Spotting a huge opportunity in Russia, shopping mall specialist, Beyond Squarefeet, recently arranged partnership talks between Indian retailers and Russian companies to open shops in Russia.
In an interview with Sputnik, Beyond Squarefeet founder and self-described chief mall mechanic, Susil Dungarwal shared his views about the partnership talks and about what opportunities exist for Indian retailers in Russia.
Sputnik: With global retail brands pulling out of Russia, what opportunities do you see for Indian retailers during the ongoing military operation in Ukraine?
Susil Dungarwal: The Russian military operation in Ukraine is more of an internal matter of Russia-Ukraine, so I won’t comment on it as a businessman.
As far as the exodus of brands from Russia is concerned, I have spoken to a lot of people in Russia in the past 15 to 20 days. And what I see is that now there is a huge gap in the Russian market and I think that if not all [but] there are a few Indian brands that can fill this gap very easily. Apart from this, there is a huge opportunity for mid-segment brands that have an excellent market in Russia.
A woman walks through shopping mall in Moscow
© Sputnik / Vitaly Belousov
Given the topography of Russia and Russians' love of fashion, I think there is a great opportunity for Indian brands there. I also feel that it can be a blessing in disguise that European brands are not there and Russians are really keen about Indian brands. So, the potential is great.
Second, one thing which should be kept in mind is that a lot of brands that have pulled out of Russia have neither given any relief to the master franchisee nor have they suspended. Such actions have caused a lot of instability among the Russian people because they think that despite investment of millions of dollars into the brand it is behaving like this.
So, by pulling out suddenly, the brands have raised a lot of questions in the minds of Russians.
So, keeping all this in mind, I think there is a good possibility of India-Russia fashion brands doing good business.
Sputnik: According to the media, four Indian brands have already signed agreements with Russian companies. Which are the brands that have shown interest in operating in Russia and which other brands are likely to join the bandwagon?
Susil Dungarwal: As of now, we have signed the NDA (non-disclosure agreement) with Russian companies. So it will be too immature to announce the names of the brands. However, it is true that four to five brands have already signed the NDA with their counterparts in Russia and they want to take this to the next level.
A woman chooses a new school uniform for her child at the Detsky Mir (Children's World) store on the eve of the new academic year, in Moscow, Russia.
© Sputnik / Ilya Pitalev
/ When I say next level that means that we have already shared the information about the brand, its capacities and credibility with the Russian counterparts.
We are expecting a delegation of Russian investors or franchise owners to come down to India sometime in May to do an actual factory visit, a site visit, store visit and know everything about the Indian brands before they invest.
This visit will provide them satisfaction about the product, its quality, design and a lot of other things including logistics.
As far as more brands joining the bandwagon is concerned, I would like to mention that initially the response was not very great but thanks to the media reports the enthusiasm is only growing more and more.
So, I think in the next three months at least 10 to 15 more brands will make inroads into the Russian market. I say three months because such things take time and most of them want to take it slow because they are looking at long-term plans with Russia and not only a stopgap arrangement.
Sputnik: Apart from the clothing sector, which other sectors are being eyed by the Indian retailers?
Susil Dungarwal: Well, I would not know much about it because our company and our counterpart, which is Shopping Centres Association of Russia, are mostly focusing on fashion, accessories, cosmetics and things related to malls. It's because with the European brands pulling away almost about 40-50 percent of malls are empty in Russia.
Closed Prada store in Moscow's Central Universal Department Store
© Sputnik / Pavel Bedniakov
/ So, the first focus is to fill those malls with brands either with the brands which are lookalike of brands that have gone or even new categories or brands of a different positioning because a mall can’t be empty for long.
We’ve also got inquiries from non-fashion brands but since I do not have much expertise on that so we have not explored that.
We wanted to go forward with the readily available data, the brands we know because as a shopping mall consultant in India, we have worked with more than 700 brands including international brands.
But here we are focusing more on the brands which have grown and created their own brand image on the Indian soil.
Sputnik: There was a report in March that Russia is also looking toward countries like China, Turkey, Iran and India to plug the gap created by an exodus of western retail companies. With China coming into picture, what competition do you see for India?
Susil Dungarwal: See, there is a difference between a brand and a product. China can only supply you with a product but not a brand whereas India can supply you with a brand. So, there is a huge difference between both.
We are talking about brands that are known and have aspirational value. For example, if somebody is buying a Calvin Klein jeans then he is purchasing a brand not the product because it is not that it is the best jeans though it might be superior in quality as compared to many others but it has created a brand image.
So people who are looking at brand will always look at India, but people will look at products we'll look at China. So why compare something which is incomparable.
Sputnik: As you said earlier, a group of Russian franchisee operators is expected to visit India in May to meet the potential partners. What can we expect from the meeting?
Susil Dungarwal: Till now, we have created a kind of portfolio of the brands which have shown interest in going to Russia. We have given a business sense to the entire portfolio mentioning the investment to be made to take that brand in Russia. Now, for the Russian counterpart to make a decision he will have to come and see the product.
So, every franchisee or investor who is coming from Russia will visit all the brands which will help him to shortlist the kind of products or the kind of brands of which he wants to open a franchisee. Their visit will help them in analysing and making a decision.
After that, obviously, commercial terms will be frozen, a long-term strategy will be formulated, a marketing plan will be created, and a launchpad will be created for Indian brands.
We can also expect that the Russian franchisee operators might sign the master franchisee agreement.
Sputnik: Can there be some problems for Indian brands with opening shops in Russia? How do they plan to deal with them?
Susil Dungarwal: I don't see any problem at all. So far, after a lot of interactions with so many brands and master franchisees, nobody has even mentioned any problem. The brands which are interested have already made inroads into countries like the UAE, Qatar, Oman, and many of them have also gone to Europe and even the US.
Passers-by near the Intimissimi lingerie store on Stary Arbat Street in Moscow
© Sputnik / Alexy Maishev
Yes, there may be a problem regarding the commercial transactions because currently Russia is out of SWIFT.
But I am sure that there will be an alternate payment method that will emerge by the time things develop. An increase in Rupee-Ruble trade can solve this problem. And I think if trade between the two countries is endorsed by the government, it will be a very good push to the entire business ecosystem.
Sputnik: Is the Indian government extending some help in facilitating the business?
Susil Dungarwal: As of now this is completely a private initiative taken up by Beyond Squarefeet Advisory and Shopping Centre Association of Russia.
However, I personally think that when this initiative makes an impact at a certain level, we might seek government intervention.
With all this happening, we are looking at a turnover of about $100-150 million in the next three to six months. So, if the quantum goes up, we will definitely approach the concerned government departments and see how they can support us to push this, where they can give us subsidies.
But this will depend mostly on the strategic decision of the governments of both the countries and we don’t want to wait for that decision and then do the business.
For an entrepreneur, whether Russian or Indian, it is all about making commercial sense to each other and obviously expanding to a new market.