Rus News Journal

Feel retail

the Moscow wholesale company working in the federal market, tries to expand the business, developing a retail direction. With a competition aggravation in wholesale sector it becomes for it the vital problem. Opening of own shops and the conclusion franchajzingovyh contracts with trading partners yet do not give desirable result.

points of support
the Company has been based about 10 years ago and originally worked in several trading directions. Later she has decided to concentrate on wholesale deliveries of house furniture and home appliances, including built in. In Company assortment the kitchen theme dominates. The technics is bought mainly from leading world manufacturers (all 15 marks well-known to the wide consumer: Ariston, Bosch, Electrolux and etc.) . The supplier delivers furniture basically from Italy and Germany.

the Company, according to the head of a direction Nikolay Meshchaninova, is included into the five of the largest wholesalers of such profile in the Russian market and has reputation of the reliable and favourable supplier among clients.

Meanwhile in the last two days the situation in business has seriously changed. Concentration of the market has increased - on separate trade marks it is necessary a minimum on ten dealers though really wide multibrand assortment simultaneously with the Company deliver no more than 6 - 7 capital firms. (On exclusive deliveries foreign manufacturers now try not to conclude contracts.) In the conditions of a competition aggravation between wholesalers profitability of deliveries steadily falls. If during former times the margin on home appliances sometimes reached to 40 - 50 % now it seldom exceeds 10 %, the tendency to the further decrease in a margin is thus clearly visible. So, on some commodity groups it is a question about 5 % of profitableness - the Company is compelled to close such directions.

Under the pressure of circumstances in the Company have come to a conclusion that it is necessary to build own retail network - not so much as spare airdrome (refusal of wholesales is not included into plans of the supplier), how many for increase in turns that should compensate firm losses on wholesale front . The first shop opened by the Company on own means, has appeared in Moscow two and a half a year back and has shown good financial results. (The shop also provided the supplier with the valuable marketing information on preferences of end users that allowed it with bolshej accuracy to carry out wholesale purchases.)

Thus for creation of a high-grade retail direction in federal scale of the Company support of trading partners on places was required. But traditionally focused on wholesale, it had no sufficient experience of management by a regional retail network. At the same time prospective expenses on opening only the shops were not entered in any way in budgetary plans of the supplier.

we had an idea to work with retail partners on the terms of a franchise. We have developed a trade mark and have suggested partners to work under our brand - Nikolay Meshchaninov tells. As he said, the Company was obliged to create all necessary conditions for effective work of shops, namely: Smoothly and in due time to deliver the franchajzi wide assortment of liquid production at competitive prices (that is with discounts), always to have warehouse stocks of production of all sold commodity categories to give instalments of payment and samples for exhibiting in a trading floor to advise on all arising questions and to help with personnel training.

In exchange for it the supplier demanded from retail dealers of full loyalty, otherwise, forbade them to co-operate with someone else. However, conditions franchajzingovogo contracts originally (and the supplier has concluded the first similar contract one and a half years ago) were formulated not so strictly - shops had the right to use additional channels of deliveries, but in the long term should work only with franshizodatelem. The contract with franchajzi also provided possibility to raise a royalty, but till now the Company has never used it: The question is not solved, whether there should be it percent from a turn or the fixed monthly payments. we were afraid to frighten off partners, and our problem was to adhere them to myself, to make so that they did not leave from us to competitors - Nikolay Meshchaninov explains. At first with shops it was necessary to work under the scheme shop - in - shop, opening on the areas of clients mini - shops. However now for the new retail enterprises which have expressed readiness to leave under a wing of the wholesaler, the compromise it is impossible: one source of deliveries - the Company position of principle.

By cash desk
By this time the wholesaler has concluded two franchajzingovyh contracts in capital and one and a half ten in regions. Such rates of development of a network have appeared are close to the planned. Nevertheless results of retails of the supplier obviously do not satisfy. According to mister Meshchaninova, the average retail point in Moscow should bring about $70 - 80 thousand a month from which approximately half is necessary on technics and half - on furniture. Thus at the regional markets where while there is no Moscow heat of a competition, the potential is more - the sales volume there can is essential exceed capital level. So, in Moscow retail margins on the kitchen technics and furniture average 15 and 30 - 40 % accordingly, in regions these figures - 30 and 60 %.

But for today any of points with which the Company works, neither in Moscow, nor in regions did not leave on demanded indicators of profitableness. Moreover, some partners do not provide even half of due turn, trading less than on $30 thousand a month.

the Reasons of such position in the Company connect with two basic problems: Insufficient motivation of shops (and, as consequence, their low loyalty) and absence at the supplier of an effective control system franchajzi. Retail points do not observe the main treaty provision and on - former buy a part of assortment from competitors of the supplier. Without financial or any other levers of influence comparable by efficiency on partners the Company can do nothing with it. Competitors of the supplier offer the same production at the same prices and are at any moment ready to pass to it road. Loyalty of the most true partner easily breaks an additional discount or, for example, more operative delivery. At the same time to supervise retail and its communications with other suppliers for the Company it is too difficult and it is unprofitable - shops - franchajzi are scattered on all country, and its most remote partner is in Vladivostok.

Reorganization is postponed
With the beginning of development of a new direction in structure of the supplier there was a department on retails. But its efficiency the doubts, after all the general accounts department till now raises, lawyers and other valuable experts first of all serve wholesale business of the Company. Principles of the corporate device of the Company always corresponded to its basic specialisation. it is available the conflict of interests of two essentially different directions - wholesale and roznitsy, - Nikolay Meshchaninov speaks. - Wholesales always brought our company the profit lion`s share. Even despite considerable decrease in their profitability, the majority of office 50 employees of firm prefer to adhere to old style of work. Specificity of retails demands attention to each separate client, and wholesale - on the contrary. Here work on an absolute advance payment and by and large equally serve all without analysis. To carry out of the obligations on the same franchajzingovomu to the contract, it is necessary for us to keep constantly in stock all assortment of the delivered goods even if its some positions bring in the minimum income: the wide choice is necessary to shops. But to wholesale it is uninteresting. The skilled wholesaler will tell to you that it is much easier and more favourable to it to sell hundred refrigerators of one popular mark and model, than as much commodity units from different manufacturers and different updating .

the Stereotype of wholesales leads to that the retail direction de - fakto remains on periphery of strategic interests of the Company. Therefore some managers of firm suggest to create the affiliated management company which all employees will work only with retail clients. The management, however, does not hasten to make the positive decision - creation of independent structure with separate staff will demand considerable expenses, and the confidence of their recoupment both was not, and is not present. Investments into development roznitsy are interfaced to high risks, and the Company already had possibility in it to be convinced. So, one of its former retail partners to whom the payment delay has been given, could not sell a consignment of goods and till now has not paid off with the creditor.

All it prevents to separate wholesale and retail directions. Meanwhile in parallel with development of a franchise the Company intends to increase number of the shops. However, from the point of view of strategic priorities there is no accurate understanding, how many in the general retail turn should make own sales, and how many - sales of trading partners. Anyway in the long term we would like to receive the most part of the income from roznitsy, - mister Meshchaninov speaks. - But at its present return it is necessary to dream of it only .