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Stalin Shutdown Survivor’s Owner Brings Luxury to Masses By Bloomberg 18 November, 2013

Bosco di Ciliegi store in GUM Mall, Moscow | Source: Ariff Shah via Flickr

tiffany MOSCOW, Russia — On rainy days, the GUM mall on Moscow’s Red Square swarms with tourists. Unfortunately for GUM, the hordes seeking shelter tend to do more looking than buying, in large part because the big-brand fashions there cost about 50 percent more than they do in Paris or London.

tiffany silver That’s a problem for GUM’s owner, a closely held Russian retailer called Bosco di Ciliegi. Without the reliable cash from tourists that fuels profits at department stores like Galeries Lafayette in Paris or London’s Harrods, Bosco has started to look beyond its flagship to new outlets across Russia, where it can win over local shoppers rather than visitors.

tiffany and co outlet “Tourists don’t buy an Ermanno Scervino coat here” because of high prices due largely to import duties and value added tax, GUM Chief Executive Officer Teimuraz Guguberidze said while sipping tea in his office overlooking Lenin’s mausoleum on the third floor of the mall.

cheap tiffany & co For the next five years, Bosco plans to focus on adding stores in four cities outside the capital — St. Petersburg, Sochi, Yekaterinburg, and Samara — because “future growth will come from the regions,” the CEO said.

tiffany outlet The Russian fashion retail market expanded 11 percent last year to about $50 billion, of which Moscow accounted for $6 billion, according to researcher INFOLine.

tiffany outlet Sochi Olympics

“Bosco’s expansion into regions looks logical,” said Anna Lebsak-Kleimans, head of the Moscow-based Fashion Consulting Group. She estimates the fashion market in Sochi, home to the Winter Olympics in February, is set to grow as much as 10 percent a year, more than twice the pace of Moscow.

Russia’s other two biggest luxury retail groups have followed a similar strategy, though they’re being more cautious. Mercury, which owns Moscow’s Tsum department store and represents brands such as Dolce & Gabbana, Giorgio Armani and Tiffany, opened a department store in St. Petersburg last year and has had shops in luxury hotels in Sochi and Yekaterinburg for several years. JamilCo, which represents DKNY, Burberry, and Escada, has stores in Yekaterinburg and Rostov. Neither company plans to enter more markets outside of Moscow.

Bosco di Ciliegi, which means Cherry Forest in Italian, a nod to Russian playwright Anton Chekhov, was founded by entrepreneur and Italophile Mikhail Kusnirovich in 1991. The company helped bring foreign brands back to the country after the fall of communism when it partnered with luggage maker Mandarina & Duck to sell upscale items such as $400 handbags. Ventures with fashion houses Nina Ricci and Kenzo followed, bringing luxury stores to a nation that had experienced little more than drab shops for seven decades.

Stalin’s Shutdown

In 1995, Bosco opened its first outlet in GUM — the Russian acronym for “Main Universal Store,” though under communism the same name stood for “State Universal Store.” GUM, a series of arcades connected by vaulted glass roofs, has been shaping the way Muscovites shop since 1893. It survived the Bolshevik revolution and a decades-long shutdown by Stalin, who wanted to demolish the architectural treasure to make more room for parades.

After Stalin’s death, GUM reopened as a showcase of the best goods the planned economy could offer, and some areas — with the best of the best — were reserved for Communist Party officials. It’s now flourishing again as luxury stores mingle with Soviet-era throwbacks like an ice-cream stand that offers cones for an affordable 60 rubles ($2) per scoop.

In 2004, Bosco bought the shopping center aiming to improve the facility and buff up the service in its shops. Now, Bosco operates stores for itself and partners in about a third of GUM’s 30,000 square meters of retail space and rents out the rest to brands ranging from Samsung to Louis Vuitton.

Shop Clusters

Bosco also manages shopping centers across Moscow and in other Russian cities, including about 80 sportswear outlets called Bosco Sports. The group’s annual sales are about 500 million euros and the CEO said it’s profitable, though he declined to give details.

Outside Moscow, Russian cities have few malls or department stores with concentrations of high-end shops, Guguberidze said. So the company is developing clusters of single-brand shops in central locations in the four cities it’s focusing on. A new outlet for a global brand in Samara — a Volga River port city of 1.2 million that has just a few fashion boutiques — will attract far more attention and customers than one in Moscow, which has hundreds of similar shops, he said.

Bosco isn’t giving up on Moscow, where its GUM flagship, just steps away from the Kremlin and St. Basil’s cathedral, attracts about 11 million people a year. To persuade the crowds to stick around, Bosco is adding more trees, benches, and dining options.

Wine, Vodka

The company is also lobbying the government to offer value added tax refunds to foreigners, which would bring prices more in line with the European norm by returning 18 percent of the purchase price to them — something tourists in most European countries have enjoyed for decades.

And Bosco is trying to create a more refined mix of stores, Guguberidze said, adding brands such as Max Mara, Moschino, Emporio Armani and Etro.

“In Russia, the consumption of good wine is increasing and consumption of vodka is decreasing because the consumer culture is growing,” Guguberidze said. “The same thing is true with fashion.”

By Ilya Khrennikov; Editors: Celeste Perri, David Rocks, Kenneth Wong

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Very cool. I first went to GUM in the fading days of the USSR, in 1989. Pretty grim and uninspiring. I went there again in 1997, much better, but still pretty unimpressive my the standards of New York or Chicago. The pictures above make it look like they’ve upgraded it quite a bit since. I’m excited to see it again!

Regarding the strategy of building in the provinces, I would recommend that Bosco di Ciliegi make sure they do their market analysis. There has always been more money, especially big luxury money, sloshing around Moscow than anywhere else (except maybe St Pete’s). There might be demand for upscale markets in Ekaterinburg, or there might not, be sure to check it out.

Dave Kaiser Business Coach to Fashion Entrepreneurs http://www.FashionBusinessSuccess.com

Dave Kaiser from Clarksburg, WV, United States 19 November, 2013 at 8:06 PM TRENDING Most read With New Launches, i-D and Dazed Embrace Digital-Age… Estee Lauder’s Granddaughters Become Billionaires on… How Vika Gazinskaya Put Herself on the Fashion Map China’s Constant Flux For Brands Big and Small, Fashion Archives Can Be a… Felipe Oliveira Baptista Says Go Slow and Don’t Court… Manolo Blahnik Women’s Wingtips Seen Curbing Shoe Slump H&M Grabs More Control of Asia Factories Amid… Join BoF for a Live Conversation with Tory Burch, 26… Burberry Group First-Half Revenue Jumps as Online Sales… Most commented Stalin Shutdown Survivor’s Owner Brings Luxury to Masses China’s Constant Flux For Brands Big and Small, Fashion Archives Can Be a Powerful… With New Launches, i-D and Dazed Embrace Digital-Age… BoF Exclusive | How Stefano Pilati Plans to Modernise Zegna Kering Sees Very Significant Drop in 2013 Net on Puma,… Join BoF for a Live Conversation with Tory Burch, 26… Estee Lauder’s Granddaughters Become Billionaires on Beauty… Manolo Blahnik Women’s Wingtips Seen Curbing Shoe Slump Week in Review | Second-Hand Clothes, i-D and Dazed, Asian… Most shared For Brands Big and Small, Fashion Archives Can Be a… With New Launches, i-D and Dazed Embrace Digital-Age… How Vika Gazinskaya Put Herself on the Fashion Map Felipe Oliveira Baptista Says Go Slow and Don’t Court… China’s Constant Flux Estee Lauder’s Granddaughters Become Billionaires on… After Identity Crisis, Brazilian Fashion Shows Momentum Burberry Group First-Half Revenue Jumps as Online Sales… H&M Grabs More Control of Asia Factories Amid… Join BoF for a Live Conversation with Tory Burch, 26… SUBSCRIBE TO THE BoF DAILY DIGEST

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Date Added: 2014-01-13 22:34:53   Posted by: tlabeotsbran    FLAG