Shopping malls are running out of space

The aggressive growth of Russian clothing chains, which began in the second half of 2022 after the departure of some global brands, may end in 2024. One of the reasons is the filling of almost all quality areas. Now the main focus of the players will be focused on optimizing the business, improving the service and increasing the brand’s loyal audience, experts say.

Large Russian clothing chains in 2024 can complete the active growth in the number of their stores, which began in mid-2022 due to the departure of some international brands, one participant in the Night in Retail industry event told Kommersant. According to him, this is due, among other things, to the occupation of most of the attractive locations. According to a Kommersant source, Alexei Kondrakov, senior vice president for real estate at Gloria Jeans, said at the event that there were no more than 100 retail facilities left in Russia where the company could open its stores. In 2023, Gloria Jeans intends to expand the network by 180 outlets, and in 2024 it will increase the efficiency of the network. A representative of Gloria Jeans confirmed the information to Kommersant.

Stockmann General Director Gennady Levkin also says that high-quality retail facilities are almost over. “Future good sites will be vacated only if the retailers who have occupied them show unsatisfactory results,” Mr. Levkin believes. According to him, in 2023 Stockmann plans to expand the network by 16 facilities, seven of which have already opened, and in 2024 to open 10 more stores. Melon Fashion Group (brands Zarina, Befree, Love Republic, Sela) previously talked about plans to double the number of new stores in 2023 compared to 2022, when the company opened 113 stores. On Tuesday, Melon Fashion Group, Lime, Familia did not answer “Kommersant”.

After the outbreak of military operations of the Russian Federation in Ukraine and a new wave of Western sanctions, several large foreign fashion brands left Russia. Among them are H&M, Zara, Uniqlo, Victoria’s Secret, Mothercare, Nike, etc. H&M had almost 150 outlets in Russia. Inditex (brands Zara, Massimo Dutti, Pull & Bear, Oysho, Bershka, Stradivarius) closed 269 stores out of 514 outlets in the Russian Federation, and transferred the rest to the Lebanese Daher Group, which restarted facilities under the brands Dub, Ecru, Vilet, Maag. Uniqlo had 50 stores in Russian shopping centers for 2022.

According to NF Group estimates, the amount of available space has already been reduced to a minimum, and some developers prefer to wait for “their” anchor tenant. According to Nikoliers, the vacancy rate in Moscow shopping centers in the first half of 2023 decreased to 13.5%, and by the end of 2022 it reached 14.9%, and in some shopping centers it reached 25-30%.

Evgenia Khakberdieva, director of the retail real estate department at NF Group, calls it logical for major fashion brands to complete their active expansion this year. The rapid growth in the number of retail facilities could not continue indefinitely, agrees the CEO of Fashion Consulting Group (FCG) Anna Lebsak-Kleymans. According to her, the best vacated properties have already been dismantled, and the rotation of stores within the chains with moving to large areas or to more attractive locations will continue in 2024-2025.

After the end of the active growth stage, Russian fashion brands should focus on developing new product categories, attracting unreached consumers, improving the quality of service and optimizing business processes, Yevgenia Khakberdieva believes. And when there are very few quality free spaces left in Russia, Russian brands will become interested in more active development in neighboring markets, she adds.

CORE.XP Senior Director Marina Malakhatko believes that some Russian clothing chains in 2024 may start and sublease excess retail space. At the same time, the expert notes, it is still too early to talk about the complete absorption of the space of international brands, and the process may drag on for another 1-1.5 years.

Alina Savitskaya