In the golden age of fashion, luxury brands usually stationed their boutiques solely along the central avenues of big cities with reputations as prestigious retail routes. London’s Bond Street, New York’s Fifth Avenue, and Paris’ Saint Honore and Avenue George V are all famous examples. As time goes by, however, the grandees of vogue are feeling the urge to move closer to grassroots shoppers, and are increasingly opening outlets in department stores.
Satisfying the Buyer’s Wishes
In the beginning, pricy brands would open their shops only at specialty stores such as Parisian Galeries Lafayette, London’s Harrods, or New York’s Saks Fifth Avenue. Americans, guided by the maxim that “business always follows the consumer,” were the first to move closer to affluent suburbs where the greatest number of potential buyers was concentrated. Because there is no street retail culture in these areas, luxury brands opened stores in shopping arcades and malls. The peculiarities of American tax legislation, with different VAT rates levied in different states, helped further this migration. For instance, many residents of the Big Apple prefer to shop in New Jersey’s shopping malls, where they can save on taxes.
In addition, most people passing by the centrally located fashion stores in America or Europe have neither the time nor the desire to drop in and buy anything. But the buyer coming to a shopping center has the intention to shop. Thus the presence of a brand in a shopping mall can benefit both seller and buyer.
However, as noted by the American expert in shopping mall management and author of Call of the Mall, Paco Underhill, the mall may also have a reverse effect. The showcases of a very expensive boutique may whet the buyer’s appetite, but because he lacks money in his wallet, he may leaves for a more affordable shop nearby.
As regards Russia in general and St. Petersburg in particular, the trend of including fashionable brands in shopping malls is furthered by the fact that many potential buyers about to join the ranks of luxury clothing consumers hesitate to call on stand-alone boutiques. “The ambience in an emporium strips the hesitant of their timidity; at our complex we offer such people the service of ‘shopping with a personal stylist’,” says deputy director of Vladimirsky Passage mall, Ludmila Kushnir.
Russian commercial interests also prefer shopping centers. This is because rent is more affordable (ranging from $700 to $1,800 per sqm per year in St. Petersburg) and a mall location also solves the security and maintenance problems.
“The shopping complex assumes all headaches related to the premise upkeep and interaction with municipal structures,” says Marina Osyanina, brand manager at Topshop/Topman, which opened its central store at the shopping complex Sennaya. “Moreover, it offers entertainments and ensures an additional flow of buyers owing to multiple brands on offer.”
Topshop/Topman, a unique and fashionable brand operating in the peculiar “VIP for masses” niche, even waived some of its principles for the sake of potential benefits. The brand’s famous London shop on Oxford Street is deemed an iconic place to visit by those who are not indifferent to vogue. In addition to basic collections, the store offers a multitude of extra services, from a vintage boutique to the assistance of a personal stylist. As noted by Ms. Osyanina, the company is also currently working on a detached store on Nevsky Prospekt.
Struggling for Private Clients
Maria Korobeinikova, who spearheads the strategic consulting department at Jones Lang LaSalle, points out that “in many planned projects (such as Paradny Kvartal, New Holland, Naberezhnaya Evropy) boutiques are declared but the demand remains limited on the part of operators. The number of shopping malls applying for the boutique segment far exceeds the number of potential tenants. A limited number of fashion brands are represented in St. Petersburg, while those that are about to enter this market prefer detached stores. For example, this is the way chosen by Bosco di Ciliegi that leased 1,500 sqm in a mansion on the Petrograd side a short time ago.”
Ekaterina Nemirova, who helms the department of shopping malls at Praktis CB, says that the owners of retail centers sometimes neglect the requirements of boutique tenants.
“The boutique tenants, direct representatives rather than franchisees, have a rather clear idea of the desired location and they may prefer central retail routes. This is what happened to Louis Vuitton which preferred the add-in and add-on premises on Malaya Konyushennaya to a complex being now designed near Moskovsky train station. They were not very happy about the close proximity to a railroad terminal,” says Ms. Nemirova.
Adds Ms. Nemirova, from Praktis CB: “The projects of dedicated boutique streets have so far been missing in St. Petersburg in contrast to Moscow, for example, which boasts the most famous national fashion street, Tretyakovsky proezd, along with Stoleshnikov Lane, a concentration of world-renowned brands.”
“The number of premises meeting the requirements of well-known world brands is limited in our city,” agrees RBI’s Natalia Valyalshchikova, manager of the boutique gallery Esfera. She considers Nevsky Prospekt with adjacent streets as well as Bolshoy Prospekt on the Petrograd side the optimal locations for the top-class brands. “The making of those areas is far from complete, since they are dotted with shops in the middle and low-middle pricing segments,” she says.
The boutique gallery Esfera, an ambitious project of RBI, will open its doors on Nevsky Prospekt in the first quarter of 2008. “Our gallery covers 2,100 sqm of sales area (around 17 stores) on two lower floors of the new luxury house Le Grand. Creating our Gallery, we tried to factor in all claims made by deluxe brands on their retail premises — high ceilings, an optimal layout conducive to the most winsome display of goods, thought-out logistics inside the gallery, big showcases overlooking Nevsky Prospekt and the pedestrian street, Telezhny Lane,” relates Ms. Valyalshchikova.
New Forms Are Needed
Besides the location problem, the demand for premises in fashion centers is lowered by factors such as the lack of consumers with high income levels in St. Petersburg who might afford luxury purchases. This is actually the main reason for the near complete lack of such shops in other Northwest cities — the few provincial glitterati habitually make shopping trips to St. Petersburg or neighboring Scandinavian countries. Also important is the fact that the local buyer is less prone to do spontaneous shopping here as compared to the Moscow buyer. This reality gives headaches to vendors, forcing them to form special collections for St. Petersburg.
On the other hand, the so-called “intelligent” brands feel comfortable on the Petersburg market with its exacting buyers. Thus Russia’s only mono-brand boutique of Comme des Garcons exists in St. Petersburg. Moreover, the company’s management permits fashion shows in the city — only Paris and Tokyo share this privilege with the city on the Neva. Comme des Garcons has the experience of accommodation in a shopping mall, and occupies a special corner at Vanity Opera. However such tenants look for complexes with a salient concept.
“A strategy is needed to attract those buyers whom the vendors of costly designer’s clothes would like to see on their premises. A lame concept does not allow a project to function effectively, so it must be revised. I could cite the Apriori and Vanity opera galleries as good examples,” comments Maria Korobeinikova.
Ms. Nemirova believes that “in building a pool of tenants, the owner should opt for brand shops to avoid a mixture with private entrepreneurs.” Elena Andreeva, retail director at IB Group, is positive that it is much easier to bring together 100 shops of democratic brands than 15-20 boutiques operating in the high pricing segments. It is thus important for small galleries to have their own philosophy in order to draw the right kind of buyers. “This must be something exciting and stirring which would drive the audience to such a mall,” explains Ms. Andreeva.
IB Group has such a project with a salient concept. This is the mixed-use Tolstoy Square on Petrograd side, where Litsedei theatre and a modern art gallery will be quartered apart from a shopping mall of designers’ clothing boutiques. IB Group also intends to involve the Tolstoy Fund which could bring the exciting works by foreign artists, musicians, writers, and actors to Tolstoy Square, given that its infrastructure predisposes it to the arrangement of different artistic events.
“This will be an art square with boutiques and conceptual designer shops of luxury brands, each also being part of the world of art,” says Elena Andreeva.
A successful concept is sometimes capable of building up the attendance of an existing complex even without renovation of the premises. “Our new concept aiming at the salon client service has been working only two years,” says Ludmila Kushnir. “During this time we’ve succeeded in significantly changing the situation for the better without resorting to a cardinal alteration. Our main shopper is a well-to-do middle-aged woman. Everything this client needs is quality classical clothes looking sumptuous and a comfortable ambience. Therefore our major tenants are multi-brand boutiques offering German and French clothes of such brands as Bandolera and Tara Jarmon. We carefully monitor the culture of trade; the contracts of lease include a clause about the proper work ethic. For instance, the shop assistants are strictly forbidden to have meals at the place of work.”
Outside of the Big City
Presently, the Petersburg galleries Vanity Opera and Grand Palace have accumulated the most impressive collections. Jamilco, representing such brands as Hermes, Chaumet, Sonia Rykiel and many others on the Russian market, has already opened four boutiques in the latter and intends to open the fifth boutique of the British brand Burberry in November. Maria Korobeinikova prizes Grand Palace as the city’s most successful boutique project.
Ms. Nemirova, also speaking favorably of Grand Palace, points out that private entrepreneurs have until recently been dominating there. Among the other remarkable properties she also mentions Apriori Gallery re-brokered by Praktis CB, the project of DLT refurbishment into a boutique gallery delivered by Mercury Group, Nevsky Plaza (near to Nevsky Palace Hotel) and Atlantic City projects. The latter is unique in that it is located in the bedroom district Primorsky. Nevertheless, thanks to the traffic heading for the fashionable Kurortny district, it is successfully filled up with such brands as Escada.
The example of Atlantic City is very indicative, since the traffic and parking problems make many potential buyers living in the new residential areas on the city’s outskirts give up on driving to centrally located boutique zones. The Nevsky City project, being delivered in Bugry community by Margheri Group, Italy, is geared towards this type of audience. This will house Russia’s first outlet center Nevsky Coliseum where the so-called “discount” boutiques of fashion brands will be accommodated on 55,000 sqm. Director General of Nevsky Coliseum, Renzo Bartolini, assumes that this will be “an ultramodern center of fashion and entertainments.”
Comments Ekaterina Nemirova: “Forming residential areas built up with luxury real estate can in itself create sufficient traffic for potential boutique zones. For example, this is what will happen after Paradny Kvartal in the area of Ryleev, Paradnaya and Kirochnaya streets is filled with occupants. The same can be said about the luxury suburban communities in the direction of Primorskoe shosse and Kurortny district. A successful operation of boutique galleries is quite possible here on the analogy of Rublevka in Moscow.”
Such brands as Lacoste and Tommy Hillfiger already have their boutiques in multifunctional retail complexes situated in the bedroom districts near the Ring Road. The Guess accessories boutique presented on the Russian market by Jamilco opened at the Grand Canyon retail-entertainment complex. This is the very urban format which such haute couture brands as Chanel or Prada prefer. Leaving luxury clothes at a mono-brand boutique in the historical center, they sell their accessories at suburban shopping complexes. One can only assume that many more retail operators from the world of haute couture will be treading this way.