In the opinion of the RBC Daily, the way chosen by Jewellery Company Adamas to win over buyers from the mass consumption segment is far from being the most cost effective. Market consolidation makes all the players to expand into the retail zone in a rapid way; may be they are not competing for the richest and most demanding buyers, but they do compete for mass buyers, who are seeking their wares in the low price range. Facing such a situation, Adamas owners went against the stream once again: instead of grand-scale sales, their company decided to launch a new project setting up a network of discount stores under the title of “Jewellery Bazaar”, thus becoming the first Russian multi-format jewellery network. This will give them a chance no to loose their initial positioning and to win over low-income and frugal public. However, going this way, the Sidorenko brothers have actually ceased their attempts to shift Adamas from the third to the first place as far as the broadness of their market expansion is concerned, since developing two networks simultaneously will preclude them from catching up the market leaders, the daily believes.
Adamas remains so far the only jewellery retailer in this country, which decided to be concurrently present in two market segments, the medium and low price ones, promoting two different brands. “It is important to seize the maximum market. This is why in this country all those engaged in jewellery business are operating with all kinds of wares. Except luxury brands, of course,” Sergey Tikhonov, Commercial Director of Almaz-Holding told to the RBC Daily. Active and simultaneous expansion of both retail networks will require double financial and organizational resources from Adamas. According to Pavel Sidorenko, today it takes from 300 000 to 500 000 U.S. dollars to open a single outlet; this is why the Adamas owners spend over 5 million U.S. dollars every month to launch a certain number of new stores. One has to take into account the cost of market promotion including two brands instead of one (in high seasons, the company run by the Sidorenko brothers is investing $2-3 million in marketing). It will be rather difficult for Adamas to match their competitors since they are developing at a faster pace: Yuvelirnaya Set 585 and Yashma Zoloto open their own stores at the rate of 30-40 a month, while Adamas launches not more than 15. By the end of this year, Adamas is going to expand its network up to 200 outlets and by the end of 2009 up to 400. Yuvelirnaya Set 585, the leader by the number of own stores, is planning to have as much as one thousand stores in two years. Yashma Zoloto also promised to open at least one outlet near each metro station in Moscow and to become the largest jewellery retail network. The attempt to seize as large portion of the market as possible turns out to be a rather costly affair to Adamas: they opened 18 “Jewellery Bazaars” in the course of four months, but none of them, according to their owner, adds any profitability to the general business of the company. Probably, it will take quite a long time when they will do it. “However, our brand and its recognizability will play a decisive role,” Pavel Sidorenko affirms.
Striving to win over mass consumers as soon as possible, jewellery networks are grappling with each other. Every year brings closer the threat of foreign players coming to this country, the RBC Daily says. The first robin is already here: Amor, an Austrian and German network, made up their mind to expand their business into Russia. This is one of the largest mass jewellery networks in Europe accounting for 1200 stores. They sell their jewels at about 30 euros a piece. Pavel Sidorenko does not exclude that some of the Russian networks, which are now listed among the four leaders in this business, namely Adamas, Yuvelirnaya Set 585, Moscow Jewellery Plant and Yashma Zoloto, were established from the very outset to be later sold. If foreigners will come to us this way, it will be rather difficult to compete with them.
In November, GK Remix, a jewellery manufacturer, is launching a Jewellery House in Krasnoyarsk. This is the first project of this kind in Russia. Experts say that the idea to mix wholesale and retail sale in one place appears to be of interest, but in their opinion, Remix will have to invest serious funds to promote this Jewellery House.
Remix is planning to open the Jewellery House, bearing the name of the company’s brand, as early as November. The new facility will be “dwelling” in the Krasnoyarsk downtown area occupying the building of the former Rembyttekhnika Company, which was engaged in repair of domestic appliances. According to Valery Burda, the Remix founder, the idea to launch this project came a long time ago, but it was postponed due to lack of necessary investment funds. The amount of investments into the Jewellery House has not been disclosed, but it will pay back in 3-4 years. The store will have an area of 1200 square meters. Retail trade will occupy three floors and the fourth will be allocated to wholesale trade. Remix products will account for 20% of the assortment, while the remaining part will be filled in by supplies from Russian jewellery factories. “We are going to offer all the jewellery services in one place. We are going to assay jewellery items, to open a design studio and to invite a jewellery stylist,” Mr. Burda shared his plans. Experts say the very idea of a Jewellery House seems to them attractive. According to Natalya Kapustina, Executive Director of Zlataya Tsep Trade House, “There is no such trade house even in Moscow and this may become a competitive advantage for Remix.” Vyacheslav Borodin, Diector of Cameo Co. Trade House Branch, has added that product offered by the Jewellery House will be greatly demanded by petty wholesale operators. “Formerly, they dealt with manufacturers and were subject to tough terms. For instance, they were made to buy a great number of products. Now wholesale dealers will be able to work with the Jewellery House targeted at small wholesale traders,” Mr. Borodin said. However, analysts note that to become efficient in the retail field will be the main challenge for the Remix Jewellery House. Natalya Kapustina notes, “The Krasnoyarsk retail market is saturated and to squeeze somebody out one has to think over the company promotion strategy in a careful way.” Vyacheslav Borodin agrees with his colleague, “To be successful in retail trade you have to invest heavily into launching a new brand, to devise your product range not to repeat what is offered by your competitors.” According to Valery Burda, the Jewellery House is currently developing its marketing policy. “First of all, we are going to promote the Jewellery House products by way of topical exhibitions,” he says.
“An important problem for us is that we do not have well established brands,” says Sergey Bogomolov, Deputy General Director for Commerce of OAO Yuvelirnaya Torgovlya Severo-Zapada. “Smolensk Diamonds is maybe the only exception. They invest a lot into advertising including glossy magazines, mass PR actions and gifts to foreign stars at presentations. Other firms have much lower advertising budgets. It is no secret that people in the West often pay a lot of money for very mediocre jewellery items, only because they belong to some famous brand. This is quite a routine market move since one has to invest hundreds of millions and even billions of dollars to develop the brand…
It would be much easier for us to sell well-known Russian trademarks, to take part in their further promotion if we had some massive advertising campaign behind,” Sergey Bogomolov believes. “We have forgotten that jewellery items along with furs and elite perfumes belong to the segment of expensive gifts. Very soon, our buyers will start their preparations for the New Year and someone will go to buy a fur coat for his wife, while someone will drop into a jewellery store. As our foreign counterparts, we are earning up to 30% of our annual turnover during New Year sales. If we shall take an active part in advertising Russian jewellery, we shall gain due to increased sales. Then, if the fur coat can ware out or become moth-eaten, jewellery items tend to be more and more expensive with years and may come in handy on a “rainy day.”
Actually, there is no advertising of jewellery in TV broadcasts transmitted over the air except the advertising campaigns lately run by Yashma Zoloto and Altyn. In general, to promote jewellery, it appears justified to use specialized paid TV channels, which are initially designated for the audience ready to absorb advertising of certain goods and services.
Some time ago, it was already reported about the “Lux-TV” program launched on the Russian territory and largely featuring jewellery. According to last month reports, the Fashion TV, a French TV channel, will come back to the Russian TV market in the nearest future. The RBC Daily informed that Alexander Shusterovich, the owner of the “Megapolis FM” Radio Station, had bought the license for its broadcasting in Russia. He is not going to confine himself to this fashion channel and intends to collect a large package of international niche channels in Russia. Today, Mr. Shusterovich is negotiating the inclusion of NTV-Plus into this package.
According to Tatyana Zaytseva, Vice-President of Fashion TV, her company has already entered into contracts with several luxury advertisers, including the Russian Representation of Swarovski as well as with some jewellery companies.
Ilya Adamsky, Commercial Director of OAO Moscow Jewellery Plant, says that his company has so far not advertised directly via paid TV channels, although its audience and the Fashion TV audience are congruent. “We would like to act as sponsors and to participate in the production of TV programs dedicated to jewellery. Our interest towards this channel will also depend on where it will be broadcast: we are interested in 45 provinces where we have our retail network,” Mr. Adamsky says.
In the nearest future, the Playboy TV Channel belonging to Playboy TV International, an international holding, will start its broadcasts in Russia, the RBC Daily reports. Experts believe that in Russia this channel will run across a variety of legal intricacies and remind that a number of cable TV operator have already excluded erotic channels out of their broadcasting packages.
Advertisers, including those from jewellery business, are skeptic about this channel. Thus, Ilya Adamsky believes that advertising by way of Playboy TV would hardly serve to improve the image of his jewellery company.
