Lee Cooper? Which retailers to target? Timeline
  9. 9. Projection on Market Shares of main Clothing Retail Categories in Russia, 2008 YES NO YES NO
  10. 10. Which channels do the middle classes prefer? Russia’s middle class consumers often frequent modern shopping centers and boutiques: more value focused consumers usually prefer hypermarkets out-of-town and expanding fast fashion players like Gap, H&M and Inditex. A multitude of street stalls and markets also survive as they are often the cheapest in the clothing sector. 3,000 such markets are active in Russia today, but their number and share of total clothing sales is diminishing. Source: Verdict Research
  11. 11. Today we will cover…. Hard metrics versus soft data Selecting channels for Lee Cooper for the middle market Which geographies to target? Which players to target for Lee Cooper? Which retailers to target? Timeline
  12. 12. Seven large Russian Federal Districts to be critically observed Northwestern Region Far East Moscow Central Region Northern Caucasus Source: Volga Ural Siberia
  13. 13. Scoring Regions in regard to the Viability of Fashion Retail Market 3.25 Northwestern Region Moscow Central Region 4.14 3.8 Volga Northern Caucasus Far East 4.0 3.38 Ural 4.0 Siberia 3.29 Footnote: 1= very good viability, 6 = very bad viability Source: UBS 4.0
  14. 14. Regional Retail Market Analysis YES Far East Federal District has the lowest share of retail sales (4%) in Russia. Central Region & the Urals are two Federal Districts with income per capita than Russia’s average of $580. Northwestern Region Far East Moscow Central Region Volga Ural Siberia Northern Caucasus The most dynamic development of retail sales in 2008 was demonstrated by the South, Urals & Volga Districts 34%, 33% and 32% y-o-y , respectively YES NO
  15. 15. Today we will cover… Hard metrics versus soft data Selecting channels for Lee Cooper for the middle market Which geographies to target? Which players to target for Lee Cooper? Which retailers to target? Timeline
  16. 16. Criteria of Players choice
  17. 17. VF CORPORATION www.vfc.com VF Corporation makes branded apparel including Jeans wear, intimate apparel, sportswear, outdoor products and workwear. PORTFOLIO Lee, Wrangler, Riders, Rustler, Vanity Fair, Vassarette, Bestform, Lily of France, Nautica, John Varvatos, JanSport, Eastpak, The North Face, Vans, Napapijri, Kipling, Lee Sport and Red Kap. Why? YES Key supplier of related denim brands in Russia
  18. 18. FIBA HOLDING www.fibaholding.com Founded in 1987 Fiba Group controls an investment portfolio of highvalue brand names in both financial and non-financial lines of business. It has 63 companies in 15 countries with $20 billion total assert & $4 billion total equity. Group's international financial investments have increased by 35% in 2008. PORTFOLIO Franchising rights of Marks & Spencer Russia in 2005 with 14 stores and 512 employees in Russia. Gap Russia it operates with 3 stores in 2 different locations. Banana Republic stores are expected to open for the 2009 holiday season in Russia. Why? YES Key supplier in our target department stores & our target independent stores
  19. 19. Jamil Co. Group Holding company with international management and international business standards. JamilCo. has been active on the Russian retail market for luxury and casual clothing and accessories of major international brands since 1993. PORTFOLIO JamilCo Group has represented the Levi’s® brand since 1988, opening the first Levi’s® store Moscow in 1993. Represent Coach brand in Russia. Why? YES Key supplier (long established) denim supplier in our target regions
  20. 20. PPE Group – Mail order Founded in 1999, the PPE Group is today Russia’s leading mail order company, operating across the entire country. The Otto Group owns 70 percent of the cooperative venture and the PPE Group 30 percent. PORTFOLIO Mail order OTTO is aimed at women between the ages of 24 and 45 and families. Bonprix is for the particularly price-conscious customer. Witt International is aimed at an older and established target group, who are looking primarily for quality in their purchases and prefer a classic dress style. E-commerce & Logistics The second company, “Business Service”, is building the required warehouse and logistics center in the town of Tver, along with a call centre for order taking and customer service. Why? YES Market leader in mail order / internet in Russia
  21. 21. Today we will cover…. Hard metrics versus soft data Selecting channels for LeeCooper for the middle market Which geographies to target? Which players to target for Lee Cooper? Which retailers to target? Timeline
  22. 22. Choosing Retailers For Lee Cooper….
  23. 23. Which cities? Expansion of Trade Centres and Shopping Malls as Key Driving Factors for Allocation of new Clothing Retail Stores in the Russian Region over the Period 2002-2008 City Map of Russian subdivisions by GDP (GRP) per capita. (2006) Source: Russian Federal Service of State Statistics of the Gross Regional Product (GRP, end of 2006), and population (1 January 2007). Estimated Number of 10406 991 1,308 1,030 4,581 1,139 1,143 1,113 1,093 993 1,387 1,055 921 10000 620 1,400 760 4,560 480 760 640 700 600 760 520 440 Nishnij-Novogorod Sub Total Tumen Kirov Saratov Kaliningrad Krasnodar Pensa Magnitogorsk Tula Togliatti 1,284 15,763 542 469 850 424 710 510 413 509 705 970 11,620 400 360 320 360 300 300 240 200 200 Subtotal 5,132 2,680 Total 20,895 14,300 Source: USB Competitors Retail Stores of Clothing located at commercial centres (2008) Moscow Volgograd Ekaterinburg Ufa St. Petersburg Omsk Samara Kazan Chelyabinsk Perm Novosibirsk Rostov-on-Don Krasnojarsk >$10'000 >$5'000 >$3'000 >$2'000 >$638.82 Population in 1.000 LEVIS STORES 26 4 3 3 2 2 2 1 1 44
  24. 24. …and which retailers? Expansion of Trade Centres and Shopping Malls as Key Driving Factors for Allocation of new Clothing Retail Stores in the Russian Region over the Period 2002-2008 INTERNET/CATALOGUE QUELLE RUSSIA Number of Denim Brands 12 Likely Size of Opportunity for Lee Cooper Financial Stability Established in Russia since SALES (2007) CUSTOMERS GROWTH SKUs. PAGES HIGH INDEPENDENT MULTI/MONO BRANDS CITY Moscow St. Petersburg Ekaterinburg Samara Ufa Nishnij-Novogorod Kazan 5KARMANOV 16 2 2 2 4 1 1 Perm 1 1 Novosibirsk Rostov-on-Don 2 Number of Denim Brands Likely Size of Opportunity for Lee Cooper Financial Stability Established in Russia since SALES 1 1 Omsk Krasnojarsk OTHER TOTAL Priority Source: 1 1 Chelyabinsk Volgograd STABLE 2,005 115BN 30M 40% IN 2008 offering 100,000 600-page catalogue JEAN SMPHONY 1 1 1 1 1 1 10 43 1 10 9 2 25 HIGH NA HIGH NA NA NA NA NA DEPARTMENT STORES CITY Moscow St. Petersburg Krasnodar Nishnij-Novogorod Ekaterinburg Ufa Total Priority Number of Denim Brands Likely Size of Opportunity for Lee Cooper Financial Stability Established in Russia since SALES STOCKMANN TOPSHOP 6 1 5 3 2 7 0 2 10 HIGH STABLE 1,989 250 M EURO 1 9 HIGH 2,006
  25. 25. …and which retailers? Expansion of Trade Centres and Shopping Malls as Key Driving Factors for Allocation of new Clothing Retail Stores in the Russian Region over the Period 2002-2008 INTERNET/CATALOGUE INDEPENDENT MULTI/MONO BRANDS YES QUELLE RUSSIA Number of Denim Brands 12 Likely Size of Opportunity for Lee Cooper Financial Stability Established in Russia since SALES (2007) CUSTOMERS GROWTH SKUs. PAGES HIGH YES YES CITY Moscow St. Petersburg Ekaterinburg Samara Ufa Nishnij-Novogorod Kazan 5KARMANOV 16 2 2 2 4 1 1 1 Perm 1 1 Novosibirsk Rostov-on-Don 2 Number of Denim Brands Likely Size of Opportunity for Lee Cooper Financial Stability Established in Russia since SALES 1 1 Omsk Krasnojarsk OTHER TOTAL Priority Source: JEAN SMPHONY 1 1 1 1 1 1 Chelyabinsk Volgograd STABLE 2,005 115BN 30M 40% IN 2008 offering 100,000 600-page catalogue DEPARTMENT STORES 1 10 43 1 10 9 2 25 HIGH NA HIGH NA NA NA NA NA May be CITY Moscow St. Petersburg Krasnodar Nishnij-Novogorod Ekaterinburg Ufa Total Priority Number of Denim Brands Likely Size of Opportunity for Lee Cooper Financial Stability Established in Russia since SALES YES STOCKMANN TOPSHOP 6 1 5 3 2 7 0 2 10 HIGH STABLE 1,989 250 M EURO 1 9 HIGH 2,006
  26. 26. In Independent Multi-brand 5KARMANOV, JS casual, Fashion Mart is good channel…..
  27. 27. Today we will cover…. Hard metrics versus soft data Selecting channels for LeeCooper for the middle market Which players to target for Lee Cooper? Which geographies to target? Which retailers to target? Timeline
  28. 28. Retail in Russia Timeline: past, present and future 2000-2012 Source: Verdict Research
  29. 29. Lee Cooper Timeline in Russia A/W 2010 Initial Meeting w/ Potential Brand Knowledge & Initial Meeting w/ Potential Brand Knowledge & Training sessions Training sessions Licensees Licensees Finalization of Licensee Finalization of Licensee Deal negotiations Deal negotiations & sign off & sign off Initial meetings Initial meetings on on BUSINESS PLAN BUSINESS PLAN Present Product Present Product A/W 2010 A/W 2010 Weekly & Season Weekly & Season sales analysis sales analysis Support w/ Support w/ marketing marketing programmes programmes Launch Launch Business Business plan plan approval approval Dec ‘09 Dec ‘09 Review marketing & sales Review marketing & sales strategy AW2010 strategy AW2010 Feb ‘10 Feb ‘10 Aug ‘10 Aug ‘10 Feedback Feedback Loop Loop
  30. 30. Lee Cooper Timeline in Russia

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