General Director of Leroy Merlin Kazakhstan Marc LOUCHET:
LEROY MERLIN IS AIMED AT RAPID GROWTH IN KAZAKHSTAN
The French retailer Leroy Merlin will open its first store in Kazakhstan in the second half of the summer. The company plans to open 25-30 stores within 15 years in the country. General Director of Leroy Merlin Kazakhstan Marc LOUCHET told Interfax-Kazakhstan about what goods will be displayed on the shelves, how the retailer chooses Kazakhstani producers and why the company plans to stay in Kazakhstan’s market for long.
- In which Kazakhstan’s cities will you be represented?
- We will open our first store in Almaty in August. The second store will also open in Almaty in late 2019, and then every year we want to open two shops. We hope that the opening of the first stores will help us grow and develop, and we will do our best to get positive results. The following cities will be: Astana, Shymkent, Pavlodar, Karaganda, Aktobe. In total, we plan to open 25-30 stores in the next 15 years.
- How much investment is to be made during this time?
- The cost of one store is 8 billion tenge -9.5 billion tenge (1.5 billion rubles -1.8 billion rubles) , (328.31 tenge/ $1).
- What market share do you plan to occupy?
- I believe that in the DIY [do-it-yourself] retail market at once we can take 25-30% and very swiftly.
It is hard to give forecasts regarding exact terms. But our concept "Low prices every day" suggests we will sell good quality goods cheaper than other players across all price categories. We plan to sell a fairly wide range of products at low prices, 20-30% cheaper than similar items that are being sold now. And I would not like people to leave our shop with anything just because they cannot afford to buy displayed goods. Therefore, we will focus on inexpensive but high-quality goods. In this we see opportunities for the development of our business in Kazakhstan. Also every year our baggage of knowledge about a city, a region where we work increases, it helps us solve the problem in attracting new customers and employees. We strive to become an organic part of the market, where our stores are present, to develop partnership and support social initiatives - to contribute to the development of the region.
- Who are your main competitors?
- The main competitors are the [chains] Comfort, 12 Months and bazaars. Bazaars occupy the largest share, and our objective is to explain to buyers that bazaars – this is not so good. People have had an opinion that there one can buy goods cheaper, but in fact it is not the case. We conducted research and compared prices, and actually prices at bazaars proved to be far from cheap. I can say for sure that our prices will be lower. We can afford it at the expense of the quality and efficiency of our supply chain. Plus, we rely on the quality of service and goods.
- What range will be displayed?
- Our store will consist of 15 sections in five main areas - home, interior, building materials, repair, garden. In the shop, which opens in Almaty, we will display up to 35,000 items. We will focus on the sections "garden", "plumbing", "kitchens" and "decor". Already now one can get acquainted with the future store range in the Leroy Merlin Studio, which is located at the Aport Mall.
We opened our studio to get to know closer our client and to adapt our product offer and services specifically for Almaty residents. This is standard practice in Leroy Merlin - before opening of the next shop we carefully study our client, we come to people in flats, communicate, study very specific requirements.
We noticed that in Almaty, unfortunately, almost no one is helping the city residents do repairs both stylishly and at affordable prices. We want to become a store where all people can draw inspiration, "spy out” ready-made solutions for their interior, learn. We will train our customers to do repairs with their own hands, in all our stores master classes are regularly held by experienced masters. We strive not only to make repairs affordable, but also a pleasant, interesting process for the whole family.
- Which manufacturers' products will be on the shelves of Leroy Merlin? Will there be Kazakh producers?
- 60% of the goods will be imported from Russia, from manufacturers or dealers, 20%
For us, Kazakhstani goods are not sufficient, and it is not so easy to find and work with local suppliers. When Leroy Merlin enters new markets, it means that we want to evolve together with local producers and suppliers. In February last year we began the quest for suppliers. And out of 100 companies we have chosen 32, but this is not enough. We plan to expand in this direction.
- In which industries are these 32 companies operating? Name the largest ones.
- They are manufacturers of dry building mixtures, construction materials, paints and kitchens. You will already see the concrete names on the shelves of the store when we open.
- By what criteria do you choose manufacturers and suppliers?
- We require that a manufacturer ensure the quality of products and the volume, and provide a profitable purchase price. If there is a manufacturer here who can provide the required quality and volume, we take this manufacturer without question. And, as practice shows, local manufacturers are evolving together with us. We have a good example: in the city of Novosibirsk, the Rainbow paint supplier started as a local producer, and now it has become an international producer. We evolved, and it evolved alongside so that everything is possible with us.
Another important factor that we take into consideration when working with suppliers is uninterrupted deliveries in the shortest possible time. Logistics is the very point that always causes concern. It is important for us that a customer can always find the goods he needs on the shelf of our store.
We have quite strict selection criteria, as we work according to certain standards. On our website in Kazakhstan there is even a separate section on working with suppliers, there one can find detailed information. Now we have many Russian suppliers, and we plan to increase the share of Kazakhstani suppliers. For the time being the volume is small, but I believe that very soon the share of Kazakh goods will grow, as soon as the knowledge about us spreads a little bit across the market.
- What, in your opinion, is necessary for Kazakh companies to pull up to cooperate with Leroy Merlin? While choosing partners, what did you see flaws in?
- We are very active and take decisions promptly. We are looking for those who share our values and can withstand our pace of work and development. In both employees and partners we are looking for, in fact, the potential for growth, desire to develop. In the process of looking for suppliers, we noted that not all of them work with barcodes, but without them goods sales are impossible in the networks. Also not everybody has approvals for goods. There are certain standards, without the observance of which we simply cannot sign a contract.
- Why did you decide to enter Kazakhstan’s market right now?
- We are entering now because we see that there is the overall development in the country. We have actively developed in Russia, we have had other projects. This year there will be Kazakhstan and South Africa. For a long time we have not entered new markets. Kazakhstan is only 18 million residents, and it is a small market for business. We decided to start entering the market with Almaty because this is the largest city in Kazakhstan and economically the most successful.
Currently not many companies are ready to invest. If you look at the Russian market, then we see how many stores operating in the same segment as we are closing down. We, on the contrary, open new stores in this situation - our ambitions are to open 20 stores a year. Competitors understand it is too much for them to repeat such rates. We intend to maintain similar development dynamic rates in Kazakhstan.
- Several international retailers underestimated Kazakhstan’s market someone pulled out of the market, someone cut the number of stores. Why do you think this happened, and what work did you do when studying the market?
- In my opinion, these companies just wanted to import, according to their concept, residents must adapt to the store. Many international companies think that these customers should adapt to the concept with which the store comes up. We do it differently. We studied preferences of customers first. We made 500 visits, and then opened the Leroy Merlin Studio to discuss with clients their wishes and understand what they want. And our range will look like the customer expects. I believe that the store will be a great success, and we will stay here for long.
- Thank you for the interview!
May, 2018
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