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12 I Companies & Markets bne September 2022
many of the departing international companies will leave the majority of their equipment and locally hired staff behind
as part of the deal, it is relatively easy for the new owners to continue the company’s business.
A controversial Yale report estimated that some 1,000 international companies have shuttered their businesses, or at least are suspending operations for the meantime, with
a combined value of 40% of Russian GDP. As the Samsonite deal illustrates, the departure of the company will not reduce the Russian economy’s value by $50mn as the company will continue to operate and in this case will possibly continue
to sell Samsonite suitcases as before, having little impact on the economy other than causing Samsonite a large one-time write-off from the forced sale.
Those losses are painful and as by far the largest consumer market in Europe in terms of population, many international companies are reluctant to abandon Russia completely. “It looks bad from the outside, but it’s a gold mine” the French head of Russian subsidiary of DIY chain Leroy Merlin told bne IntelliNews in an interview a few years ago.
IKEA will make a comeback
This explains why on August 24 Sweden's IKEA announced it will not sell its Russian business and will reopen its stores in two years' time.
The Swedish furniture store is arguably one of the most committed of all international brands to the Russian market, and was trying to get into the market in the 1970s during Soviet times. The 2000 opening of its flagship Khimki store is widely seen as a landmark in Russia’s retail history and the starting point for the Putin boom years that transformed so many Russian lives. Since then the iconic furniture store
has invested heavily in Russia and thoughout the region as bne IntelliNews detailed in a feature on the IKEA Empire.
The company told Russian newswire Tass that is not looking for a buyer of its business in Russia and plans to reopen stores and warehouses within two years.
IKEA has just finished a sell-off of it stock via its website and mothballed its stores. Warehouses and stores will remain closed until the retailer’s return, and plants in case of their sale will provide IKEA with a right to produce goods in future at contractual prices, a source told Tass.
"IKEA is not going to sell its business in Russia, what it has never done in other countries also. The retailer plans to return to Russia independently within a year or two, after the change of the economic situation and sanction pressure soft- ening. Stores, the so-called ‘blue boxes,’ will remain closed until the return of IKEA and will probably be let on lease since the next year. The company at the same time keeps about 700 employees that will continue working in offices and do the job for Swedish colleagues," the source added.
"Keeping the corporate culture and working standards for IKEA" was the decision in principle when accepting the scenario of operations suspension in Russia, the source noted.
"The company is selling plants in view of pressure from Sweden but with the option that these plants will later produce furniture and other merchandise under its orders at an acceptable cost. The strategy is to vacate warehouses and retain stores not yet closed so far," the source added.
MBOs
The transfer of business to local franchisees or manage- ment is one of the options for maintaining a presence in the Russian market for many companies, since leaving the country is unprofitable for most of them.
Experts speculate that Samsonite's MBO deal may include an option for returning the company to Samsonite Interna- tional should the political landscape change in the future, as has been included in other deals. For example, McDonald's agreement with businessman Alexander Govor, who is now the owner of the Russian clone Vkusna i Tochka (Delicious. Period.) contains a buy-back clause at any time within the next 15 years, reports Vedomosti.
And Chemodan is likely to flourish, reports Vedomosti, call- ing its president Shikulov "Russia’s suitcase king". A pioneer onthe market, he was the one that facilitated that aggres- sive early entry into Russia that luxury luggage companies are prone to. In addition to Samsonite, Shikulov actively brought several other leading brands to Russia, as was typical in those days. Russia was such a difficult market to operate in during the wild 90s, international companies were happy to give exclusivity to any local distributor that was prepared to pay cash up front and take on the onerous task of clear- ing the goods through customs. Traders that could manage this quickly became millionaires and with their resources expanded fast to sign up other producers of related goods, building little empires in the process.
According to SPARK-Interfax, Shikulov is also the CEO of Accessorize Rus (selling bags, gloves, shawls, jewellery, etc. under the British Accessorize brand) and Bozhzhi Rus (selling the Italian clothing brand Boggi Milano), as well as a board member of Guess CIS. His Robinson Logistics also represents the Italian underwear Calzedonia franchise network in Russia.
Under the terms of the deal, Samsonite stores will start to reopen this month under the new brand "Suitcase Pro", Vedomosti reports. Some of the biggest outlets in Moscow in the flagship stores in the Metropolis mall, Atrium and Europa shopping centres in Moscow have already been rebranded and reopened, as well as at the Greenwich mall in Yekaterinburg.
The company's website says that it is a network of premium multi-brand luggage and travel stores selling Samsonite, American Tourister, Lipault, Tumi brands (all owned by Samsonite International).
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