The era of easy money in Russia is over – you have to work harder than before
The silhouette of a leaping predator – the logotype of one of the leading international manufacturers of athletic clothing, shoes, and accessories – is well-known and doesn’t require any additional advertising. The German company PUMA, which rakes in an annual turnover of four billion euros and sells their products in over 120 countries, came to the Russian market in the early 2000s. Vladimir Gorobets, Area Head of Retail at Puma Russia, Turkey, Ukraine and CIS, talked to Capital Ideas about how the company is doing in Russia.
When did PUMA enter the Russian market and why did the company make this decision? How important is the Russian market for PUMA?
I’d like to start by saying that PUMA’s story started all the way back in 1948, in the small Germany town of Herzogenaurach. The company was founded by Rudolf Dassler. In 2018, the brand will be celebrating its 70-year anniversary.
PUMA opened an official representative office in Russia in 2002. For PUMA, Russia was and continues to be one of the most important rapidly developing markets in Europe. It’s also an important market because active lifestyles are very popular in Russia.
PUMA has a fairly wide range of products: shoes, clothes, accessories. What kinds of products does the company sell in Russia?
The kinds of products that are offered in specific countries usually depends on the popularity of specific kinds of sports and assessments of customer demands for each product category. As of today, the products we offer in Russia include gear for running, fitness, football, motorsports, as well as products for people who like athletic styles. We refer to the last two categories as SportStyle. PUMA collaborates with professional athletes and teams when developing new collections. This is important, because it helps us ensure that new products meet the requirements of people who shape our athletic history. Thus, famous PUMA athletes and teams include: Usain Bolt – the fastest person on Earth, Italy’s national football team, and Formula 1 Ferrari, Mercedes AMG, and Red Bull Racing teams. In 2016, Rihanna became the creative director of women’s collections for PUMA. Rihanna and PUMA also have a joint collection called “FENTY PUMA by Rihanna.”
Aside from this, PUMA presents 4-5 seasonal collaborations with designers, young brands, and artists every season under the Puma Select line. This year, our partners are Daily Paper, Han Kjøbenhavn, Naturel, and Sophia Webster. All the collections can be found in the recently-opened PUMA Sportstyle corner at Tsvetnoy Central Market.
Do you have your own brand stores or do you sell your products alongside other brands? How many stores do you have in Moscow, in Russia, and in the regions?
We currently have 3 key sales channels: wholesale, retail, and our online store. The wholesale branch works with multi-brand stores. The retail team focuses on developing its own chain of monobrand stores and online sales. As of today, PUMA has over 60 brand stores across 16 major Russian cities.
What about the online store in Russia? Are there a lot of online sales and what do people usually buy?
Russia has an official online PUMA store – ru.puma.com. As of today, this is our biggest store in Russia in terms of product selection. So people looking for new products and exclusive models often go with the online store.
What is PUMA’s share of the Russian athletic market? What do your sales volumes in Russia look like?
PUMA is currently in third place on the Russian market among all athletic brands. Over the past 7 years, the company has posted consistent double-digit growth figures in terms of sales volumes.
How have the unfavorable market conditions and ruble fluctuations affected PUMA’s performance metrics in Russia?
Of course, PUMA made some adjustments in Russia during the crisis. We went through a decline in turnover, lower margins, and lower profitability in hard currency. Optimizing expenses was an important tool for keeping business afloat. This enabled us to reduce our losses to a minimum during the crisis, and we didn’t close a single store. Instead, we continued to invest in the Russian market. From 2015 to 2017, we opened over 20 new stores – a 50% increase compared to 2014.
Today, some foreign entrepreneurs talk about new risks on the Russian market, freezing their projects or closing up shop. What is PUMA’s take on the situation?
We have a positive outlook on PUMA’s potential for development in Russia. At the same time, we recognize that the era of easy money in Russia is over. Companies have to work twice as hard as before in order to be successful.
Do you still consider the Russian market to be appealing for foreign businessmen?
Of course. Russia has a lot of potential and continues to be one of the most attractive markets in the world. I think that, assuming everything goes well over the next 2-3 years, Russia has every chance of bouncing back to pre-crisis levels in terms of sales volumes and profitability in hard currency.
PUMA has always collaborated with some of the most famous athletes, from the legendary Pele and Maradona to Cesc Fabregas and Gianluigi Buffon. Does PUMA work with any famous Russian teams or athletes?
Right now, the company’s marketing policy is aimed at collaborating with international stars, who are the main drivers of the brand.
In Russia, PUMA collaborates with the Krasnodar football club.
The 2018 FIFA World CUP, which will take place in Russia, is around the corner. Will PUMA be participating in any way?
There are qualifying rounds right now, and we’re closely watching as the events unfold. We are counting on at least two national teams supported by PUMA making coming to Russia: Uruguay and Switzerland.
Of course, the Russian PUMA office is putting together a program within the scope of the World Cup. We’re going to start by introducing new cleats in anticipation of this event.
What kind of advice would you give to people who want to start doing business in Russia?
I usually don’t give advice, but I do have one tip. In order to be successful in Russia during the current economic climate, it’s important to have faith in this country and stay calm during this turbulent period.
Do you live in the Russian capital or do you just come to visit? How do you like the city?
I’ve been in Moscow since 2010. I travel around Russia and other countries in Europe a lot. I usually spend up to two weeks a month in Moscow. It’s a wonderful city with a lot of history and a unique atmosphere. I like Moscow most during the summer – long days, clear roads, cozy cafes, and excellent parks for morning runs.