Footfall has increased by 110% in just five years at IKEA Shopping Centers Russia’s (IKEA SCR) 14 MEGA branded malls, spurred by intelligent asset management that attracts both Russian consumers and a strong mix of western retailers. In 2007 footfall at IKEA SCR’s MEGA centers stood at a total of approximately 123 million visitors, but this figure had risen to around 254 million by the end of 2012.
IKEA SCR continuously conducts in-depth consumer research and re-shapes its tenant mix according to consumer preferences. It has a total of approximately 3,000 leases, and in 2013 20% of lease agreements will expire at some of its MEGA centers, while a further 15% are set to end in 2014.
IKEA SCR is currently taking full advantage of this lease flexibility, by further refining its already strong tenant mix. This also provides a significant opportunity for western retailers looking to safely enter or expand further in Russia, by taking space at the country’s most popular shopping centers. IKEA SCR’s MEGA centers are undoubtedly the strongest, most established retail destinations in their local markets, which include Russia’s regional “millionniki” cities with over one million inhabitants.
Russia’s retail market is Europe’s largest consumer market with an annual retail turnover of RUB 19.1 trln (approx. €466 billion). It showed a significant growth rate of 7.2% in 2011 vs 6.3% in 2010. Between (FY) 2008 and (FY) 2012, total tenant sales at MEGA Centers have increased by 85%, and have risen 19% between (FY) 2011 and (FY) 2012.
International retailers now see Russia as a key growth market, and with the help of MEGA Malls, a safe environment to operate in. For example, Spanish retail giant Grupo Cortefiel recently demonstrated its confidence in the country by purchasing its Russian franchise operations that comprised 67 stores, many of which are located in MEGA malls.
IKEA SCR is focusing on bringing in the best tenants for MEGA consumers, fine tuning its lease plans, relocating existing tenants and clustering retailers to create the strongest retail destinations possible. IKEA SCR’s research provides valuable data on its customers shopping behavior, as well as their satisfaction with different aspects of MEGA Centers, including the retail categories on offer.
It shows that customers visit MEGAs 2.2 times per month for over two hours per visit. IKEA SCR also has significant knowledge of the reasons for customer visits, which include convenience of location, affordable prices and the range of stores. Interestingly, the company divides its customers into separate segments that represent the demographics and characteristics of MEGA customers.
Customers are divided into: Fledglings, Young Independents, Nest Builders, Playschool/Primary School Parents and Secondary School Parents. Aiming to know its customers better, IKEA SCR also uses what it calls the ‘personas’ approach. ‘Personas’ are a kind of archetypal customer that represent the needs of larger groups of customers, in terms of their goals and personal characteristics.
Each “persona” has a name and background bio and acts as ‘stand-ins’ for real customers, and help guide decisions about brand positioning, tenant mix, concept and communication channels and messages.
Håkan Nilsson, Head of Leasing at IKEA Shopping Centers Russia said: “FY 2012 we had 254 million visitors at our MEGA Centers, and the figure is set to rise. Constantly updating the concept is essential to ensure we continue to provide the leading Russian retail destinations for our customers.
“With leases lasting for an average of five years we can actively asset manage our shopping centers to ensure we get the best possible tenant mix. It also allows us to work with new and existing tenants to maximize their profits by relocating them within centers, or ensuring new tenants are in the best possible position for their retail category,” added Nilsson.
“This Spring MEGA will be celebrating its ten year anniversary, with it being a decade since the first MEGA was opened in Teply Stan, Moscow. I believe the brand’s long term success can be attributed to IKEA SCR’s unique approach to running its shopping centers, and because of the “safe platform” MEGA centers provide retailers entering or expanding in Russia. MEGA centers provide a familiar environment for foreign retailers in which the legal and cultural barriers to entry have already been safely negotiated,” Nilsson continued. Before signing a deal with a potential tenant IKEA SCR thoroughly considers the added value it will bring to the overall tenant mix, how the retailer will benefit existing tenants, whether the potential tenant is unique, and importantly, how much a retailer’s offering fits with target MEGA customers.
Nilsson explains that IKEA SCR’s objective is to provide an attractive shopping experience by offering world renowned brands to customers who place importance on good quality and reasonably priced products. Fashion, lifestyle, sports and electronics brands are particularly popular with Russian consumers. IKEA SCR believes tenants from a variety of sectors create the best offer for consumers, thereby enhancing sales for all tenants.
For example, at MEGA Khimki in Moscow main retail categories are split as follows, 49% clothing, 11% entertainment, 9% electronics, 8% children’s goods, 9% restaurants and 4% shoes and bags.