Thousand Member Chain of Buyers

Maka GHaniashvili

Number of Famous brand shops became more in Tbilisi in recent years. A few years ago, one could hardly meet franchise shops, but now situation has changed.

The global financial crises affected many companies and many shops were closed as in the world so in Georgia. However, there are brands making first steps on Georgia”s market now. Is not it interesting what sorts of conditions are there which helps or makes barriers for their successful business in Georgia?
While discussing business representatives of franchise shops underline some problems being typical for the sphere. The main and very important problem concerning all of them is lack of customers it can be said that “fair” institute still works in Georgia as people still consider fair prices lower than shop. As clothes are sold on fairs for cheaper price customer”s priority often is price instead of quality and it is not a surprise with the background of bad economic conditions being in Georgia. Cheap products come from China and Turkey in Georgia. China is the world”s number one in manufacturing and exporting clothes and ? of world clothing export”s comes on Chinese export. In case of China, we mean mass manufacturing of clothing and not brandy shops. However, Chinese manufacturers have begun accenting on quality recent years and as a result; prices on their goods became 35% higher in 2002-2007 on international market but despite this made in china goods are cheaper than brandy shop prices.
In case of Georgia one of the problems of the business concerns so called issue of residuals. In standard case goods, residual for sale at the end of the year or of the season must be 5-7% as it is in Europe but the index is 30-40% in Georgia and residual goods cannot be sold till the second season. It can be called long-term investment but it is a very serious problem because of rising amount of clothing for sale.
2008 August evens and financial crises have made leasing prices cheaper what is the most important component for shop functions but representatives of the sphere mention that prices on commercial real estate are still very high. One of the main problems is absence of a big commercial place where people could by everything. There is chaos and mess in Tbilisi in aspect of this issue. According to the world experience when people go to such place it makes big profit. This method works well in developed countries where you can hardly meet shops from place to place. As practice has shown such objects are closed in a short time of periods Georgia is different in this way: shops often are away from each other and sometimes customer needs to drive from one part of the city to another one to buy the product he needs wasting time and money. For Example, in the cities of Germany all kind of trade objects are located on one street. Representatives of some brandy shops who are going to quit their shops after some years of works mentioned that the business will never be successful until Downtown problem is not solved. When reminded about existing such trade centers as “Karvasla”, “Kidobani” or “Tbilisi Central” they answered that this is only attempt to make place such as Downtown but none of them is close to its idea. In Developed countries Downtown means a place where is possible to satisfy customers with any age and taste in fact this is city in a city where are gathered not only clothing and domestic product but food products and different kind of service objects. None of above-mentioned trade objects have opened in recent years can satisfy such demand.
The Director official representative office in Georgia of “Rene Lezard” Davit Khutsishvili said the representative office exists in Georgia during three years and the shop of representative office was opened in 2008 fall. That was a time when there were not so many brandy shops in Tbilisi but there were so called “boutiques” which were supplied mostly from China and Turkey. “The shop was open after August war then financial crises was followed which affected each sector of economic and among them our business. That is why it is not excluded for our shop to be closed. Our leasing price is not very expensive and the business is well organized but the main problem is bad commercial results. Nowadays there is the one category of customers who can buy our product and it is only one thousand member small group. While sales number of customers increase but they are not stable clients. There is difference in determining middle and upper middle class in Europe and Georgia. With European measures “Rene Lezard” is a brand for middle class and clothes cost in Georgia the same price as it is in Europe but in Georgia these same costs are for upper middle class population. The idea of this business is that 50% of new collection has to be sold with initial prices that is the main gain of the business and after the primary realization follows bargain. But Georgia is different even in this way and customer waits for bargains”, – said Davit Khutsishvili.
As we have above mentioned many shops are closed in Georgia. For example, shop “kokai” on Gamsakhurdia avenue. Owners say that the brand was not successful in Georgia as the shop was opened in pro war period and was for middle and upper middle class, the same reasons have shops “minel” and “Shavignion” and “Naf-Naf kids”.
The owners of the shops say that due to global financial crises their customers reduced by 20-25% and sales were shrank but there is positive trend from the spring 2010 and number of sales increase slowly.
2008 began very well for business there were many negotiations and many brands were going to enter Georgia”s market but August war and financial crises affected on business environment, economic crises was followed by credit problems and difficulties with banks.
Despite the difficult situation in Georgia there are some brands going to enter the country”s market. British brand Mothercare is going to open a shop in Tbilisi and offer kids and pregnant woman”s clothes and accessories to Georgian customers, the new brand enters Georgia via Azeri operator Sabah Group. The director general of Sabah Group Otar Kiria said that the brand exists more than 50 years and has more than 3 000 shop in the world. Negotiations were held during 3-4 years. They had offers from Tbilisi local business groups but their choice was co-operate with half British Azeri company Sabah Group that entered Azeri market 7-8 years ago. Sabah Group Georgia is planning to lead other brands in Georgia. Mothercare product is not very expensive.
This is situation existing in Georgia. It is interesting what kind of situation is there in the world. Nothing is good. As it seems the near future will bring rising prices on clothes and the reason of it is stable inflation in cotton manufacturing sector. The biggest flood during decades in Asia has destroyed 1/3 of harvest that can make things worse. Cotton prices are soaring in Asian states it already costs 50% more than last year. Analytics suppose that rising prices will affect trade nets that will not be able to sell cheap clothes.
Problems were not strange for world clothes industry; of course the representatives of this sector experienced bad results of global financial crises on themselves. The government of France supported the idea of creating bank to help designers of clothes and accessories. This sphere is considered in France as cultural heritage.
The better days are not for Georgia”s model industry too, local one develops slowly so companies are trying to attract customers by different marketing steps and some of them are planning to reach to South Caucasus market. There are about 50 companies but only ten of them are big players. Heads of the agencies said that Georgian market is too small for such business and because of it only some of them have perspective to develop themselves.
There is difficult times for our country and for the world and many shops quit existing for the reason but there are brands entering the market in this not attractive environment. For the part of population the priority remains unchanged – fair and one thing proves this priority analytics mention that the average 40 millions GEL is spent in Lilo Fair annually.