Housewares boutiques instead of: as the new network takes the main streets of Moscow

General Director of “Mohottala” Vladimir Mekhedov daily collects information about the customer shops — it formed the basis of most of the range of the store

Founder and co-owner of “Mohottala” Suren Zotova quite confusing for traders the main problem is 1st Tverskaya-Yamskaya Moscow and other main shopping streets — Parking is difficult not only at the store, and in principle nearby. “If I was counting on motorists, I’d opened auto parts stores” jokes Zotov in conversation with the correspondent of RBC.

Their stores businessman opens in the calculation primarily at buyers who live within walking distance. “The most expensive in the metropolis — time, and in most shops with a wide range of products for the home need to go outside Moscow,” explains Zotov.

“Mashopttorg” began to develop in July 2015: by mid-March 2016 in Moscow, he worked for 22 stores, including at the beginning of the New Arbat, Kutuzovsky Prospekt and on Sretenka. Rapid growth helped the crisis: in early 2014, the share of vacant retail space in the heart of the capital and, in particular, on the 1st Tverskaya-Yamskaya began to grow. The company, which often kept the unprofitable shop on main street “to image” and put up with expensive rent, could no longer afford “business card”.

On the 1st Tverskaya-Yamskaya shop “Mohottala” change the Bank “Orient Express”, in Novy Arbat took the place of the shop “White wind Digital”, on Dorogomilovskaya the shop used to Enter, on Sretenka — Hugo Boss, lists the head of street-retail consulting at JLL Yulia Nazarova. It is the emergence of a large number of vacant premises, rental rates in rubles and the willingness of owners of premises at significant discounts given the “Mashopttorg” the opportunity to Express themselves, she said.

According to Knight Frank, the leasing of premises “Mohottala” on the 1st Tverskaya-Yamskaya today can cost anywhere from 27 to 30 thousand rubles. per 1 sq. m against 38 to 40 thousand rbl. for 1 sq. m last year (at the rate of 62 rubles per dollar). While the rate for the room on Kutuzovsky Prospekt has decreased by half — to 40 thousand roubles for 1 sq. m. Zotov admits that the situation with commercial real estate in Moscow allows him to obtain from the owners of premises good conditions — only ruble-denominated contracts on long term, monthly vacation rental during repairs for quality indexing rates.

50-220 thousand rbl. for 1 sq. m a year — this is the spread of the cost of rental on the Central streets of Moscow

To open stores in shopping malls business wants fundamentally. “Working “on the street”, I know people that live in this quarter, they are becoming more affordable, we feel, we know where and what the consumption. We must be good neighbors to these people. While at the Mall you neighbor only neighboring store,” explains Zotov your strategy.

In the context of image, this strategy should work. The shops on the main street with large luminous shop Windows attract the attention of consumers, says consulting managing partner, Watcom Shop Mechanics Dmitry Netkach. But then it should move if not in shopping malls, at least in the sleeping areas, where shops with a wide range of household goods is not enough, he said.

At the request of the buyers

On Dorogomilovskaya glowing sign, “Mohottala” visible from the shopping center “European”. Here Zotov and partners opened the largest store of its new network — 500 sq m retail space (average store “Mohottala” occupies about 250 square meters). The huge glass showcases neat racks, mostly with farm products: shelves with the means and devices for cleaning and cosmetics are replaced by a corridor from shovels and brooms, and some tool for repair — kitchenware, small appliances, stationery, the goods for rest, sports equipment, even seeds and a bit of children’s toys. Most products in the shampoo shops “1000 trifles”.

The range is formed literally by the requests of users, explains the Manager of the network “Mashopttorg” Ilya Polyakov. Every day the staff collects a list of goods, which the buyers are interested in sales consultants. If the requests are repeated and this product is no longer — it is added to the matrix. For example, the last innovation was the mass perfume brands — from Adidas to Dolce & Gabbana.

Reports about interested buyers, a tradition that originated in another retail project Zotova and partners — network Krepmarket that specializes in nails, screws and other fasteners and currently generates the main income. First four stores of the “Krepmarket” were opened for the construction market of Moscow and Moscow region in 2003, the network now has 106 stores, including franchises.

The mounting portion of the range of nursing network «Krepmarket" came in stores «Mohottala”, says managing networks Ilya Polyakov
Photo: Semyon Kats for RBC

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The mounting portion of the range of nursing network Krepmarket came in stores “Mohottala”, says managing networks Ilya Polyakov Photo: Semyon Kats for RBC

According to the company, revenue of the company Krepmarket in 2014 amounted to 1.2 billion rubles., net profit — 103 million rubles According to the forecast (financial year ends at the end of March 2016), the sale of “Krepmarket” in 2015 will grow by about 60%, to 1.9 billion rubles.

Judging by the lists, which sellers passed Lieutenant, buyers were interested in the presence of soap, utensils and even aromatic candles, says Polyakov. Some categories of consumer goods, such as household chemicals, tried to implement in “Krepmarket”, but to organize the sale of all kinds of goods, which asked customers, it was impossible, he says. Therefore, the partners decided to build another network — hardware stores medium format.

Half a billion on the network

The concept, structure and design, as well as the name of the store Zotov, according to him, invented and painted on a piece of paper in 10 minutes at one of the meetings. As Polyachkov, it’s a family business: Zotov and Polyakov — cousins, the General Director of a network Vladimir Mekhedov — in-law Suren Zotova, but all strategic decisions are taken only by Zotov. Mekhedov and Polyakov in the beginning sold fasteners and tools on the market, Zotov developed grocery stores in the Kaluga region. After the sale of his little network, he together with the relatives decided to develop Krepmarket.

From the nursing network “Mashopttorg” got a small number of fastening products and other hardware products in the range, and General distribution center near Moscow. The rest of the business processes of companies, according to Polackova, are completely separated.

Spanish friends

The founder of the chain stores Krepmarket and “Mashopttorg” Suren Zotov appears in Spanish documents of the special Prosecutor for the case, which is called “the case of the Russian mafia in Spain”. In the Protocol of the preliminary investigation directed for consideration to court, prosecutors accused of creating factions on money laundering several Russians, including Gennady Petrov, Alexander Malyshev, and others. Based on the minutes the New Times in December published its investigation, and later a full translation into Russian was published on the website of the organization “Open Russia”.

In the document, sent, as indicated by the “Open Russia”, the criminal chamber of the National court of Spain in Madrid, Zotov mentioned in the description of the surroundings of Alexander Malyshev. “<…> The third stage are Ildar Mustafin, Ruslan Tarkovsky and Suren Zotov, managing part of the economic and entrepreneurial interests Malyshev”, — stated in the Protocol. Also in documents it is spoken about existence of a loan agreement between Peresvet S. L., which indirectly controls Malyshev, and “Krepmarket”. We are talking about a loan of €700 thousand from 22 August 2005.

Suren Zotov confirms his acquaintance and communication with Alexander Malyshev, but says it has nothing to do with business or any other activity of Alexander Malyshev. The existence of loans from structures Malysheva he denies.

Request sent to RBC at the Madrid Prosecutor’s office, went unanswered.

The format of the new stores was invented in 2013, but pilot shop “Mohottala” opened only in may 2014, and active development began in the middle of 2015. By the time they were 22, four were preparing for the opening.

Zotov said that the opening of one “Mohottala” area of 250 sq. m costs about 25 million rbl. “That’s a lot — surprised the General Director of the company “INFOLine-Analytics” Mikhail Burmistrov. — It turns out their shop is more expensive, “Pyaterochka”, which is on the square in the 400-450 sqm open for 20 million rubles, twice the price of the standard “Magnet”. Probably they are very much invested in repairs and equipment.” To recoup such an investment would require, according to his calculations, about six years — comparable to the payback periods for the hypermarket.

Zotov agree: the opening of the store comes out expensive. “But often the owners of the shops to announce that the launch cost them 3 million rubles, but this is not true. They indicate only their own money, and in this discovery the share of debt is very high: the Deposit for the rent, equipment costs, commercial debt, in the end, he is worth 15 million rubles”, — says Zotov. He expects the stores will come to a breakeven level in three to three and a half years.

To partially free up funds for the opening of shops of a new network, the team decided to close the unprofitable outlets “Krepmarket”: at its peak in 2014, the network consisted, according to the magazine “a firm Secret”, over 200 stores, now there are only 106.

Anti-crisis ambitions

For the first six months revenue for the new network amounted to 550 million rubles., EBITDA — on 17%. “Very good indicator” for the new network, said Zotov. Judging by the number of issued loyalty card, she has not less than 34 thousand customers. By the end of 2016, the network should be doubled — up to 44 stores. Then annual revenue will be about 2 billion rubles, counting the founders “Mohottala”.

Has not done without surprises. “We were expecting peak sales before the New year, but it just never happened,” says Polyakov. Crisis the mood of the buyers make, “Mashopttorg” thorough approach to the range of stores: part of the positions from the commodity matrix was eliminated, says Polyakov, refusing to disclose details.

Another challenge facing “Mohottala” and the majority of retailers, the devaluation of the ruble. More than 50 thousand items offered by the network, the import accounts for 65%, with 95% of contracts are direct contracts with factories. Products popular foreign brands, cosmetic and economic, over the past year and a half on the shelf has risen on average by 40-50%, says commercial Director of the network drogerie “smile of the rainbow” Nikolay Krasheninnikov. In 2015, the sale of goods from mid-price and expensive segment decreased almost 50% in real terms.

“Mashopttorg” seeks to purchase goods of companies that are poorly represented on the Russian market. “When we all have one and the same product, it is not a market game and not the price tag. Not interested,” explains Zotov. According to the founder network, buyers try to work directly with factories. The average mark of the goods — 80%, there are categories where it exceeds 100%. According to Krasheninnikov, this mark-up is justified, especially for small goods, which are expensive to maintain.

The share of goods produced in Russia, “Mohottala” small: most often, according to Zotova, the goods of similar characteristics and of comparable quality in Europe can be found cheaper. But Russian goods on the network has — textile, crystal, fertilizers and seeds. Head of sales Department of the company “the First decision” (brands Natura Siberica, “Grandmother Agafya”) Anna Selezneva says that in 2016 with “Mohottala” was concluded the direct contract delivery. To compare this network for the indicator of average sales with other stores too early, she says, but “Mashopttorg” already significantly increased the volume of purchases. “They are very ambitious,” says Seleznyov.

Free niche

According to the map service 2GIS, at the beginning of March 2016 in Moscow was 2075 stores in the category of “Household goods” (not counted in the statistics of relevant departments in grocery stores). Food stores were almost four times more — 7941, and pharmacies — in 2.5 times (4977).

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Niche hardware stores within walking distance far from the “saturation point”, said a representative of the manufacturer of cosmetics and household products Henkel. Especially the lack of stores of this format are evident in the Central areas of large cities, he said: “market Players are just poking the most successful business models”.

“On intersecting categories of range “Mashopttorg” competes with so many retailers, but as that segment of the hardware stores does not exist”, — says Mikhail Burmistrov. Still the main players in this niche were obsolete brick and mortar stores household goods. The company, according to the expert, managed to get in two important trends: saving for all consumers, first, were less likely to visit the restaurants and started cooking at home, and secondly, cut spending on repair, but still tend to buy inexpensive items for the home.

“INFOLine-Analytics” following the results of 2015 for the first time in seven years, recorded a decrease of sales in DIY stores in 2015 its turnover amounted to 1.46 trillion, or 4,89% lower than a year earlier. The number of visits to restaurants in eight major cities in the first nine months of 2015 decreased by 4% and in monetary terms, the market grew by only 2%, which was calculated by the NPD Group.

On the format and range of the network should still work, says Burmistrov. “As, for example, sales of small household appliances, we can compete with “M. Video”? It’s a very different purchasing power,” says he. It is because of this competition hypermarkets, according to the expert, reduce the number of appliances in its range. A large — area more than 300 sq. m — shops “Mohottala” in terms of revenue per square meter is unlikely to be able to compete with X5 Retail Group and “Magnit”, he warns.

The basic format of “Mohottala” — yet the average household stores format “at home,” says Zotov. In the street he sees several niches: the businessman is considering the concept of two new networks — food and non-food.