An insider guide to the growing Kazakhstan retail market

The background of conceptual fashion brands in Kazakhstan dates back to the beginning of 2000s. Brands Mango and Benetton were one of the first conceptual stores that were operating in Almaty. Back then these brands were mistakenly considered to be expensive and unaffordable to the majority of population due to a high markup, which exceeded European retail prices by up to 70 per cent. In the beginning of 2000s owners of Master Franchises enjoyed the absence of competition on the fashion retail market of Kazakhstan, and Almaty in particular. As a result of lack of variety of quality products on fashion retail market, most of Almaty customers (approximately 90 per cent) preferred to do shopping on barakholka- huge open air market, which used to be the main source of clothes in the 1990s and still has a share of the market. 

“Adem” was the first indoor market that was called a trade centre. Mini stores that operated there were selling the same products as on open air market, but with some sort of merchandising e.g. mannequins, etc. 

In 1999 the first conceptual trade centre Ramstor Samal was opened in Almaty, followed by City Center trade centre in 2003. However, even after the launch of the first conceptual trade centres the quantitative measure of the variety did not turn into qualitative one. There was a lack of conceptual mono-brand stores. Moreover, high rental rates in trade centres (up to 120 USD per sqm for areas of 100 sqm) kept potential professional tenants away. Appearance of several other trade centres that were built in the beginning of 2000s improved the situation to some extent, but did not improve a deficit of full-fledged, conceptual stores. 

MEGA was the first trade and recreation centre of international scale with a number of full-fledged conceptual stores. However, during the first two years since the opening of MEGA many of its tenants constituted multi-brand stores whose owners simply copy pasted concepts of European stores. Benetton, Mexx, Esprit, Tommy Hilfiger stores were represented in MEGA through their local franchise owners. The return of investments period was around 1.5 years in pre-crisis year due to abundance money in the country. 

2008 and 2009 were marked by the opening of several other trade centres among which were: Sputnik (12 000 sqm), Prime Plaza (11 000 sqm), and Aport mall (55 000 sqm) – the first conceptual mall in Central Asia built according to international standards. Starting from 2009 and up until now the content of fashion retail market in Almaty has been witnessing stable improvement.

The next important bench-mark on the fashion retail market which has to be highlighted is opening of Zara store in Almaty. This event created a revolution on the retail market of Kazakhstan and established new standards of competition. Today Inditex directly represents Zara, Pull and Bear, Stradivarius, Bershka, and Massimo Dutti brands in Kazakhstan. These brands demonstrate sales that exceed 8,000 USD per sqm per year. Another big player on the market is Fawaz Alhokair with its daughter company Retail Group Kazakhstan representing GAP, Accessorize, Monsoon, Aldo Accessories, Aldo Shoes, La Senza, FG4, TOP SHOP, Lipsy and others with around eight additional European and American brands in the pipeline. 

Besides international franchise owners, there are several strong local companies that currently operate on the market. A good example would be Union Space company representing Mexx, New Yorker, Motivi, Naf Naf, Jack Jones, Vero Moda and other brands in Kazakhstan. 

Lately, Turkish companies have also demonstrated competitiveness of their mass fashion concepts. In autumn 2011 LC Waikiki opened its first store (1600 sqm) in Almaty in Aport mall. Turkish retailers demonstrated their understanding of the market and its high demand for quality apparel at affordable prices by active development in mass fashion segment. 

However, even given the presence of aforementioned brands, open air markets like barakholka still takes a substantial share of retail market. The reason for this is unsatisfied demand for variety of customers. Nevertheless, open air markets started losing 15 per cent of their customers every year due to poor service, lack of comfort during shopping, weather conditions (hot in summer, freezing in winter), absence of parking spaces, affordable prices for clothes in trade centres, and many other reasons. 

According to the estimates of Yerzhan Urazbayev, head of department of rent of Aport mall, around 50 European, Turkish, Russian, and American brands are going to enter the market of Kazakhstan in the next two years creating a new fashion retail boom. 

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