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Big brands are leaving the shopping centers and going "to the street"

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Entrepreneurs suffer because of higher prices for rental of premises in the shopping centers, which are bound to the foreign currency exchange rate

All retail businesses rent premises and are directly dependent on the cost of the lease. Depending on the type of the business, this cost varies from 5% to 30% of the turnover of the company. Due to an increase in the cost of rent, which in most cases is tied to a foreign currency exchange rate for lease of non-residential premises, an entrepreneur should either increase the final price of the goods, or keep the price at the current level for conservation of demand to maintain the level of profitability.

Experts point out that the tenants are forced to negotiate more with the administration of big shopping centers due to falling traffic and sales by 35-40% even in popular shopping centers. In addition, the amount of an average check reduced significantly.

In 2015, retailers in Kazakhstan and Russia will continue to reduce costs, and will consider only those shopping centers where traffic is the least doubtful and rent is adequate to a demand. "In general, if the developers expect that professional retailers will open new and exciting brands in their shopping centers, owners of shopping centers should maintain a flexible rental policy. For example, no attachment to US dollar, offset the cost of finishing, to provide holidays for payment at the time of repair of facilities", - said the secretary of the Secretariat of Trade of the National Chamber of Entrepreneurs of Kazakhstan "Atameken" Zhibek Azhibaeva.

"However, even the decline in rental rates will not be able to align the market, to improve the situation we need a full transition to a percentage from turnover", - she said.

Thus, according to Azhibaeva today major brands recommend leaving recalcitrant owners of shopping centers and move on to street retail. The level of sales of recognized brands is higher today on the streets, rather than in the shopping centers, as the owners of freestanding stores are more loyal towards their tenants.

"For example, “KIMEX and Grazie” are at the market for more than 20 years. If you take the top five stores, just four out of five have a street retail format. That is, these shops on the streets are more active than those that are in the malls. Besides street retail landlords are making concessions easier than the owners of the shopping centers", - she added.

Nevertheless street retail can be good only for recognized brands and less-known shops usually attracted less people, and for them it is best - to sell goods at the shopping centers, where people come specifically for shopping.

In connection with the remnants of the old collection the costs of storage increase as well. Logistics and customs duties make up the lion's share of the cost of goods. Income is 40-50%. As a result, retailers reduce the order for the next season by 50-60%. If there is some turnover retailers try to delay sales period, but the market still forces, remnants still remain. In addition, retailers in many niches for products in the network reduce the margin to make tenge price more affordable to an average consumer.

"In connection with the transition to a free floating exchange rate, weekly monitoring of prices on essential commodities is being conducted. This monitoring showed that there is a trend of an increase on food prices on both domestic and imported products. Nevertheless, the group of non-food products has a systematic increase in prices for essential goods. Everything that concerns the industrial group, the goods that are imported into Kazakhstan (imported clothing, footwear, etc.), the prices for these goods rose

20-40% ", - stated the representative of the NCE.

Today, Kazakhstan is dependent on imports, as the country's low production localization, so tenge devaluation necessitated raising prices for many commodity groups.

In order to avoid fuel shortages for gasoline Au 92-93, the Government decided to abandon price controls on gasoline in Kazakhstan. After deregulation in gasoline prices was a sharp increase in prices in the areas of trade, transport and public transport.

Thus, according to Azhibaeva, shopping and entertainment centers need to maintain a flexible rental policies, lease should  be unbind to the dollar rate, and the calculation of rents should be based on percentage of turnover.

"Given the above, we consider it reasonable at the site of NCE RK "Atameken" to hold a working meeting with representatives of trade and entertainment centers, commercial banks and Department of entrepreneurship and Industry under Akimat of Astana to discuss problematic issues of leasing retail space", - she concluded.


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