Sportmaster beefs up business

Issue Number: 
German Abayev

Sportmaster, a heavyweight in sporting goods retailing in Russia, is in training for a $20 million drive that will allow it to pile on the muscle by expanding its store chain.

The company plans to broaden its Moscow network from six to 12 stores by the end of 2001, and its regional network in Russia and the C.I.S. from five to 35 stores by 2005, officials said.

Retail Sales Director Leonid Strakhov said an upturn in Russia's economy, coupled with the climate in the company, means the time is right for the move.

"We have accumulated experience in retail sales technology after our first five years, and are ready to use the lessons that we have learned. We are ready for expansion."

Moscow is the company's most lucrative market, accounting for 75 percent of sales. Sportmaster officials said that situation isn't set to change, even though the "regions have great potential."

Sportmaster was launched in 1995, when its first store, Kettler – an official dealer of the German sports firm of that name – opened on Moscow's Leninsky Prospekt. Today, the firm is an official dealer of brands including Adidas, Reebok, Nike, Columbia and Asics, and takes 25 percent of the capital's branded sports goods market.

Its three main competitors are multi-brand sellers Profi, SportCity and Pan Sportsmen, which together have a further 25 percent share in the city's market, according to company research.

Sportmaster plans to spend $20 million on expanding its retail network. That money will come from the company itself and from outside investors, including some foreign firms – although the company would not reveal details. "We have big, even unprecedented, plans," said Strakhov.

Sportmaster management said Russia has specific difficulties when it comes to selling high-priced sports goods. Only 10 percent of Muscovites – about 1 million people – can even afford to shop at Sportmaster, officials acknowledged.

The company expects that number to double by 2005, mainly resulting in more sales of low-cost sporting goods. It expects to see a similar pattern in the regions.

Sportmaster General Director Dmitry Shangin said prices would be the same at all stores, wherever they are in Russia and the C.I.S. Sportmaster's customers have salaries of $150 a month and above, according to company data.

As it looks to expand, the company's strategy of opening stores on busy streets, with convenient parking and big window displays, is pretty much international, industry observers say.

The difference comes with the issue of store space. Sportmaster doesn't provide customers with the playgrounds and trial areas that feature in many of its American and Western European counterparts. The reason is scarcity of adequate retail space in Moscow, company officials said.

"The specifics of Russia don't allow us to copy Western tactics completely," said Strakhov. Sportmaster managers said they could be prepared to enter the construction business to overcome that problem and get better retail facilities in Moscow in the future.

In planning stores, size certainly matters to Sportmaster. Its development strategy foresees stores of 1,000 sq. meters and up. In the regions, however, Sportmaster plans to set up 400 sq. meter stores. "In the regions, the big [store] format is not always justifiable," said Strakhov. The company's biggest store – 2,400 sq. meters – is in St. Petersburg. The biggest Moscow store – 1,500 sq. meters – is on Dmitrovskoe Shosse.

In 1998, Sportmaster launched a discount card system, which gives the holder a 5 percent flat discount on any goods for an unlimited time. The card is given to any buyer who has made a $100 purchase. Sportmaster cards are also accepted at a number of electronics and household-goods retailers, such as M-Video and Starik Khotabych, and their discount cards are in turn accepted at Sportmaster.

Sportmaster offers 10 percent discounts on Internet sales. E-commerce, however, has not been profitable so far due to little computer proliferation and lack of reliable payment mechanisms in Russia, said Shangin. Besides, Russians prefer to see expensive goods before they buy them, he said. "If a woman plans on buying a $600 ski suit, she wants to see how it fits her."

Even though the chain carries well-known international brands, it has to deal with the rough reality of the local market in Russia. The company's management stressed that the success of the Russian economy determines the company's success. "Like all sane people, we want stability and an increase in the purchasing power of Russia's population," Shangin said.