Money Growing: Meters of Gold

For some time in Moscow there have been luxury class jewelry brands. The jewelry of famous jewelers is not often put out on display but is sold to order. Russian jewelers also do not lag behind their foreign counterparts. According to experts, the jewelry business in Russia is actively developing. More shops are opening, and they need premises. Companies also have their own factories for the extraction and processing of diamonds and gold.

Silent luxury

Jewelers are creative people, but they are mysterious. They can talk for hours about the beauty of their products and the clarity of diamonds with pleasure but when the subject turns to business dealing, the owners of jewelry boutiques are not inclined to answer questions. This is understandable; the jewelry business is an expensive business and built on “an individual approach to clients,” the majority of which are famous and rich who don’t like drawing attention to themselves.

However, Vedomosti knows, for example, that Podium, which owns the Podium Jewellery boutiques in Moscow, has not limited itself to Russia. They have decided to open boutiques in Courchevel and Paris. The boutique in Courchevel opened in December 2007 and will stay open until the end of the season, i.e. until the middle of April. According to the company, the boutique is more than meeting its expectations. Podium says that the majority of its clients are Russian but that “foreigners buy no less.”

To open an 80-sq.m boutique in Courchevel is a question of status and prestige and promotes the image of the Podium brand, says a company source. With this in mind, Podium Jewellery aims to be closer to potential clients, to satisfy their needs any time, anywhere. The boutique is located in Galerie Espace Diamant and is surrounded by famous brands.

The opening of a boutique in Paris is planned for the end of 2008. A premises on Faubourg Saint Honore is currently being done up. Podium Jewellery plans to open boutiques in other large European and U.S cities, but this does not mean there will be no new shops in Moscow or the rest of Russia, the company says.

The company’s boutiques in Moscow are in prestigious areas of the city: 15 Tverskaya street (8,000 sq.m) 14 Kuznetsky Most (400 sq.m), 18 Novinsky bulvar (30 sq.m). The company also has a store in Rostov-on-Don located on the central street of the city; Sadovaya ulitsa.

Another significant event was the entrance onto the Moscow market of the world's largest diamond extractor. De Beers, which provides more than 40 per cent of the world’s production of diamonds, has already opened one boutique in GUM, says Alexei Beketov, manager of communications at JamilKo. A second is planned to open shortly on Stoleshnikovsky pereulok. Diamontaire Lev Levayev is also engaged in the jewelry business on the Moscow market. According to him, this is because this market is developing at high rates. And also because one of Levayev’s businesses is the extraction of diamonds. "The company has a solid reputation in the international diamond market, and we therefore decided to start manufacturing jewely. We have a really huge choice of diamonds and stones,” says Levayev. According to him, in approximately a month, the company’s first luxury class jewelers will open in Moscow

at 7 Kuznetsky Most. The area of the two-level boutique will be 200 sq.m. The main trading hall will be located on the first floor and will decorated in simple modern style: marble floor, gray silk panels, comfortable furniture, antique chandeliers and mirrors. The first and second floors will be connected by a magnificent spiral staircase. On the second floor there will be a private salon – the pride of the boutique. This will be a rotunda restored from sketches of the eighteenth century, with light blue walls, parquet, and bronze display units. This boutique will only sell products that it has manufactured itself, no other brands will be represented here.

"We already have shops abroad. The first is in London, the second opened in New York in the autumn of 2007, and we have another in Dubai," says Levayev. Therefore it is completely natural for us to open shops in Moscow. Beautiful jewelry pieces are loved in Russia and the company has something to offer clients both in terms of the quality of diamonds and design, the businessman is assures. Nevertheless the luxury boutique remains its only one.

Levayev notes that in this business the company will make returns not only in the luxury segment, but also in the middle class segment and plans to open a chain of jewelry shops across the whole of Russia. According to him, there will be 200, including in Moscow, Belarus, Kazakhstan and Ukraine. However the businessman was unable to say how many exactly would be in Moscow. But he did specify that the "average sale" in the shops would be $350-$400 for a product. Levayev says that they will develop this business by means of the Moscow Jewelry Factory (MYuZ), which at present already owns 135 jewelry shops. Only Russian produced gold and diamonds will be on sale in them. MYuZ is one of the oldest Russian jewelry enterprises, having existed since 1920. Its assets now include the Ruiz group, which, in turn, is controlled by Levayev.

Russians Are Coming

There are not many Russian jewelry brands on the market. Some of them have not only shops, but also their own manufacturing capacities. Representatives of such companies confidently declare the use of the highest quality raw material. Vice president of the Kristall Mechti jewelry house Yulia Puzyreva says that the company has currently successfully opened 18 stores. The majority of them are located in the center of the capital, but a few of them operate in the regions: in Khimki, Mytisschi and Odintsovo. The company does not plan to stop here. "In 2008-2009 we plan to open international-class jewelry boutiques in New York and Tokyo, which will specialize in the sale of large Yakut diamonds weighing more than 1 carat. We are also going to capture the CIS countries, since opening a shop in Kiev. As for Russia we plan to open a shop in St. Petersburg and Grozny,” says Puzyreva.

The company’s assets include factories that manufacture jewelry. It currently has two operating factories: Yakutskiye Brillianty (Yakut Diamonds), which makes a great bulk of products focused on mass consumers, and Sozvezdiye Roskoshi, which produces “extra” class products. "Here they design and make exclusive, one off jewelry pieces," specifies Puzyreva.

She explains that the decision to open their own manufacturing capacities is connected with the fact that in Russia there are unique deposits of gold and diamonds, and it would be silly not to use such opportunities. According to Puzyreva, the company also wanted more creative and economic independence.

Within the structure of commercial and industrial holding Bronitsky Yuvelir is the Bronitskaya Jewelry Manufacturer. In Moscow the chain currently has 15 shops, each one measuring 70-80 sq.m. They are located in all districts of the city, with preference given to the center and quiet areas. The company refuses to impart whether it owns the properties or rents them, referring to a trade secret.

The Altyn gold superstore chain operates in the jewelry market of Russia, Kazakhstan, Kirghizia and the UAE. Altyn currently has more than 20 jewelry stores. Three of which are located in Moscow. According to Altyn, the area of the shops in the chain are 500-700 sq.m. According to information on the company’s website the company now has stores in St. Petersburg and Omsk besides Moscow. In 2008, the area of Altyn jewelry superstores in Russia are planned to be increased to 1,200 sq.m, the company has said.

It’s own manufacturing capacities in Bishkek (the Altyn factory) measures more than 4,000 sq.m. Originally the Altyn jewelry factory was created in Kirghizia in 1990 and located on the territory of the less well-known Cholpon shoe factory. In Russia an Altyn factory was established in 2005 in St. Petersburg on the territory of the well-known enterprise in Russia Krasny Treugolnik (Red Triangle). This giant manufacturer started in the twentieth century (it was established in 1894), and is now a monopolist in the market of rubber products. In the short term the reconstruction of existing buildings covering an area of more than 6,000 sq.m will be carried out.

Natalia Davidenko, head of the broker services department at Astera says that a serious player is actively entering the Moscow market and that is the 585 chain, which previously had only been represented in St. Petersburg and other regions. According to her, this operator has every of being able to seriously compete with such large market players as Altyn. The Russkiye Samotsvety chain is also trying to enter the Moscow market. Their shop is located in Zhulebino.

Director of the 585 national jewelry chain Georgy Pobelyansky says that four of its stores are already operating in Moscow and four in the region. The stores in Moscow are located on Stary Arbat, Leningradsky prospekt, and in the area of Vodny Stadion metro station. According to Pobelyansky, this is only the beginning. The company plans to have a total of 200 stores in Moscow. The chain currently owns a total of 450 shops in more than 130 cities, 400 of which have been opened since July 2006. The average bill in a shop of the chain, according to Pobelyansky, is a little more than 2,000 rubles. The stores sell both Russian and Italian gold

Golden streets

For a jewelry boutique, location is hugely important, and in many respects defines attendance. The prestige of a place and a favorable neighborhood with popular points of attraction for the potential audience is important. Another essential aspect is the presence of parking. "To begin with nobody paid attention to this, but with the tightening requirements for parking in Moscow this factor frequently defines the choice of shop for the buyer," summarizes Podium.

Consultants actively participating in searches for areas for jewelry shops, say that tenants do not have any special requirements. The main thing is that there is a window display. Jewelry shops are considered impulse-buying shops and are usually located on the ground floors of shopping centers. Jewelers also operate in the street-retail format.

The average area of a shop in a shopping center is 50-80 sq.m, the average rental rate of which is $1,500-$3,000 per sq.m a year. Street-retail format shops can reach 100-200 sq.m and are more expensive. In shopping centers, corner sections are considered successful, says Oksana Averkina, a leading consultant at Magazin Magazinov.

Jewelry shops are not afraid to compete with each other, therefore in shopping centers it is conceivable that they can be neighbors. 585’s requirements include an area from 100-250 sq.m and a rectangular shaped premise - "in other shapes it is difficult to place the necessary show cases, and make wide throughfares and navigation simple for buyers," explains Pobelyansky. And also large, wide display windows – there should be a good view of the shop.

Passing pedestrian traffic is also important: it is desirable that in the evening this should peak at about 2,000 people.

Davidenko notes that each segment has its own requirements when it comes to looking for premises for jewelry shops. Location is important for the mass market. A residential area or direct affinity to the metro is desirable. An area from 100 sq.m, with high pedestrian passing traffic and a large show-window are necessary for such a premises, and in her opinion, the rental rates can range from $1,500 to $3,000 per sq.m a year.

For the luxury segment one of the requirements, which may be one of the deciding factors, is that the area and the neighbors are of the same level, and not below. In addition to show windows, high - not less than 3 m - ceilings and long-term rental contracts for not less than for 5-7 years are among the requirements. It is also desirable that the premises are located in the city center or on a prestigious road such as Kutuzovsky prospekt, the expert specifies.

Several differences in the requirements for premises is explained by the distinct business model of each segment, explains Davidenko. The mass segment focuses on passing trade and profitability increases if the number of passers by is higher and the luxury segment focuses on a small number of regular clients and an absence of crowds. Such tenants spend a lot on the internal furnishing of a premises.

As for jewelry shops located in shopping centers the only requirement of such premises is that they have large electrical capacities (from 12 KW for 100 sq.m, whereas other profile shops generally require from 8 KW). “The display windows and counters in jewelry shops are constantly on so that everything sparkles and glistens," specifies Davidenko. In addition jewelers may ask to establish their own security system on the perimeter of the rented area. The rest, for example armored glass and windows or safe storehouses, tenants install at their own expense, the expert sums up.

Olga Kondaurova, a commercial real estate market analyst at CB Richard Ellis says that chains in the luxury segment rent areas in luxury class shopping centers: Vremena Goda, Petrovsky Passazh, GUM Department Store, and also prime retail streets such as Petrovka and Stoleshnikov pereulok.

Stores for the mass market, according to her, are located in usual shopping centers, and on streets that are busy with pedestrians. Their requirements are reduced to areas from 20-80 sq.m. As for electricity she agrees that increased capacities in connection with the special (raised) level of lighting is required.

In her opinion, there is only one particular unique characteristic - that in shopping centers it is possible to come across "jewelry zones." But Kondaurova thinks that jewelry is not bought on impulse. "Visitors frequently come to precisely buy jewelry, which allows jewelry shops located in a common neighborhood, to be able to operate and not compete against each other," finishes Kondaurova.

The security present in jewelry shops is no less than that in banks. The stores of Bronnitsky Yuvelir, for example, according to Sergei Gandilyan, the PR-manager of retail-manufacturing holding Bronnitsky Yuvelir, the glass of the front shop windows are anti-vandal with a high level of protection against mechanical damage.

Video surveillance systems are installed and areas outside the shop as well inside are monitored, he says. In the shop storehouses, the highest degree of security is established. They are rock solid against break-ins and are equipped with complex alarm systems that react to any kind of penetration, says Gandilyan.

Employees of private security enterprises (ChOP) are used for the security of stores, the number of which directly depends on the area and location of the shop. If it is a big store then security will include several people so that they can guard the whole territory of the shop, says Gandilyan. ChOP employees have the right to use special means (including fire-arms) in securing the chain’s stores in all cases that are provided for within the Russian law.

Altyn says that for general security they have "doors, glass, etc." And other particulars depend on the internal security service.