Import substitution of ceramic tiles in Russia - myth or reality?

Raffaele Mascolo, director of property management at Kerama Marazzi, spoke about why the demand for ceramic tiles does not fall, where Kerama Marazzi prefers to open stores.

How do you think the finishing and construction materials industry is doing now?

Today, much depends on how each specific company worked before the crisis and what strategy it adheres to.
By and large, this applies to any industry, including construction and finishing materials. On the one hand, professional players understand that it is impossible to fully prepare for a crisis. On the other hand, it is necessary to make plans in such a way as to overcome a storm or complete calm, because there will always come a moment when your ship will be on the crest of a wave and the wind will fill the sails. That is why for Russian manufacturers the current situation is not only a test of strength, but also a time of new opportunities. This is a time of breakthrough for those who developed production and improved quality, because many market segments are freed from imported products, and an urgent need for import substitution arises. As for the ceramic materials industry, it is noteworthy that there has not been a strong decline. A person continues to take care of his family, strives to equip his home, repairs, builds, creating a comfortable living space around himself. In addition, there is now a redistribution of costs by individuals. Many factors have an impact, for example, the changed situation in the tourism industry (soaring exchange rates, closure of many inexpensive and popular tourist destinations). As a result, the money planned for vacation is directed to other investment assets, the most optimal and priority of which is improving the quality of the apartment.

Has the crisis affected Kerama Marazzi?

Everyone is feeling the crisis. The question is the ability to adapt to realities. The history of the company goes back more than 20 years. During this time, starting in 1988, when one of the first joint Russian-Italian enterprises in Russia was founded in Orel, we have come a long way and accumulated enormous experience. What is Kerama Marazzi? Firstly, it is a leader in the domestic market in the production of ceramic tiles, mosaics and ceramic granite. Secondly, our production is located in Russia, so even before 2014 our prices were not the highest, and now even more so. The demand for our products remains stable, so far we have not noticed any significant changes. The only emergency situation occurred in December 2014, when people, in order to save their savings, began feverishly buying goods (equipment, jewelry, cars, etc.) and making repairs. This also affected our products. Those who had enough funds invested in real estate. However, not everyone who bought apartments managed to make repairs, so there is still a large reserve for the sale of finishing materials.

So you haven’t changed your plans for developing a chain of stores?

Until today, we have not adjusted our plans. We and our partners continue to open points of sale as before. At the end of 2015, we already had 330 branded stores in Russia, as well as in Kazakhstan, Armenia, Latvia, Belarus, Ukraine and other countries (a total of about 90 retail outlets outside Russia). It is possible that we will enter the market of a new region or country. Every year we open about 35 stores (our own or client ones) - in 2016, I believe, about the same number will appear. But we are not just expanding our network: we are increasing the area of ​​retail outlets, using more modern equipment, expanding the range of products presented and constantly improving their quality. Expanding the range of new collections is one of the reasons for the large number of new discoveries. This, by the way, is a unique case - no manufacturer of ceramic tiles in the world has such a wide network of its own mono-brand stores. In addition to mono-brand stores, Kerama Marazzi products are also presented in DIY stores.

By what principle do you choose DIY stores for your products?

Here the principle of interaction is different, which has developed over many years of our cooperation with DIY retail chains in the finishing materials market. A wide range of products, more than 2000 items, allows us to offer products to a wide variety of customers, for every taste and budget, including DIY customers.

How do you choose premises for your branded stores?

We locate our stores either in street retail premises or in shopping centers, wholly or partially specializing in the sale of plumbing fixtures, building materials, furniture and other goods for interior and exterior decoration of objects. Our network has stores of various formats ranging from 80 sq. m, and the retail space of our flagship stores reaches 600–700 sq. m. In shopping centers, as a rule, the area of ​​retail outlets is about 70 square meters. m, but sometimes we open large stores in shopping centers - when we are asked to become an anchor tenant in new projects. However, we do not always agree to such offers, since we very carefully select locations for our stores. We must admit that we prefer street retail. The success of a sales point in a shopping center strongly depends on the success of the entire project, but in a separate building - only on the location. 60% of our branded outlets are located on the street. Although even with this placement, certain problems sometimes arise. It is difficult to “protect” such stores when, for example, they close nearby or prohibit parking. There were cases when another building was erected directly opposite, and it turned out that our store was no longer on the first line, but on the second. In such cases, you have to look for a solution, even moving to another place. But even despite the possible risks, we still prefer street retail. Our mono-brand stores work well because Kerama Marazzi is an established, well-known brand, about 80% of consumers know us. Practice also shows that it is better if the store is located in a good area of ​​the city with high traffic, not necessarily in the center. While new buildings are being erected, the owners of the “primary” are doing repairs, and then the “secondary” needs to be updated. In Russia, there are quite a lot of one-room and two-room apartments in houses, which are bought for a while and resold after a few years. And the first thing that apartment owners do is, of course, renovation. Another positive feature of new areas is that they have the potential to continue to grow.

What kind of neighbors are ideal for you in shopping centers?

It is very convenient to be close to stores that sell products that match ceramic tiles. For example, plumbing fixtures and bathroom furniture, which are often presented as related products in our stores. It’s good when there are stores of finishing materials nearby, and the proximity to foreign manufacturers of ceramic tiles is quite advantageous, especially now - our products outperform imported ones in terms of price and quality. Kerama Marazzi products are presented in shopping centers and construction markets, although from the point of view of developing branded trade, modern shopping centers are preferable. Recently, for example, we opened a flagship store in the Roomer furniture center (Moscow), which completely suits us both in terms of its quality and the stores presented in it.

Source: CRE Retail No. 35 / April 2016