Money Growing: Books in Chains

Bookshops have really changed in the market economy. Dealers of intellectual products are considering the trends of time. The most important things are convenience, a wide assortment of goods, and not only printed editions but also their electronic versions. The mobile format of the most active book-selling chains allows them to develop both in tiny premises - so-called bookstores, and in the format of supermarkets.

The development of large retail areas has allowed bookstore chains to announce the expansion of their target audience and increased revenue.

Pioneers and leaders

According to Yuri Yudakov, head of the office real estate department at Praedium, the leader in the market of bookshop chains is Top Kniga (more than 500 shops in all the federal districts of the Russian Federation), which began operating with wholesale trade in Novosibirsk, and then switched to retail trade under the following brands: Litera, Pishi-Chitai (Write-Read), Knigomir (Bookworld), Las-Knigas, Gorodskaya Soroka. In addition Top Kniga carries out retail trade through federal and regional grocery chains, and also through independent bookshops with which the company has established partnerships. The first Top Kniga shops appeared in Moscow in 2003. Now in the Moscow region there are 32 Knigomir shops, including four in Moscow, and the others - in a radius of 150 km from the center of the capital, in particular in Protvino, Pavlovsky Pasad, Dubna and Ramenskoye. Of the other formats, there are five Las-Knigas shops and four Litera shops. "Not so long ago in the Vremena Goda shopping center on Kutuzovsky prospekt we opened our first premium-class shop - ВооkLexica,” says Elena Sergiyenko, director of the Moscow division of Top Kniga. “Its range includes many expensive, exclusive and gift editions." The Top Kniga chain currently controls more than 10 per cent of the book-selling market in the Russian Federation.

According to Praedium, in second place is book chain Bukva, which has more than 300 shops, and in third place is Moskovsky Dom Knigi (Moscow House of Books). According to Svetlana Yarova, head of the design department at Astera, the Moskovsky Dom Knigi chain and the Novy Knizhny chain have more than 40 shops each.

In the Moscow region, according to research carried out by the institute of marketing research GfK Rus (the Russian branch of the world's largest research company GfK Group), the most well-known book chains are: Las-Knigas – 11.8 per cent, Litera – 8.4 per cent and Moskovsky Dom Knigi – 2.7 per cent. But the most popular is Knigomir book chain. 20 per cent of respondents questioned in the capital stated that they visit the shops of this chain.

According to Sergiyenko, the pioneer of the retail format developed by Top Kniga was Knigomir (now there are already 387 of such shops). Its first bookshop that appeared in Novosibirsk had open access to books and closed access to other goods. "It is possible that the wide range of goods, which was not limited only to books, promoted the fast development and wide popularization of this format," says Sergiyenko.

Litera is a book and stationery cash & carry. It has 26 shops positioned in the wholesale-retail sector of stationery goods and books (its range includes more than 15,000 books, no less than 5,000 kinds of stationery goods, about 4,000 names of toys and games, and more than 2,500 types of cards, 1,000 periodicals and a wide range of CDs/DVDs). Its concept assumes lower prices in comparison with averagely priced goods and the maintenance of various systems of encouragement for buyers.

As a new interesting format actively developing recently, Alexander Dyachenko, the director of development at elite real estate agency Welhome, notes the Republika chain of shops. This chain belongs to Vadim Zasypkin, the owner of the company that manufactures Dimov meat delicacies. Experts say that he had an idea about bookshops for a long time and has successfully carried it out. The first Republika shop opened in 2006 on Ulitsa Tverskaya-Yamskaya. Now the chain has stores operating in Krylatskiye Kholmy business park, Gorbushkin Dvor shopping center, Lotte Plaza, Mega Belaya Dacha, etc.

Besides bookshops chains have opened book publishing houses. Roman Sokov, the director of the consulting department at Becar Commercial Property Moscow, lists: publishing house AST – Bukva chain, Eskino - Bukvoed and Novy Knizhny, and Melody Guardia – Nizhniy Slobodan. "For a publishing house its own shops are the largest trade channel, they can compete thanks to their prices as there is no margin, they can sell exclusive editions before other shops, and clear unsold stock," Yarova explains.

All in one

In a shopping center a bookshop carries out the same function as cafes or perfumery shops, it is a mini-anchor that attracts extra visitors. PeresvetInvest thinks that chains that sell not only books but stationery products and accompanying goods aspire to rent premises in large shopping complexes.

A bookshop currently, in the opinion of the buyer, should not represent an elementary book depository, but should be comfortable and have additional services, including a cloakroom, a children's playground, a club, a stage, a coffee house, a program of cultural activities, etc. For example, St. Petersburg’s book chain Bukvoed has opened shops in Severnaya Palmira under a format that is new to the Russian market – called a cultural-leisure center. Here, in addition to shelves of books, there is a coffee house, a children's games room and a scenic platform. In the Moscow Biblioglobus store a literary club-coffee house has opened, where it is possible not only to have breakfast, but also to meet authors of books and get their autographs. Such practice is the norm in the West. In the stores of America’s largest book chain Barnes Noble, Starbucks coffee houses operate.

In Las-Knigas superstores meetings with modern writers, children's themed evenings, and launches of new books are often carried out. "And for visitors to "acquaint" themselves with a chosen book in more detail, all shops have specially equipped corners for reading with comfortable armchairs and sofas and children's play areas,” says Sergiyenko. Las-Knigas is the youngest format developed by Top Kniga, but there are already 16 of such superstores.

In the shops of the Knigomir chain it is possible to buy stationery goods and toys, newspapers and magazines, gift cards and wall calendars, CDs and DVDs of modern directors and world film classics, electronic encyclopaedias, games for development and audio books. The average range includes more than 30,000 books. Bookberry’s range numbers more than 70,000 classical and modern Russian and foreign literature, children's books, textbooks and professional books, art albums, foreign-language books, and also guidebooks, stationery, newspapers and magazines and other accompanying goods. In Biblioglobus, besides books, it is possible to buy cameras, CDs, MP3 and DVD players, flash memory cards and iPods.

But there are also chains that offer minimum comfort with a maximum assortment. "One of the largest in Russia is the Bibliosfera book chain, whose focus is on providing a wide assortment of business literature and fiction," Sokov gives as an example.

Closer to people

Yarova thinks that a determining factor for the accommodation of a bookstore in a shopping center is consumer traffic. "A bookshop can generate its own stream of buyers by means of window displays and signs when it is street-retail format, but advertising in a shopping center is more complicated," she says.

In most cases buyers purchase books spontaneously, often, for example, when they go food shopping. Therefore when looking for a location, bookshop chains first of all pay attention to the number of residents in the area that visit the shopping center, and also on the presence of competitors nearby.

According to Olga Shirokova, the head of the consulting, analytics and research department at Blackwood, the market of chain operators in book retail is limited - practically in all shopping centers bookshops are represented by the superstores of one of the 3-4 most well known chains. "Bookshops rent premises in shopping centers under the principle "if it is not us then it will be our competitors," Yarova says. For example, according to experts, the majority of stores in the Bookberry chain are located in shopping centers (Varshavsky, Mega Khimki, Mega Teplyi Stan, Gallereya Aeroport, Global City, Fifth Avenue, Dream House, etc.), but Bukva and Novy Knizhny only place about 30-35 per cent of its stores in shopping centers. "Bukva and Novy Knizhny prefer street-retail premises and represent non traditional bookshops and space for creative people." says Sergey Volochkov, director of the commercial real estate department at Mayfair Properties.

Yudakov notes that chains of bookshops prefer to rent premises in large shopping centers with a big attendance outside the Third Road Ring or in small shopping centers in the city center where a large stream of visitors is also maintained. "Preference is given to shopping centers with total areas exceeding 10,000 sq.m," confirms Sergiyenko. In connection with the development of the large shopping mall format outside the MKAD, retailers are opening their shops there (Bookberry).

Book chains actively use premises in the street retail format on the first line of streets with high passability, near metro stations. In the Moscow market there are also chains that prefer to develop only independent bookshops, for example Chitai-Gorod, Biblioglobus, Moskva trading center, etc.

Room for letters

According to Yudakov, practically all book store chains prefer to rent areas, rather than buy and own premises as such purchases take a long time to pay off. According to Kira Butba, head of the commercial real estate department at Vesco Consulting, as a rule, bookshops with a range totalling 50,000 books occupy premises in shopping centers measuring 100 - 600 sq.m. In Shirokova's opinion, the most widespread format for bookshops is premises measuring 300-400 sq.m. The majority of such stores operate in shopping centers. Less often are there shops measuring 1,000-1,500 sq.m, the majority of which fall under the street-retail format. Bookberry has opened a shop in the center of Moscow, on Nikitsky Bulvar, with an area of 1,300 sq.m," Butba gives as an example.

According to Sergiyenko, Top Kniga has examples of successful shops measuring from 50 to 1,000 sq.m. In the compact format with areas of 30-50 sq.m and which are dominated by newspapers and magazines and books Gorodskaya Soroka operates. "As the majority of bookshop chains develop on a regional scale, their requirements concerning volume of space varies in different regions. According to Sokov, the Bukvoed chain considers offers of rent on retail premises in Moscow and St. Petersburg with areas measuring 200 – 2,000 sq.m, and in the Northwest federal district (in Murmansk, Petrozavodsk, Pskov) 450-1,000 sq.m.

In Moscow and the Moscow Region, Top Kniga is interested in premises measuring 100 – 2,000 sq.m. They consider rental, sub rental and purchase offers. In the Northwest district, including St. Petersburg and the Leningrad region, rental and sub rental offers in the form of retail shops measuring 70-1,000 sq.m are considered, in the Siberian district 50-200 sq.m are considered, and in the Ural district (Yekaterinburg, Tyumen, Ufa, Chelyabinsk, Perm, Izhevsk) 100-400 sq.m and 800-1,000 sq.m are considered. The Bukva chain of bookshops is represented by various formats, and is therefore interested in areas from 100 to 1,500 sq.m.

"Unlike grocery or entertainment segment operators bookshops are rather undemanding tenants," says Shirokova. Ashot Barsegyan, head of commercial real estate at MIAN Real Estate Agency, specifies that they do not put forward special requirements for premises. Their conditions bear little importance: the shop should be dry as superfluous humidity will negatively affect the quality of the goods, the premises should have an open lay-out which allows for the placement of the required number of book racks, and high ceilings are desirable. As Sergiyenko confirms, the standard preferred characteristics for Top Kniga’s shops are: good light exposure, the allocated entrance groups; if it’s a separately standing building a place for a sign on the front of the building, and a car park for shoppers.

In Yudakov's opinion, in Moscow there is an acute problem of bookshops finding areas to rent due to high rates or poorly located shopping centers. "Rental rates for street retail format book shops are roughly $1,000 per sq.m a year," says Shirokova. In some cases the rental rate can reach up to $2,000 per sq.m a year, adds Barsegyan. According to him, rental rates in the majority of shopping centers and the priorities in selecting a pool of tenants compels bookshops to be limited to either small areas in zones with high passability, or larger but cheaper areas in socles. At the same time large bookshop chains can act as anchor tenants - in this case rental rates will be lower: from $100-150 per sq.m a year. According to Dyachenko, shopping centers are interested in book stores as tenants. "But frequently providing them with areas is unprofitable: the discount which is requested by bookshops, can reach up to 50 per cent of the rental rate requested by the proprietor," the expert stipulates.

According to Sergiyenko, the chain considers premises with a rental rate of up to 15,600 rubles per sq.m a year including VAT. Although the expert does not hide, that in concluding contracts there are conditions. For example, when a company sees that the shop is a magnet which can increase the inflow of visitors to the shopping center, Top Kniga considers it has the right to carry out negotiations with its owner on a lower, preferential rent rate. The cost of opening a Knigomir store is 1.2 million to 1.5 million rubles. "If renovations are required then the size of investment increases, but we try to rent ready premises. The average area of such shops is from 150 to 250 sq.m," specifies Sergiyenko. For Bukva and Las-Knigas shops areas from 900 to 1,500 sq.m and more serious investments of 12 million to 16 million rubles are required.

In Shirokova’s opinion, the prospects for the development of the book business are connected with the expansion of the product range they offer due to such fields as multimedia, stationery goods, etc. These also increase the average area required. For example, Bookberry develops two formats – premises measuring 300-400 sq.m and premises measuring 1,000-1,500 sq.m.

According to Volochkov in the future niche book shops and stores that will conceptually organize the space in the store and offer not only books but a way of life, will have the advantage. "It is possible to expect further overlapping of bookshops with coffee houses where buyers have the opportunity not only to buy a book, but also to study it with a cup of coffee," predicts Butba. In the opinion of experts, in the future bookshops will be present in every Moscow shopping center.