A study of the luxury market conducted by CPP Consultants Ltd. found that Brioni, Ferragamo, Yves Saint Laurent, Givenchy, Jimmy Choo, Burberry, Bvlgari, Versace, Dolce & Gabbana, Valentino, M. Missoni and Aigner were among the brands that expressed interest in the local market. They saw great potential, particularly as a result of economic development and new EU membership.
This year there were no significant entrances from big brands, with the exception maybe of multi-brand types of stores. But next year big names are on the list: Louis Vuitton announced its arrival in March while yearend may see Emporio Armani and Armani Cafe.
The local market is low on evening gowns, suits for business women and wedding dresses, the latter being addressed only by local brands. The men's fashion segment also needs more development although 2007 brought some improvement, the CPP study shows. Alsa Boutiques moved its Zegna and Pal Zileri shops to a different location separating them. These were among the first luxury brands introduced on the market in 1993.
Franchise or multi-brand?
What is the best choice: a franchise or a multi-brand store? Oliver Petcu, general manager of CPP Management Consultants Ltd., says “it is a matter of option and…flair, which also has to do with the investors' long term plans.” Thus, if they want a business that should develop over a longer period of time in which profit comes gradually, a franchise seems the best choice. For a smaller investment, a multi-brand store is an option. The brands within the store can change, at the risk of losing coherence, it is true, but at the same time adjusting the costs.
The CPP study shows that Romania is one of the most dynamic markets in Eastern Europe. More and more wealthy Romanians try to show a newly- acquired status through the brands they consume. This is why Bucharest has seen an increase in the international brands on the market. However, none that appeared in 2006 are in single-brand franchise stores but rather in multi-brand stores.
The pros of opening a franchise include, first of all, the fact that a firm exclusively owns the brand on the respective market. Secondly, there is the possibility of carrying out an intense marketing and PR campaign for the brand, building a client data base, with the possibility of implementing loyalty strategies for customers. Employees can benefit from training and, last but not least, there is a high rate of profit because the buying price is much lower than in the case of the multi-brand stores, says Petcu.
On the downside, there are the initial investment costs which are rather high and the investment is not recovered for three or four years. Respecting the brand's global marketing strategy is also a requirement and this translates financially into high costs, covering the redecoration of the space once every three years so that the brand's identity is presented as well as possible. Petcu says the international brand imposes “the good representation of the brand,” which means acquiring products from all of its collections, even in small quantities, and the impossibility to adjust the volume of orders from one season to another.
The single-brand franchise stores that have entered the market so far are Max Mara, Ermenegildo Zegna, Canali, Pal Zileri, Hugo Boss, Escada Sport, Escada and Guess.
A not-so-successful case is that of the Escada franchise, owned by Romanita Iovan, which was closed. The owner said this was because wealthy women prefer to buy Escada clothes outside the country and due to exorbitant rents for the spaces, the study shows. However, the CPP study also says Escada was not the right choice for the Romanian market and the evening gowns are considered by many too conservative and classic. As far as rents are concerned, “these are indeed growing constantly especially since banks and drugstores are willing to pay almost anything for a good location.” The space held by Escada was taken over by the owner of the L'Occitane franchise. Its second store is due to open this fall.
Diverse brands instead?
Among the advantages that a multi-brand type of store offers are smaller initial investments without the obligation to acquire furniture or arrange the space following certain directions. Moreover, the manager of the store can decide how many products to acquire and what brands to include in the shop and thus have greater control over the expenses. On the other hand, the lack of the appropriate decorations and furniture inside the store can trigger a lack of confidence from customers who may even have the impression that the store is dealing in fake products. Limited stocks can also be a problem for customers. Moreover, the moment its franchise appears on the market, the respective brand withdraws from the multi-brand, says Petcu.
One of the recently opened multi-brand stores is Victoria 46. Located downtown Bucharest on Victoriei Avenue, it is owned by Solmar Group, which owns and controls the franchise for Mango and Castro in Romania. The store sells products from brands such as YSL, Givenchy, Missoni, McQueen, Chloe and Roberto Cavalli. According to the study, the store's weak points are the limited space in which certain brands are displayed, as well as the lack of parking space. Moreover, PR and marketing projects are missing.
Another multi-brand space is Jolie Ville Galleria, part of the Jolie Ville Mall. Located in the north of the city, it is owned by the HKS group. Since its foundation, the store has changed several times the mix of brands displayed in an attempt to attract more customers. Currently, it displays Ferre, Valentino Red, Emilio Pucci, Versace Jeans, Just Cavalli, John Galliano and Moschino Jeans.
The Place Concept Store is a multi-brand owned by Sarrieri Lingerie Group and displays a mixture of niche brands such as Jimmy Choo, Barbara Bui and Christian Louboutin, “a surprising choice for Eastern Europe which is dominated so far by luxury brands from Italy such as Cavalli, Dolce & Gabbana and Ferre,” the study says. The Place has acquired a reputation as a result of massive PR and sampling activities in women's magazines.
Victoria 46 and Jolie Ville Galleria are the only stores which host men's collections as well. Brands include Alexander McQueen, Yves Saint Laurent and Baldessarini.
Luxury events mark growth tendencies
Growth opportunities on the market have spurred the advent of luxury shows over the last few years. One example is Luxury Day, which took place last week. The event united luxury brand representatives, investors interested in different sectors of the industry and public figures.
This year's edition hosted approximately 10 luxury brands as partners and another 25-30 brands as guests, double the figure from last year, says Petcu.
The second edition of the Luxury Show fair will take place in Bucharest between December 6 and 9. “As a result of the success in 2006, Luxury Show became a brand in itself,” according to Nadina Nedelea from Intelligent Media Solutions, which is in charge of organizing the event.
“This year's edition aims to consolidate this brand, to bring new brands and memorable premieres in Romania, but also increase the number and quality of the exhibitors.”
Nedelea adds that the Romanian market is just starting to show its potential. “In Romania, participation in such a fair represents an instrument for promotion, marketing and sales. Participation in the future edition is influenced by the sales that the company registers during the fair,” says Nedelea.
For Luxury Show 2007 organizers expect 200 brands which is a 50 percent increase compared to last year. In 2006, the total value of the contracts closed only during the fair amounted to EUR 5 million but the effects could be seen even after the close of the fair.
For this year's edition, there is already a 60 percent occupancy degree of the Romexpo Central Pavilion. The fair will reunite under the same roof the best- known luxury brands in the world, from jewels and sophisticated outfits to high- tech and spectacular interior decorations and last generation helicopters, limousines and yachts. Many of them will be presented for the first time in Romania. The brands will be exhibited in five categories Home & Design, Motorshow, Trend Fashion, HiEnd and Leisure & Pleasure.