Vladimir Nekrasov, president and a major shareholder of Arbat Prestige

Arbat Prestige is one of the most dynamically developing specialized retail chains in Russia. The announcement that the chain will start spreading to the regions shook the Russian beauty industry. Only with 13 stores in Moscow (total sales area – 45 thousand sq.m.) it has been able to reach a turnover of US$202 mln and the forecast for 2004 is US$300 mln. Arbat Prestige is filled with different brands both premium and mass market with 250 suppliers delivering more than 35000 SKUs to the shelves and there are another 200 companies in the waiting list hoping to enter the chain. With half a million US$ investments, Arbat Prestige by the end of 2005 plans to achieve remarkable results. President and founder of the chain, Vladimir Nekrasov speaks about the today and the future of Arbat prestige.

- The retail business is growing in Russia and specialized perfumery chains enter into strong competition involving international players. Can you comment on the situation?

Vladimir Nekrasov:
- I consider competition as a very positive and normal business attribute. Though I would like to stress that in my opinion competition can evolve between equals that are equally powerful and important market players. Unfortunately, at present I don’t see on ex-Soviet territory a market player that could be equal to Arbat Prestige. There is a formed and proven concept about leaders – 85-90% of the market belongs to them – the rest is for the rest. Only the one who brings new, revolutionary, innovative ideas to this market will win the competition. Now basing on the level of management, know-how and financial resources none can compete with Arbat Prestige and I can say with authority that Arbat Prestige has no competitors.

- Russian perfumery and cosmetics market is growing with record speed (20-25% annually according to ExpoMediaGroup Staraya Krepost). Will you explain the phenomena?

- The growth obviously means that the whole industry is experiencing the best of times. And this can not only be attributed to the growth of purchasing power or that people started to spend more on cosmetics or that the market is still not saturated enough as it can be triple the size (in 2003 it was equal to US$5,7 billion but its potential is US$12-14 billion). People returned to the organized retail. After the disintegration of USSR people turned to open air markets 15 years ago. And now they are coming back to the civilized retail realizing that they will not only get the quality and protection from counterfeit but also the best prices. We are attracting also a lot of teenagers to the stores who previously were afraid to shop. We are giving them an opportunity to find a product for themselves. So in a way we are forming a new consumption culture in Russia.

- Are you planning to launch a private label brand?

- A lot of chains do private label brands. And of course we will think about it when the annual turnover of Arbat Prestige will be equal to US$500 mln. So that our own brand will take approximately 5-10% shares.

Arbat Prestige. Factsheet:
Founded in 1989
The year when the retail network was formed – 1999
Active clientele of the chain – 1 mln people
Ownership: 60% of the shares belong to Vladimir Nekrasov, the founder and the president and 40% to the investment company Troika Dialog.