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Eastern Europe best bet for value retailers

Eastern Europe provides the greatest opportunity for value retailers looking to expand internationally, Peacocks chief executive Richard Kirk told the Retail Week conference today.

Peacocks, which has 60 overseas stores,will be opening 30 to 40 stores in Russia following the success of seven trial stores in St Petersburg, Kirk told delegates.
He said: “Quite frankly trading over there at the moment means it’s a lot easier to open stores in Europe than it is here.”

Findlay Caldwell, vice chairman UK and chief executive European division of value chain QS, speaking on the same panel as Kirk, agreed that Eastern Europe provided real opportunities for value retailers.

He said: “Our majority stakeholder, the Alok Group, also owns a retail chain in the Czech Republic and I spent some time over there. We feel there is a real opportunity for QS in that region with the amount of retail space per thousand people much lower than the UK. The economy is growing, plus there's a real hunger for fashion out there, so the market is open to us.”

Kirk said that the opportunity of emerging retail markets was down to the polarization of shopping and the split between luxury brands at the top and value chains at the bottom.

He said: “Basically it’s either top end or value in these regions. You have to remember that when you move into these markets, when you’ve paid the extra shipping costs and other costs associated with international expansion, your prices can be up to 30% higher than they are at home. This means that the pricing structure at middle market companies like M&S is sent into the stratosphere. The Czech Republic’s average income is 30% of what it is in the UK so price is a real issue.”

Kirk said it was not just Eastern Europe that offered opportunities to expand, and added that the group was already committed to opening 50 stores in Turkey over the next three years.

Both QS’s Caldwell and Peacock’s Kirk warned delegates that they should expect to see more consolidation in the value fashion sector this year. Kirk said: “We’ve already seen the Select come in and out of administration with half the number of stores. When the March rent quarter period comes around it’s likely we’ll see another casualty. The bottom end of the market is finished. If you’re only trading on price you’ve nowhere to go.”

The pressure to police supply chains and improve ethical standards was also an issue for value retailers, according to the panel at the conference. But QS’s Caldwell and Peacock’s Kirk were frank in laying out their position.

Kirk said: “It’s difficult for smaller value retailers like us to compete with initiatives by larger businesses like M&S, in fact it’s almost impossible to be honest. We have to do as much as we can. We literally do not have enough resources to be able to police factories and do all the things we should do. What we can do is try to piggy back onto factories that are used by bigger organisations that will have already done the auditing. We are definitely not a leader in this field. I think that our customers do care to a point. But to us, it’s still very much price that matters.”

Caldwell agreed: “All we can do is let suppliers know about our sourcing policy and ask them to adhere to it. But over the last six months we have opened up offices in Bombay, Bangladesh, Shanghai and Delhi. Part of their work will be to pre-vet the factories as much as possible.”

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