Service in action: How foreign retailers open turnkey stores in Russia
Most of the Russian fashion retail (clothing, shoes, accessories stores) are represented by foreign brands. All of them once had to enter our market, and, therefore, at the very beginning to choose a method:
- independently rebuild the business under local realities;
- contact the service contractor and, according to the principle of one window, entrust him with the solution of all problems that arise when opening stores.
As our practice shows, most of the time, foreign networks prefer the latter, and therefore they challenge the contractor to open turnkey shops for them. We tell what it is and what problems the service partner faces during the implementation of the process. And so that our story is substantive, we build it on the examples of our customers.
For a start, let's see what the retailers are asking them to open turnkey stores. Here are some of their characteristic features:
- large foreign networks;
- well-established business processes, IT ideology and corporate standards;
- not planning to independently understand the specifics of Russian legislation;
- prefer to deal with one contractor, from which you can ask immediately for everything.
Such retailers apply to the contractor at the project stage. They perfectly understand what their Russian retail chain will look like in terms of branding - after all, they already have developed corporate style, brand book, ready-made templates for interior design and exterior shops, and customer service standards. And they understand that IT infrastructure, software park, operational processes will be affected by the specifics of the regulatory framework - they will have to be rebuilt and supplemented.
Sometimes we encounter not quite typical requests for opening a turnkey store - from start-ups in fashion retail.
What is a turnkey discovery
If it is short and very simplistic, then the customer gives the contractor all the tasks of opening an outlet. Ideally, alone. For example, in Europe, service companies can even provide communication services to customers. In our case, retailers need to directly enter into some contracts with service providers. This is due to restrictions of Russian legislation. In this situation, we, as an integrator with many years of experience, accompany the customer until a contract has been concluded with the service provider, and also offer assistance with the maintenance of non-core contracts. This mainly concerns the provision of IT infrastructure.
But even in this case, opening a turnkey store in Russia consists of a huge set of tasks. Among them:
- finding a place to shop;
- redesign of the rented premises (starting from the sales area, ending with engineering infrastructure, electrical, installation of a fire protection system, redesign of cable systems left over from past tenants);
- preparation of back office (organization of document flow, tax, logistics processes, preparation of jobs);
- Tasks for the front office: creating a cashier zone, adjusting the processes of inventory;
- planning and implementation of IT infrastructure (IT landscape of information systems, planning of communication networks, data flows and interaction with external systems, taking into account all the requirements of legislation in the field of information technology).
It is not surprising that during the implementation of such a voluminous project, problems and new tasks regularly arise due to various factors. Let's talk about the most typical of them.
Problem number 1: Terms
“Make sure everything is ready yesterday” - the very request that is most often addressed by customers. Foreign retailers are no exception. As the saying goes: “Time is money,” and we understand this, but in our reality there are objective factors that strongly influence the timing of the project. Unfortunately, customers often miss a lot of things that are not just risks, but real factors affecting plans. We reveal and advise them, give an objective picture and possible scenarios for the implementation of the project.
For example, one client asked us to build a full-fledged retail network ready to grow in two weeks from scratch. But it is unreal. Tasks such as preparing back-office systems, filling them, registering a retailer with the Federal Tax Service of the Russian Federation, and developing a product directory take time. On average, opening a standard clothing store per 100 square meters with the entire infrastructure takes 2.5-3 months. If the retailer is only interested in the automation of the sales area, then you can meet in 1 month.
Problem number 2: Budget
Here we will not surprise you: the dream of any retailer is to do well, but at the same time as cheap as possible. Indeed, the same problem can be solved in different ways with the involvement of various tools. For example, count the discount on goods in a notebook, and then adjust the check. Or install a promotional module for the cash program and spend every minute hundreds of marketing campaigns.
Therefore, at the stage of concept formation, if the customer does not have his own corporate standard, we suggest to follow the most effective way: the greatest automation of trade processes. And thus, we are not only closing the single-step needs of the business, but also laying the opportunities for its further development.
But such multivariance often leads to the fact that the customer tries to choose the cheapest option voiced by us, the maintenance of which, almost certainly, will cost more expensive later than the more expensive options at the beginning.
For example, our client, a European retailer who decided to open a network of women's clothing stores in Russia, considered the possibility of doing so without a central server and a communication channel. Yes, at first glance, it is cheaper. However, it leads to the fact that if there is no position in the product directory, the sale of this item becomes impossible in any store of the network. In addition, the Russian legislation imposes an imprint: the retailer reports to each tax on each item sold (FZ-54). If sales data is not received - and if there are no communication channels and a central server, this will happen - the cash register will be blocked. And it will be impossible to work.
All the same retailer then decided to save time in order to speed up the opening of the first store, so I decided to act without automating the opening process itself (setting up programs and equipment). In our opinion, it was short-sighted, because all the work was done individually in manual mode. Saved 20-30 hours on the development of automation led to the fact that, in conjunction with the extensive growth in the number of stores, the distribution network became heterogeneous. It took work on its standardization and putting in order. And this, in turn, subsequently led to the very automation of the discovery process.
We do not exclude that the decision made by the customer was strategic - he was ready to increase expenses in the future, because the main thing for him at that time was to enter the Russian market on a strictly planned time.
Another customer did not accept our recommendations for choosing an EFT terminal. As a result, an enterprising bank specialist, to whom he turned, sold him the cheapest equipment, which did not even have a SIM card. That is, if the communication channel disappeared in the store, the retailer automatically lost profit: you could only accept payment in cash. Of course, we could earn extra money on this problem by making paid improvements for the cash register program. But instead, they helped the customer to hold repeated negotiations with the bank in order to return the EFT-terminals and select new optimal, but inexpensive devices.
Problem number 3: The impact of legislation on discovery
This problem does not depend on the retailer or the service contractor. Just the Russian legislation in terms of trade is constantly changing. Grocery stores have already suffered from the Unified State Automated Information System, then all affected 54-FZ. From 2019, clothing and footwear stores will have to adapt to the mandatory labeling of goods, switch to the fiscal data format 1.05 and VAT at 20%.
Each such innovation of the authorities forces retailers to significantly change business processes, to bear the costs of upgrading software, buying new equipment. So, at the planning stage of projects and budgets, they can rely on one legislative situation, and by the time of implementation it becomes completely different. As market participants, we quickly monitor changes and thoroughly understand them, so we are in constant dialogue with the customer, warning of possible difficulties and involving him in pilot projects.
Problem # 4: Third Party Contractors
As we have already said, in our country only one service provider cannot physically stand behind the opening of retailer’s stores. For some jobs, you have to enter into agreements with third-party companies. For example, with communications providers already mentioned by us.
It is good if third-party contractors are attracted by the same single service provider, who coordinates their work very clearly. Worse when the retailer does it. Because it is far from a fact that he will find really customer-oriented performers.
One of our clients, entering into a contract with a communications provider, underestimated the risks of the decision being made, although we warned him about them and chose not the best contractor. At that time, he had plans to open several stores, but he did not even fully know where they would be located geographically. As a result, it turned out that in the shopping centers where he rented the premises, the communication provider he had chosen was not represented. I had to wait for him to ensure his presence on the selected object. And this is not only the physical work on the laying of cables, which, in theory, could be done fairly quickly, but also legal / organizational issues that required decent deadlines and tickled all the nerves. However, despite the mutual efforts of the provider, we, including the customer, naturally
Another retailer faced a problem when transferring data to the FTS. His global partner in the accounting department received an automatic right to cooperate with the network in Russia. The Russian division was in charge of such issues as:
- registration of legal entity;
- registration of a legal entity in the FTS system when registering KCP;
- search for the fiscal data operator (CRF).
As a result, OFD functions were assigned to a small company from Yekaterinburg, with an office of several people and a time difference with Moscow. 30 days after the opening of the first store, the first CCP was blocked in it, since the data from it was not received by the tax department. Soon the problem was repeated in another store. On Sunday, our specialists had to urgently take another KKT to the retailer, re-register it and restore the cash desk's operability.
By the way, practice shows that about 75% of the problems that appear when opening a turnkey store, have nothing to do with the “Pilot”. At the same time, half of them were decided by our specialists. This is because we understand the action of the chain, warn the risks of retailers, and are interested in the fact that their business in our country has developed successfully.
Problem # 5: Global Integration
The task of the retailer is not only to adapt to Russian realities, but also to integrate the new division with headquarters. For example, employees of the central European office of our client simply “forgot” that the data transfer protocols with their central system were transferred to the Russian representative office. As a result, during the update, we were not included in the list of alerts, and after the update, the data ceased to flow into the information system. As a result, the Russian network turned out to be irrelevant reference books of goods and supplies were not loaded.
Problem number 6: Short-term planning
As they say, the appetite comes with eating: therefore, it is important at the start to standardize all the retailer's wishes, together to think about what processes they need at the stage of business formation.
The chain of women's clothing stores that turned to us decided that in the early stages she did not need promotions. The retailer planned the introduction of promotional tools much later. However, with the opening of the first store I realized that customers need to be attracted not sometime in the future, but right now. But how to do it without the right tools is not clear. The store employees, at all, were sure that the promo server was already working, and made a discount to the buyer on the very first day of work. As a result, the product went into a check with a negative price - and this is in the long run a tax penalty.
So, we have listed only the most typical problems that retailers face when opening stores in Russia. In fact, they are not six, but much more. Therefore, most foreign networks prefer to contact a reliable service provider to solve all the problems. The main thing is to find such a partner, who will really solve problems and insure the retailer both day and night, will do everything to help quickly enter the market and gain a foothold on it. So that the chain of stores at the same time could focus on strategic and business objectives. Also, the service partner should help the client to subsequently improve the positions he gained in the market - he knows the features of the systems built by him, which initially have the potential for growth and development.