Retailers are optimizing business in a reaction to refusal of consumers from imports

Poor customers can't afford expensive fish any more

Photo: Aleksei Solodunov

The Furshet chain of retail stores in Ukraine will become smaller. The company is planning to reduce the area of the premises from 2,500-3,000 sq m to 1,500 sq m, Chairman of the Supervisory Board and co-owner of Furshet Ihor Balenko told Capital. «The optimization will be applied only to leased spaces, where we will be able to reach an agreement with lessors,» he explained, adding that around 60% of the chain’s stores are located in leased premises. According to the official website of the company, the retailer is currently developing a chain of 144 outlets, of which 104 are located in Ukraine and 10 in Moldova.

According to estimates of the managing partner of the Retainet Consulting Company Oleksandr Lanetskiy, the average area of a Furshet store is currently 2,500 sq m. «For optimization (repairs, changing the conditions of supplies, leftover stock), the company must spend US $2-3 mn,» the expert calculated.

Buyers are saving

Optimization of the chain is a forced step, explains Balenko. The company is being pushed to this due to falling sales in physical terms, in particular the decline in sales of imported products. «Our assortment has decreased and the stores no longer need such spaces,» he concluded.

Other retailers also speak about re-orientation of demand towards cheap goods. Co-owner of the food retail chains Tavria-B and Kosmos Borys Muzalev says that over January-August his stores sold 40% less foreign products compared to the same period in 2013. Meanwhile, the sales of affordable groups of goods (the markup for the products is set by the government and cannot exceed 15% — Capital) grew by approximately 5 percentage points to 30% of the goods turnover in monetary terms.

Consumer’s thrift is due to the 15-30% rise in prices of food products depending on the category of products. General Director of the Krai Group of Companies (the hypermarket chain Krayina and supermarkets Krai) Vitaliy Koba says that from January to August the turnover in hryvnia grew by only 5%.

The existing trend worsens the financial situation of grocery stores that earn money on non-food groups of commodities and food products that are not subject to government regulations, i.e. alcohol, olive oil, canned goods, etc. For these goods the retailers set high markups of 50-100%.

No replacement

The negotiations between Furshet and its lessors will be difficult, believes commercial real estate expert Vadym Zinchenko. He explains that it is possible to find a new tenant for a 1,000-1,500 sq m space in Kyiv, while in the regions this is quite difficult.

Also, other retailers will be forced to optimize their business, assures Lanetskiy. «The chains will close all unprofitable stores, primarily those located in the east of the country,» he predicts, adding that first the players will revise their assortment. Koba says that Krai is already in the process of doing that. «We are taking out of the assortment the products that don’t sell well,» he confirmed. According to data provided by Director of the GT Partners Research Company Ihor Huhlya, as of the end of 2013 there were 1,238 food chain stores in the eastern region of the country (Dnipropetrovsk, Donetsk, Kharkiv, Luhansk and Zaporizhzhya oblasts).