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Comfortable, practical and stylish footwear from Russia

Obuv2

Obuv Rossii Group is a federal retail shoe chain ranked among top two Russian footwear retailers (according to Discovery Research Group). The Group is the leader of the mid-price segment of the shoe market. Obuv Rossii manufactures shoes utilizing all main types of sole construction techniques. All stages of production are fully automated, using high-quality equipment by some of the leading international manufacturers such as Desma, Newlast and Orisol.

Turning points in company’s history
The company has been on the market for 15 years. All important milestones are associated with the launch of new brands: in 2003, Obuv Rossii included several Westfalika stores - today this is the main brand of the Group. Westfalika is a multi-brand stores of the mid-price segment, offering classic design shoes and urban style shoes for every day. In 2006, the company opened the first shoe supermarket Peshekhod. The target audience of the new Peshekhod is 20-60-year-old people, who move actively and at the same time want to look fashionable and bright. In Peshekhod you can also find collections of past seasons from other monobrand networks of the Group. In 2014, Obuv Rossii included 3 brands: the new Emilia Estra network is a fashionable and trendy footwear only for a young female audience. Also, this year Obuv Rossii acquired the company Rossita, which managed the brands Rossita and Lisette and had more than 80 stores throughout Russia. Rossita is a store of European shoes for the whole family; the Lisette brand represents a French, refined, romantic style in design. Since 2014, the company is developing the direction of Internet commerce. At the moment the Group operates five online stores. In 2014, Obuv Rossii opened a shop to produce polymer footwear, acquiring an automated complex that allows a full cycle of production of such footwear. In 2015, as a result of the M&A deal, the footwear manufacturer S-TEP entered the Obuv Rossii group of companies. This high-tech enterprise gave a big impetus to the development of the company’s production line. In 2016, Obuv Rossii opened a shop for the production of special footwear. For this purpose it mastered a new technology for fastening the sole - the method of hot vulcanization of rubber on the workpiece. Now the company produces shoes with all the main types of soles, footwear from natural, synthetic and polymeric materials; shoes for all seasons, casual, semi-sports and work shoes, as well as footwear that withstands extreme loads and temperatures. When it comes to the development of financial services for customers, in 2007 the company launched a consumer lending program to buy shoes together with banks and in 2009, with its own installment payment service. In 2012 the company offered customers cash loans and in 2015, combined all the additional services within the framework of the innovative loyalty program Arithmetic (Arifmetika), which is now implemented on the basis of MasterCard payment cards. It unites both the traditional accumulative-discount system, and a set of additional services, such as installments, cash loans, payments for services and others.

Strategic potential
The company sees its strategic potential in the multi-format strategy. Obuv Rossii develops several brands, each of which has a unique positioning and its audience of buyers. This increases the market capacity for the company and allows it to take a larger share. Turning to international experience, multi-format strategy allowed Belle (China), Deichmann (Germany), CCC Group (Poland) to become leaders of their national markets. The main asset of the group is the brands and loyal customers. Obuv Rossii is very attentive to its product and develops additional services for customers. The company controls all stages of product creation, from the development of the collection and ending with its sale to the end customer. Obuv Rossii has its own design and R&D center, which develops and introduces new materials and technologies into production. The company offers its customers not only a wide range of footwear, but also a wide range of related products under their own brands - clothes, bags, shoes care products, hosiery, etc. Related products allow to increase revenue, earnings, stimulate complex purchases and increase customer loyalty. The company has high-tech production and high level of IT integration in the retail network. Obuv Rossii extends the set of high-tech services and improves the omnichannel trade model in order to increase the number of points of contact with the brand and form a unified experience of interaction with the brand. A significant competitive advantage is also the team. Many specialists work in the industry for 10-15 years and perfectly know the process of production and product creation.

Manufacturing process and main products
The company develops several lines of activity. Firstly, it is the retail sale of footwear and related products. Obuv Rossii holds more than 550 stores in more than 150 cities of Russia. The company develops five retail chains: Westfalika (a monobrand store of classic footwear), Peshekhod (multi-brand shoe supermarket), Rossita (a store for the whole family), Emilia Estra and Lisette (fashion showrooms). Also, the company develops brands of footwear and clothing for the active lifestyle: S-TEP, ALL.GO and Snow Guard. In addition, the network provides a wide range of related products under its own brands. In 2017, the related products accounted for 31% of retail revenue. Secondly, the company operates two shoe factories in the Novosibirsk region. The production of the Group is characterized by a high level of automation and modern equipment of the world’s leading manufacturers used at enterprises. The Group’s production facilities exceed 5 thousand square meters. Obuv Rossii produces casual shoes and footwear for outdoor activities under its own brands, such as S-TEP, all.go, Pioneer of Arctic Travel. The Group also entered the corporate footwear market and produces special footwear and footwear for various industries (banking, food, etc.). Thirdly, the company is developing e-commerce. The Group works on the model of omnichannel trade, using different channels of communication and sales. In 2017, the multi-channel sales, including e-commerce, grew by 56%, the audience of online stores increased by 38% (from 2.5 million to 3.4 million people). Fourth, the company also develops a number of additional services for customers. Obuv Rossii has been developing this direction since 2007. Today, the company’s stores offer such services as installment payments, cash loans, cash payments, etc. They are all united within the framework of the innovative loyalty program Arithmetic (Arifmetika). At the end of 2017, the number of cardholders increased by 25% and reached almost 2 million people.

Production technologies
To develop the collection, the company uses 2D and 3D programs to design shoes, and provide full integration with the further production process. At the factories, the Group uses automated systems of Orisol. It’s an Israeli company, the world’s leading manufacturer of such equipment. Obuv Rossii has the largest fleet of such machines in the country. At the first stage, automated systems allow a 5-6-fold increase in labor productivity. However, with a deeper mastery of technology, you can bring this figure to 6-8 times. In addition to improving productivity, the company also has the opportunity to produce a more complex range - shoes with a combination of materials, a large number of lines, such as in semi-sports shoes. Part of the assortment is produced using German molding technology. For this, Desma injection molds are used. Casting technology allows to achieve a high level of strength of shoes, since the top of the shoe is attached to the sole at the molecular level. The factory is one of the few in Russia that produces footwear with natural fur on injection molding technology. For the production of special footwear, the company uses the technology of hot vulcanization of rubber on the workpiece. A part of the assortment is produced by the glue method. The factory presents the key methods of fastening the sole, therefore from the assortment point of view the possibilities of the company are not limited. Obuv Rossii has an automated system for manufacturing footwear from EVA. The company produces not only clogs, flip-flops and other summer shoes, but also boots from EVA on solid technology.

New investments and further growth
Today, the company is one of the most effective in its sector. At the end of 2016, the EBITDA margin was 25.5%. As for profit, in 2016 it amounted to 1.18 billion rubles. Consolidated unaudited revenue in 2017 was 10.8 billion rubles, an increase of 8% compared to 2016. Obuv Rossii plans to further develop collections and assortment of related products under its own brands. The Group will improve the model of omnichannel trade, develop new sales channels, and expand the set of additional services for customers. The company also plans is to increase labor productivity and to maximize the use of equipment that operates in the factories. In October 2017, the company raised 5.9 billion rubles during an IPO on the Moscow Stock Exchange. Obuv Rossii became the first public company in the Russian fashion and footwear market. The attracted funds will be directed to the development of key business areas of the company, primarily to expand the retail network. And this, in turn, will also contribute to the growth of production volumes. In the next 3 years Obuv Rossii intends to double the retail network. In 2018, the company plans to open about 100 stores. The Group will also develop the product range, increase the efficiency of the retail network, develop an innovative loyalty program, improve production, increase output, introduce new materials and technologies.

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