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Russian Business Shows Interest in Georgian Market in the Wake of Recession in RF

Russian Business Shows Interest in Georgian Market in the Wake of Recession in RF

The manufacturer of clothing and retailer “Melon Fashion Group”, managing clothing brands Befree, Zarina and Love Republic, entered in early May on the Georgian market through a franchise.

The company’s partner launched the Love Republic store in Tbilisi. Analysts say that against the backdrop of a recession in the Russian market, Georgian market looks attractive; despite the relatively low purchasing power and a small amount of the local market, the economy has been growing at about 2% per annum. In May, it was reported on the “Melon Fashion Group” website that the company brought to market its first store in Georgia Love Republic via franchise. It became Armine Margaryan, who in October 2014 brought the company in the market of Armenia by opening its first store brand Love Republic in Yerevan.

“Melon Fashion Group” found it difficult to say how many stores will be launched in Georgia, noting that all depends on the capabilities of franchisees. According to the website of the company, the shop floor area ranges from 120 to 180 square meters. According to General Director of “Melon Fashion Group” Kestutis Sasnauskas, the company aims to use the potential of regional markets and the markets of the CIS. He notes that the company has extensive experience in the development of the franchise in Kazakhstan and Belarus, as well as the opening of a franchise store in Armenia showed good results.

The company operates the clothing brands Befree, Zarina and Love Republic. As of May 1, 2015 the company manages 656 stores. Of these, 624 in Russia (511 – own retail network and 113 franchised), 20 stores – in Ukraine, seven – in Kazakhstan, three – in Belarus, one in Armenia and Georgia. In general, analysts commented the expansion of the manufacturer and the retailer into a new market in a positive way. Daria Yadernaya, CEO of Y Consulting, says that to assess the feasibility of entering the Georgian market is quite difficult. “It all depends on the partner.

The market is not saturated yet there,” – says Ms. Yadernaia. In her estimation, the investment in the opening of one Love Republic boutique may reach € 100-150 thousand. Timur Nigmatullin, financial analyst , believes that the cost of launching a new store can be € 550-700 per square meter of retail space. “Priming product costs about € 400 per sq. m. The rest of the investments are spent on the repair and purchase of commercial equipment.

Given the recession in the Russian market, the entry into Georgian market looks rational. In spite of the relatively low purchasing power and a small amount of the local market, the economy shows the annual growth rate of about two percent per annum, “- emphasizes Mr. Nigmatulin.