The deal of the year took place on the Russian fashion market: the oldest women's clothing brand was taken over by its main competitor.
Let's try to figure out how this happened and what factors today affect success in the fashion market.
Melon Fashion Group (MFG), owner of the Zarina, Befree and Love Republic brands, has acquired Sela, Russia's oldest women's clothing retail chain. Dmitry Balakirev, the founder of the Molla.ru project and the author of the Next Brands website, visited the new MFG office in St. Petersburg and learned about the current state of the group's business and the key components that help to be successful in the fashion world.
The theses below were compiled on the basis of an interview with MFG CEO Mikhail Urzhumtsev, as well as observations of the development of other fashion business brands and key trends.
Design and experimentation
In today's world of spoiled consumer and social media, the most important thing is to create an attractive design and follow the trends. Even the world's largest brands such as Zara, H&M и Tommy Hilfiger repeatedly lost touch with trends and created collections that buyers did not like. As a result, companies suffered losses, wasted time searching for new designers and concepts, in order to be on top again. Therefore, the only chance to be successful in fashion is to create many models, try, experiment and do it quickly.
It used to be a fantasy, but now 12 collections a year and the assortment is updated every few weeks is the key to success and dynamic development. The implementation of such a business strategy is possible only with the close teamwork of all participants in the process: designers, clothing designers, pilot model manufacturers, suppliers, as well as through the rapid execution of orders at factories, delivery to stores, marketing support, retail and back office.
According to MFG, the delivery time for new collections from foreign factories to the company's stores is only 39 days.
Buyers prefer clothes of those brands that are close to them in style and mood. That is why each of the MFG brands is focused on its audience: Zarina is a classic women's brand, Befree is a modern clothing brand for a youth audience, Love Republic is a brand for bright and active girls.
A new concept and slogan "moms and monsters" has already been developed for the Sela brand, aimed at reaching a female and children's audience.
Modern stores with attractive interiors, large floor space and in the right locations continue to provide a key competitive advantage. The retail real estate market is stagnating, there are practically no new shopping centers being built, which means that you need to be in the best locations and organize the work of stores as efficiently as possible. It is necessary to expand successful stores, constantly work on the relocation of less successful outlets.
The area also matters - large stores sell more. According to MFG, sales per square meter in large stores are almost the same as in smaller stores.
A fashion business, like any other, requires investment and sufficient funding. The costs of marketing, rent of retail space, advertising are growing for all market participants, but there are significant differences. Major players not only get the best prices from suppliers and manufacturers, but also additional benefits. According to MFG, Chinese factories allow them to pay for goods as they are ready, while the Sela brand did not have such conditions. This creates a significant advantage in financial planning and makes it possible to invest more in development, rather than freezing funds in the accounts of suppliers.
Online clothing sales are doubling every year, and in MFG's online business, the Wildberries and Lamoda marketplaces generate the largest share of sales. Having your own online store is also very important for a fashion business, although for many it is more of a fashion showcase. MFG is actively developing this area, which has significant potential.
For professionals, fashion brand website traffic data and the number of followers on Instagram are an important indicator of business success.
Comparison of these brands MFG and Sela clearly shows a significant gap:
- Sela.ru: www - 350,000 / month, Instagram - 149k followers.
- Zarina.ru: www - 530,000 / month, Instagram - 219k followers.
- befree.ru: www - 500,000 / month, Instagram - 207k followers.
- Loverepublic.ru: www - 463,000 / month, Instagram - 319k followers.
Involvement of founders in business
More than any other business in the fashion industry, it requires the daily participation of the founders in the development. MFG General Director Mikhail Urzhumtsev has been working in the group for over 20 years, the company's top managers have been working for many years. Modern technology allows you to travel, lead an active lifestyle, but the founders and management must always stay up to date with all the details of the business and understand market trends.
Experienced clothing designers, a young and active team in design and marketing, strong support from logistics and financiers - this is like a recipe for success. And when the whole team is in one modern and comfortable office, it is also a powerful incentive to attract new staff. The MFG office is located in a historic place where fashion has been created since the 19th century. The company's designers independently developed the interiors of the office and distributed it to various departments of the company and creative teams of brands.
Now the teams of all four brands of the group are located in a single building, but they work on the designs independently. Also, pilot samples of clothing are created in the building, which are brought to industrial models, all the nuances are clarified, and only then sent to production.
The current business structure and streamlined processes have enabled MFG to succeed and grow in the challenging Russian fashion market. Not all the factors that influenced the success of the group are noted here - in any large business there are many nuances that people do not like to talk about publicly. Although MFG does not disclose the terms of the takeover of the Sela brand and the details of the deal, this is an important step in the development of the group and a serious bid for leadership in the Russian market, where the fashion segment is still controlled by foreign H&M, Inditex and LPP.