worldwide & russian retail markets facts 2009-2012. forecasts 2012-2016 research.enter

WORLDWIDE AND RUSSIAN RETAIL MARKETS 2009-2016

MAKING CONCLUSIONS BUILDING PLANS

2

ABOUT CSR ENTER

CENTER OF STRATEGIC RESEARCH OF ENTER (CSR ENTER) has been created in 2011.

One of our ambitious targets is to form trends in the retail industry, mainly market research and analytics. This led to the creation of CSR Enter, the core aim of which is to increase the market transparency.

Public researches can be downloaded for free on www.enter.ru/research

Visit us on Facebook: http://www.facebook.com/research.enter

Center of Strategic Research of Enter (CSR Enter) has been created in 2011. One of our ambitious targets is to form trends in the retail industry, mainly market research and analytics. This led to the creation of CSR Enter, the core aim of which is to increase the market transparency.

ABOUT CSR ENTER

Public researches can be downloaded for free on www.enter.ru/research

2

Market Research by CSR Enter:

Visit us on Facebook: http://www.facebook.com/research.enter

In case of questions & queries, comments and proposals for partnership, e-mail us: [email protected]

«Present Trends in Retail: the New Way of Shopping» 2 April 2012.

«Online Retail Barometer: New Knowledge (2Q 2012)» 27 July 2012

«Business Results of the Retailers for 2011 and 1Q 2012» 3 September 2012

«Present Trends in Online Retail: Facts and Figures» 10 October 2012

«Customer-Centrism: metrics, cases, facts» 28 February 2013

«Business Results of the Retailers for 2011» 8 April 2013

In case of questions & queries, comments and proposals for partnership, e-mail us: [email protected]

3

CONTENTS

WORLDWIDE AND RUSSIAN RETAIL MARKETS USA ...................................................................................................................................................................6

CHINA ................................................................................................................................................................8

RUSSIA .............................................................................................................................................................. 10

SEGMENT ANALYSIS PERFUMES & COSMETICS ................................................................................................................................ 14

JEWELRY & WATCHES .......................................................................................................................................29

FURNITURE .......................................................................................................................................................46

SPECIAL FOCUS: WORLDWIDE BEST-PRACTICES .....................................................................61

4

METHODOLOGY

TERMS AND MEASURES:

CAGR (Compound annual growth rate) — shows average weighted growth rate over several periods.

Offline Retailers – companies which operate only through stationary retail stores.

Online Retailers – companies which operate through their own website, catalogue or (and) call-center.

Multichannel (both online and offline) – companies which operate both though the Internet and other distant channels and through traditional retail outlets.

Mixed Product Range – segment which consists of retailers that are specialized on 2 or more commodity categories.

Weekly Traffic (Unique Weekly Visitors) – average number of weekly unique visitors of an internet retailer’s website. Traffic of retail segments is estimated by top-3 companies in each segment.

WORLDWIDE AND RUSSIAN RETAIL MARKETSSALES VOLUME & GROWTH RATES

EXPANSION OF E-COMMERCE

6

WORLDWIDE MARKETS

RETAIL IN THE US

USA Retail Sales* USD bln

KEY FACTS

During 2012 non-food retail grew up 3 times more than food retail (7.2% vs 2.6%). The total retail market’s CAGR in the USA reached 6.3% in 2009–2012.

* In current prices (including inflation) Sources: US Census, analysis by CSR Enter

Food RetailNon-Food Retail

7

WORLDWIDE MARKETS

E-COMMERCE IN THE US

USAE-commerce Sales USD bln

KEY FACTS

E-commerce market was growing faster than the total retail market in the US during 2009-2012 (with CAGR of 14% vs 6%).

Source: Morgan Stanley analytics

F F F F

8

WORLDWIDE MARKETS

RETAIL IN CHINA

CHINARetail Sales* USD bln

KEY FACTS

In contrast to other developed countries share of food retail in total retail market is still more than share of non-food retail (56.2% vs 43.8% in 2012) but non-food retail is growing much faster than food (28% vs 10%).

* In current prices (including inflation). Exchange rate: 1 RMB = 0,1585 USD

Sources: NBSC, analysis by CSR Enter


9

WORLDWIDE MARKETS

E-COMMERCE IN CHINA

CHINAE-commerce Sales USD bln

KEY FACTS

E-commerce market in China is growing rapidly: according to different forecasts the volume of the market is to raise up by 340 bln USD in 2016 and catch up with the US level.

Source: Morgan Stanley analytics

F F F F

10

RETAIL IN RUSSIA

RUSSIARetail Sales* USD bln

KEY FACTS

Non-food retail in Russia is growing faster than food retail: with CAGR of 15% vs 12% in 2009–2012). Share of non-food retail increased from 51.4% in 2009 to 53.5% in 2012.

* In current prices (including inflation). Exchange rate: 1 USD = 31.065 RUR

Sources: Rosstat, analysis by CSR Enter


11

E-COMMERCE IN RUSSIA

RUSSIAE-commerce Sales USD bln

KEY FACTS

According to CSR Enter estimation, Russian e-commerce market’s CAGR was approximately 25% in 2009-2012; projected CAGR for the period of 2012-2016 fluctuates from 22% to 35% by different estimations.

* Forecasts made by Fast Lane Ventures and InSales are estimated till 2015.

Sources: analysis by CSR Enter, Morgan Stanley, InSales, Fast Lane Ventures

7 10

13

19

26

36

43

8 11 13

15 19

23 28

2010 2011 2012 2013П 2014П 2015П 2016П

E-COMMERCE IN RUSSIA

* Forecasts made by Fast Lane Ventures and InSales are estimated till 2015.

Morgan Stanley Estimation CSR Enter Estimation

Fast Lane Ventures Estimation InSales Estimation

RUSSIA. E-commerce Sales* USD bln

Sources: analysis by CSR Enter, Morgan Stanley, InSales, Fast Lane Ventures

KEY FACTS

q  According to CSR Enter estimation, Russian e-commerce market’s CAGR was approximately 25% in 2009-2012; projected CAGR for the period of 2012-2016 fluctuates from 22% to 35% by different estimations.

2013F 2014F 2015F 2016F

12

RETAIL IN RUSSIANon-Food Retail Segments

RETAIL IN RUSSIA

RUSSIA. Non-Food Retail Segments

Sales, USD bln (estimation)

2011 2012

Electronics & Home Appliances

Household Goods & DIY*

Kids’ goods **

Furniture

Perfumes & Cosmetics

Jewelry & Watches

Pets’ Products

+23%

+24%

+12%

+15%

+13%

+13%

+21%

Segment CAGR

2012-2016

~ 11%

~ 13%

~ 16%

~ 12%

~ 16%

~ 19%

~ 10%

~ 17%

Share of Internet Sales

~ 2%

~ 6%

~ 4%

~ 4%

~ 1%

~ 9%

CSR Enter estimation based on official statistics

* Textiles, household chemical goods, tableware, floor coverings, building materials ** Excluding baby food

Sources: analysis of CSR Enter, Rosstat, GFK

* In current prices (including inflation). Exchange rate: 1 USD = 31.065 RUR

2,9

7,5

11,1

11,3

14,3

22,3

37,7

2,4

6,6

9,8

9,8

12,3

18,0

30,6

13

18% 12%

9%

Товары для красоты и здоровья Парфюмерия и косметика

Одежда и обувь

13.9% 11.3% 12.3%

8.5%

29% 29% 28%

Мебель Товары для дома и DIY

Ювелирные украшения и часы

15.1% 12.9%

20.8% 18.8%

10,7% 7,8%

4,7%

Одежда и обувь Товары для дома и DIY

Парфюмерия и косметика

10.3% 7.4% 7.7% 7.6%

37% 28%

13%

Автозапчасти Спортивные товары


12.1% 11.6% 16.1%

11.2%

8% 6%

3%

Товары для красоты и здоровья

Товары для спорта и отдыха

Одежда и обувь 7.9%

2.7% 10.8%

5.2%

2.0% -0.5% 0.8% -1.3%

GROWTH RATES OF WORLDWIDE MARKETS

1st QUARTER 2013

* Non-food retail does not include retail sales of automobiles and petrol. ** In all rates considering 1st quarter 2012 the updated data is taken.

WORLDWIDE RETAIL GROWTH RATES SLOW DOWN

Growth rate 1st quarter 2013 to 1st quarter 2012

Growth rate 1st quarter 2012 to 1st quarter 2011

Sources: analysis of CSR Enter, US Census, Eurostat, NBSC, IBGE, Statistics South Africa, Rosstat

Health & Beauty Sports & Outdoor

Apparel & Footwear

Health & Beauty Perfumes & Cosmetics

Apparel & Footwear

Furniture Household Goods & DIY

Jewelry & Watches

Clothing & Footwear Household Goods & DIY Perfumes & Cosmetics

Auto Parts Sports & Outdoor

Jewelry & Watches

0,3% -1,6% -2,8%

Товары для красоты и здоровья Электроника


Health & Beauty Electronics

Apparel & Footwear

Retail Non-Food Retail* Top-3 Segments

USA

European Union**

Brazil

China**

South Africa

Russia**

SEGMENTANALYSIS

PERFUMES & COSMETICS

GET NOWSEGMENT ANALYSIS OF INTERNATIONAL & RUSSIAN RETAIL [email protected]

15

METHODOLOGY

«Worldwide markets» section is based on the data provided by National Statistical Services: US Census («Health & personal care» sales excluding pharmacies and drug stores sales) and National Bureau of Statistics of China («Perfumes & Cosmetics» category). Historical sales are calculated in current prices (including inflation), the forecast sales are calculated according to McKinsey and Euromonitor estimations.

«Online-retailers product range» section is based on the analysis of 5 selected companies of the industry: «Il de Beaute», «L’Etoile», «Rive Gauche», «Ozon.ru», «Enter.ru» — in accordance with the SKU available on the website. Price ranges are calculated according to present classification:

«Worldwide markets» section is based on the data provided by National Statistical Services: US Census («Health & personal care» sales excluding pharmacies and drug stores sales) and National Bureau of Statistics of China («Perfumes & Cosmetics» category). Historical sales are calculated in current prices (including inflation), the forecast sales are calculated according to McKinsey and Euromonitor estimations.

«Online-retailers product range» section is based on the analysis of 5 selected companies of the industry: «Il de Beaute», «L’Etoile», «Rive Gauche», «Ozon.ru», «Enter.ru» - in accordance with the SKU available on the website. Price ranges are calculated according to present classification:

METHODOLOGY

Economy Mid - Mid Mid + Premium

Perfumes Products < 1 000 1 001 -  1 500 1 501 -  2 000 2 001 -  2 500 > 2 501

Gift Sets < 1 000 1 001 -  1 500 1 501 -  2 000 2 001 -  2 500 > 2 501

Skin & Body Care Products < 300 301 -  600 601 -  900 901 -  1 200 > 1 201

Hair Care Products < 300 301 -  600 601 -  900 901 -  1 200 > 1 201

Make-up Products < 300 301 -  600 601 -  900 901 -  1 200 > 1 201

16

WORLDWIDE MARKETS

PERFUMES & COSMETICS MARKET IN THE US

USARetail Sales*, USD bln

Share of Perfumes & Cosmetics in Non-Food Retail

While the projected CAGR of Perfumes & Cosmetics market in the US for 2012-2016 is 5%, Internet sales are to grow almost twice faster (~10%).

* In current prices (including inflation). Forecast sales are based on the growth rates at constant prices (Euromonitor) and inflation (US Census).

Sources: US Census, Euromonitor, analysis of CSR Enter

KEY FACTS

2,1%

2012

35.5 3.,4 42.3

46.9 49.1 51.4 53.8 56.3

8.0% 8.2% 7.9% 8.0% 8.5% 8.9% 9.4% 9.9%

2009 2010 2011 2012 2013П 2014П 2015П 2016П

Продажи, млрд. долл. Доля онлайн-ритейла, %

CAGR 2009-2012 = 10% CAGR 2012-2016 = 5%

Retail Sales, USD bln Share of Internet Sales, %

2013F 2014F 2015F 2016F

17

WORLDWIDE MARKETS

PERFUMES & COSMETICS MARKET IN CHINA

CHINARetail Sales*, USD bln

KEY FACTS

According to the estimation Perfumes and Cosmetics market share in total retail market in China is to grow up from 6.6% in 2012 to 17.2% in 2016.

* In current prices (including inflation). Exchange rate: 1 RMB = 0,1585 USD



23.5 27.4 30.2 33.2

36.5 40.1

44.2 48.6

2.4% 4.0% 5.1% 6.6% 8.3% 10.6%

13.5% 17.2%

2009 2010 2011 2012 2013П 2014П 2015П 2016П


CAGR 2009-2012 = 12% CAGR 2012-2016 = 10%


2013F 2014F 2015F 2016F

18

PERFUMES & COSMETICS MARKET IN RUSSIASALES AND GROWTH RATES

KEY FACTS

The economic crisis of 2008-2009 had no significant impact on this segment: CAGR remained high (21%) for the period of 2007-2009.

Projected growth rate (CAGR) of market sales in Russia for 2012-2016 is about 16% thus Perfumes & Cosmetics sales can reach 20 USD bln in 2016.

* In current prices (including inflation). Exchange rate: 1 USD = 31,065 RUR.

Sources: Rosstat, Euromonitor, analysis by CSR Enter


RUSSIARetail Sales in Current prices*, USD bln

7.3 8.4 9.8

11.1 12.9

14.9 17.3

20.0

2009 2010 2011 2012 2013П 2014П 2015П 2016П

CAGR 2012-2016 = 16%

CAGR 2009-2012 = 15%

2013F 2014F 2015F 2016F

19

Growth in constant prices, %

Growth in current prices, %

MARKET VOLUME AND INFLATION

* The data rate of «Sports & Outdoor» sales in 1Q 2012 is incomparable with 1Q 2011 because of Rosstat methodological change.

1Q 2012 to 1Q 2011 1Q 2013 to 1Q 2012


PERFUMES & COSMETICS MARKET IN RUSSIA

n/a*

20.1%

10.7%

8.8%

3.0%

6.5%

9.6%

5.2%

3.4%

3.0%

37.5%

28.1%

24.4%

13.1%

11.8%

11.7%

11.3%

10.0%

7.4%

9.5%

8.8%

-1.9%

7.3%

14.2%

9.8%

8.3%

3.5%

24.4%

19.8%

14.9%

22.7%

14.0%

17.1%

14.9%

12.6%

Автозапчасти

Спортивные товары

Игры и игрушки


Товары для дома и DIY

БТиЭ

Косметика и парфюмерия

Мебель


Auto Parts

Sports & Outdoor

Toys & Games

Jewelry & Watches

Household Goods & DIY



Furniture

Clothes & Footwear

INTERNET ~ 3-5%

DIRECT SALES + MLM* ~ 40-45%

OFFLINE SALES ~ 45-50%

KEY SALES CHANNELS, % KEY FACTS

q  The share of direct sales through catalogs is reducing in favor of Internet sales. According to CSR Enter estimation this channel will grow about 2 times faster than the total market with CAGR of about 30% in 2012-2016.

* MLM – Multi-level marketing – is a marketing strategy in which the sales force is generated mainly from the recruited salespeople

SHARE OF DISTANCE SALES

Sources: analysis by CSR Enter


KEY FACTS

The share of direct sales through catalogs is reducing in favor of Internet sales. According to CSR Enter estimation this channel will grow about 2 times faster than the total market with CAGR of about 30% in 2012-2016.

20

KEY SALES CHANNELS%

21

KEY FACTS

q  Maximum peak of retail sales in Russia within a year has been reached in December (sales are 2.3x of monthly average) and in March (1,4x of monthly average)

q  Minimum peaks of retail sales in

Russia within a year have been reached in April and May

SEASONALITY OF RETAIL SALES * 2012

Source: analysis by CSR Enter

SEASONALITY PERFUMES & COSMETICS MARKET IN RUSSIA

0.8 1.1

1.4

0.6 0.6 0.7 0.9 0.9 0.8

1.1 0.9

2.3

* One «unit» stands for the arithmetic mean value of market sales per annum divided into 12 months. Consequently the diagram illustrates real distribution of annual sales by months.


SEASONALITY

SEASONALITY OF RETAIL SALES *2012

KEY FACTS

Maximum peak of retail sales in Russia within a year has been reached in December (sales are 2.3x of monthly average) and in March (1,4x of monthly average)

Minimum peaks of retail sales in Russia within a year have been reached in April and May

Source: analysis by CSR Enter* One «unit» stands for the arithmetic mean value of market sales per annum divided into 12 months. Consequently the diagram illustrates real distribution of annual sales by months.

22

The core sales channel - OFFLINE

Spec

ialis

t Re

taile

rs

Mix

ed P

rodu

ct R

ange

Ret

aile

rs

The core sales channel - ONLINE

Producers practicing direct sales through catalogue and multichannel marketing

* Drogerie retailers - non-food retail chains specialized in day-to-day goods including perfumes, cosmetics, home care etc.

Multichannel retailers Online retailers

Traditional specialist retailers

Selection - 15 companies with revenue more than 300 mln RUR in 2012 disclosed in mass media and Spark Interfax

Drogerie retailers

The size corresponds for total consolidated revenue of each company (without VAT) in 2012. Source: analysis by CSR Enter

KEY TYPES OF THE MARKET PLAYERS PERFUMES & COSMETICS MARKET IN RUSSIA

Avon

Oriflame

L’Etoile Amway

Rive Gauche

Ile De Beaute

Mary Kay

Faberlic

Yves Rocher

Sangi Stil

Magnit Cosmetics

Ulybka Radugi

E5.ru

Ozon.ru

Enter

23

Average number of weekly unique visitors within first 13 weeks in 2013, in thousand

Aver

age

grow

th r

ate

of w

eekl

y tr

affi

c w

ithin

fir

st 1

3 w

eeks

in 2

013,

%

DIY (Do It Yourself)

Furniture

Kids’ Products

Household Goods

Sports & Outdoor

Jewelry

PERFUMES & COSMETICS

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6% Average = 922

200 900 100 2000 3000

Auto Parts


Clothes & Footwear

Mixed Product Range

* Traffic of retail segments is estimated by top-3 companies in each segment.

WEEKLY TRAFFIC OF KEY MARKET PLAYERS WEBSITES IN 1st QUARTER 2013


Average = 2,4%

Source: monitoring of internet retailers by CSR Enter

GET NOWTOP-66 ONLINE-RETAILERS WEEKLY TRAFFIC [email protected]


WEEKLY TRAFFIC OF KEY MARKET PLAYERS WEBSITES IN 1ST QUARTER 2013

24

WEEKLY TRAFFIC OF KEY PLAYERS WEBSITES IN 1st QUARTER 2013 Unique weekly visitors, in thousand

Average growth rate: 1,1%







121 121 123 121 139

126 130 125 184

195 154 179

154

1 2 3 4 5 6 7 8 9 10 11 12 13 Number of a week

etoya.ru

letu.ru

shop.rivegauche.ru

среднее

Ile De Beaute (etoya.ru)

L’Etoile (letu.ru)

Rive Gauche (shop.rivegauche.ru)

Average

PRODUCT RANGE BREAKDOWN* IN ACCORDANCE WITH THE SKU AVAILABLE ON THE ONLINE RETAILERS WEBSITES

* According to monitoring of internet retailers by CSR Enter in March 2013. Selection – «Il de Beaute», «L’Etoile», «Rive Gauche», «Ozon.ru», «Enter.ru» websites

MAKE-UP PRODUCTS

SKIN & BODY CARE PRODUCTS

PERFUMES PRODUCTS HAIR CARE PRODUCTS

KEY FACTS

q  The most significant number of SKU are goods from 3 categories: Make-up Products (34% of the product range*), Body & Facial Care products (34%) and Perfumes products (21%) – in total almost 90% of the online retailers’ product mix

ONLINE RETAILERS PRODUCT RANGE STRUCTURE

21% 2%

9%

34% 34%

GIFT SETS


ONLINE RETAILERS PRODUCT RANGESTRUCTURE

PRODUCT RANGE BREAKDOWN*in accordance with the sku available on the online retailers websites

KEY FACTS

The most significant number of SKU are goods from 3 categories: Make-up Products (34% of the product range*), Body & Facial Care products (34%) and Perfumes products (21%) – in total almost 90% of the online retailers’ product mix

* According to monitoring of internet retailers by CSR Enter in March 2013. Selection — «Il de Beaute», «L’Etoile», «Rive Gauche», «Ozon.ru», «Enter.ru» websites


25

GET NOWINTERNET RETAILERS PRODUCT RANGE [email protected]

26The classification is disclosed on «methodology» slide

Economy 26%

Mid – 15%

Premium 31%

Mid + 14%

Economy 19%

Premium 31%

Economy 5%

Premium 40%

Mid 12%

Economy 21%

L’ETOILE EL DE BEAUTE RIVE GAUCHE OZON.RU

Economy 50%

THE MARKET *

Premium 18%

Mid + 14%

Mid 16%

Mid – 19%

Economy 33%

ENTER.RU

Premium 53%

Mid – 16%

Mid 18%

Mid + 16%

Mid + 18%

Mid 16%

Mid – 8%

Mid + 15%

Mid – 12%

Premium 11%

Mid + 7%

Mid 11%

Mid – 21% Mid

14%

* According to total number of SKU of the following companies: «Il de Beaute», «L’Etoile», «Rive Gauche», «Ozon.ru», «Enter.ru»

ONLINE RETAILERS PRODUCT RANGE PRICE RANGES (ACCORDING TO THE NUMBER OF SKU)


KEY FACTS

§  Consolidated share of top-10 brands (according to the number of SKU*) is just about 20%

Dior 3%

Clarins 3%

Shiseido 3%

Clinique 2%

L'Oreal Paris 2%

Estee Lauder 2%

Collistar 2%

Payot 2%

Givenchy 2%

Guerlain 2%

Other 80%

ONLINE RETAILERS PRODUCT RANGE TOP-10 BRANDS (ACCORDING TO NUMBER OF SKUs)

Source: monitoring of internet retailers by CSR Enter * According to total number of SKU of the following companies: «Il de Beaute», «L’Etoile», «Rive Gauche», «Ozon.ru», «Enter.ru»

KEY FACTS

Consolidated share of top-10 brands (according to the number of SKU*) is just about 20%

* According to total number of SKU of the following companies: «Il de Beaute», «L’Etoile», «Rive Gauche», «Ozon.ru», «Enter.ru»


27

Traditional offline market develops steadily. It’s occupied by federal players competing in quantity and quality of exclusive purchasing contracts and actively promoting private labels.

Detailed researches indicate that the premium class perfume is equally demand by customers both in large cities and regions. Regional consumers with lower income are ready to spend for perfumes however they do really save money on care cosmetics and make-up products. During the high season buyers prefer to buy premium class perfumes as a gift (especially in December)

Internet sales of perfumes and cosmetics are developing intensively. Enter’ analytics demonstrate that the conversion of products in this category is 10% higher compared to the other products. Most likely it happens due to the fact that Internet consumer comes for the very particular product: favorite perfume, tested tone or hair-dyes.

Nevertheless the major brands and retailers give preference to the traditional offline retailing, being very watchful to the web-shop window. That definitely stops the development of e-commerce and stimulates shadow market.

OFELIA SAMEDOVADirector of «Jewelry, Watches & Perfumes» Department

ENTER OUTLOOK

28

SEGMENTANALYSIS

JEWELRY & WATCHES

IN PARTNERSHIP WITH«LUCAS ZOLOTO»

GET NOWSEGMENT ANALYSIS OF INTERNATIONAL & RUSSIAN

RETAIL [email protected]

30

METHODOLOGY

«Worldwide markets» section is based on the data provided by National Statistical Services: US Census («Jewelry stores» category) and National Bureau of Statistics of China («Gold and Silver jewelries» category). Historical sales are calculated in current prices (including inflation), forecast sales are calculated according to McKinsey and Euromonitor estimations.

«Online-retailers product range» section is based on the analysis of 5 selected companies: «Sunlight», «Magicgold.ru», «MIUZ.ru», «Almaz-holding.ru», «Enter.ru» – in accordance with the SKU available on the website. Price ranges are calculated according to present classification:

Economy Mid Premium Luxury

Jewelry with precious stones Rings < 6 500 6 501 ₋  13 000 13 001 ₋  25 000 > 25 001

Jewelry with precious stones Earrings < 9 500 9 501 ₋  23 000 23 001 ₋  30 000 > 30 001

Jewelry with precious stones Neckwear < 3 500 3 501 ₋  12 000 12 001 ₋  27 000 > 27 001

Jewelry with semi-precious stones Rings < 4 000 4 001 ₋  8 500 > 8 501

Jewelry with semi-precious stones Earrings < 8 000 8 001 ₋  12 500 > 12 501

Jewelry with semi-precious stones Neckwear < 3 000 3 001 ₋  5 000 > 5 001

Jewelry with artificial gemstones Rings < 3 000 3 001 ₋  6 000 > 6 001

Jewelry with artificial gemstones Earrings < 5 000 5 001 ₋  9 000 > 9 001

Jewelry with artificial gemstones Neckwear < 2 000 2 001 ₋  3 500 > 3 501

Jewelry without stones Rings < 3 000 3 001 ₋  6 000 > 6 001

Jewelry without stones Earrings < 5 000 5 001 ₋  9 000 > 9 001

Jewelry without stones Chains < 5 000 5 001 ₋  8 000 > 8 001

Jewelry without stones Wristwear < 3 500 3 501 ₋  6 500 > 6 501

Jewelry without stones Neckwear < 2 000 2 001 ₋  3 500 > 3 501

«Worldwide markets» section is based on the data provided by National Statistical Services: US Census («Jewelry stores» category) and National Bureau of Statistics of China («Gold and Silver jewelries» category). Historical sales are calculated in current prices (including inflation), forecast sales are calculated according to McKinsey and Euromonitor estimations.

«Online-retailers product range» section is based on the analysis of 5 selected companies: «Sunlight», «Magicgold.ru», «MIUZ.ru», «Almaz-holding.ru», «Enter.ru» – in accordance with the SKU available on the website. Price ranges are calculated according to present classification:

METHODOLOGY

31

WORLDWIDE MARKETS

JEWELRY MARKET IN THE US


Share of Jewelry in Non-Food Retail

While the projected CAGR of Jewelry sales in the US 2012-2016 is 4%, the same rate for Internet sales is about 10%.


Sources: US Census, Euromonitor, analysis of CSR Enter

KEY FACTS

1,4%

2012

26.0 26.4 29.1 30.7 31.9 33.1 34.4 35.8

5.8% 6.1% 6.1% 6.2% 6.6% 7.0% 7.4% 7.8%

2009 2010 2011 2012 2013 2014 2015 2016


CAGR 2009-2012 = 6% CAGR 2012-2016 = 4%


2013F 2014F 2015F 2016F

32

WORLDWIDE MARKETS

JEWELRY MARKET IN CHINA


KEY FACTS

While the projected CAGR of total jewelry sales in China for the period of 2012-2016 is 16%, the same ratio for Internet sales is more than 40%.

The share of Internet sales remains insignificant vs the background of the traditional format, but will double for the further periods.

* In current prices (including inflation). Forecast sales are based on the growth rates at constant prices (Euromonitor) and inflation (NBSC).

Exchange rate: 1 USD = 6,3091 RMB.


Share of Jewelry in Non-Food Retail 2,7%

2012

13.7 20.0

29.1 34.8

40.2 46.5

53.8 62.2

0.3% 0.2% 0.2% 0.3% 0.4% 0.4% 0.5% 0.6%

2009 2010 2011 2012 2013П 2014П 2015П 2016П


CAGR 2009-2012 = 36% CAGR 2012-2016 = 16%


2013F 2014F 2015F 2016F

33

JEWELRY & WATCHES MARKET IN RUSSIA

SALES AND GROWTH RATES

KEY FACTS

Projected CAGR of total jewelry sales, watches and costume jewelry in Russia is about 17% for the period of 2012-2016. Thus sales of these products are to exceed 14 bln USD by 2016.



Share of Jewelry in Non-Food Retail

2012

2,0%

RUSSIARetail Sales in Current Prices*, USD bln

0.5 0.5 0.6 0.6 0.7 0.7 0.8 0.9 1.0 1.2 1.4 1.6 1.9 2.2 2.5 2.9 3.3 4.0

4.6 5.3

6.3

7.4

8.8

10.5

2009 2010 2011 2012 2013П 2014П 2015П 2016П

Часы Бижутерия Ювелирные украшения

CAGR 2009-2012 = 16%

CAGR 2012-2016 = 17%

Watches Costume Jewelry Jewelry

2013F 2014F 2015F 2016F

34





1Q 2012 to 1Q 2011 1Q 2013 to 1Q 2012



n/a*

20.1%

10.7%

8.8%

3.0%

6.5%

9.6%

5.2%

3.4%

3.0%

37.5%

28.1%

24.4%

13.1%

11.8%

11.7%

11.3%

10.0%

7.4%

9.5%

8.8%

-1.9%

7.3%

14.2%

9.8%

8.3%

3.5%

24.4%

19.8%

14.9%

22.7%

14.0%

17.1%

14.9%

12.6%






БТиЭ


Мебель


Auto Parts

Sports & Outdoor

Toys & Games

Jewelry & Watches




Furniture

Clothes & Footwear

35


SHARE OF DISTANT SALES

KEY SALES CHANNELS,%

KEY FACTS

The share of Internet sales of jewelry in 2012 is about 1% but the segment remains one of the most promising in e-commerce in general

Sources: analysis by CSR Enter, Euromonitor

INTERNET

OTHER RETAILERS

SPECIALIST JEWELRY RETAILERS ~ 1%

~ 50% ~ 49%

36


SEASONALITY


KEY FACTS

Maximum peak of retail sales in Russia within a year has been reached in December (sales are 2.3x of monthly average), January (2x of monthly average) and traditionally in March (1,7x of monthly average).

Source: Partner of the research company «Lucas Zoloto»

* One «unit» stands for the arithmetic mean value of market sales per annum divided into 12 months. Consequently the diagram illustrates real distribution of annual sales by months.

2.0

0.7

1.7

0.7 0.6 0.7 0.8 0.6

0.4 0.7

1.0

2.3

Janua

ry

Februa

ry

March

April

May

June

July

Augu

st

Septem

ber

October

Novem

ber

Decem

ber

37


MARKET STRUCTURE

SALES BREAKDOWN (2012):By material type

KEY FACTS

Sales of gold and silver jewelry makes the largest share of sales of the overall market (about 44%), with 95% of similar products produced in Russia. Also, 80% of products with colored stones are produced in the domestic market. Exactly the opposite situation is in the field of diamond products (only 30% of the products sold were produced in Russia in 2012)

Source: Partner of the research company «Lucas Zoloto»

JEWELRY WITH JEMS JEWELRY WITH DIAMONDS

OTHER JEWELRY GOLD, SILVER etc.

28% 28%

44%

70%-imported goods 30%-domestic goods

5%- imported goods 95%- domestic goods

38


MARKET STRUCTURE

SALES BREAKDOWN (2012):By product type

KEY FACTS

The key types of products are rings, as well as the neck-accessories, occupying more than 60% of the market in terms of sales.

Source: Euromonitor

NECKWEAR

RINGS

EARRINGS

WRISTWEAR

OTHER

36%

27% 14%

16%

7%

39

Ozon.ru

ENTER

585

Yashma

Adamas

MIUZ

Russkie Samotsvety

Jenavi Accessorize Selena

Krastsvetmet

Alltime.ru

Bestwatch.ru

Bronnitskiy uvelir

Sunlight

Specialist online-retailers Costume jewelry manufacturers with

multichannel retail network

Manufacturers with retail stores


KEY TYPES OF THE MARKET PLAYERS


Spec

ialis

t Re

taile

rs

Mix

ed P

rodu

ct R

ange

Ret

aile

rs




Multichannel retailers

Online retailers

40


Furniture

Kids’ Products

Household Goods

Sports & Outdoor

JEWELRY


-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6% Average = 922

200 900 100 2000 3000




Aver

age

grow

th r

ate

of w

eekl

y tr

affi

c w

ithin

fir

st 1

3 w

eeks

in 2

013,

%

* Traffic of retail segments is estimated by top-3 companies in each segment. Source: monitoring of internet retailers by CSR Enter

Auto Parts


Clothes & Footwear

Mixed Product Range

Average = 2,4%




41

85 105

128 147 144 147 146 147

166 187

156

109

135

1 2 3 4 5 6 7 8 9 10 11 12 13

Number of a week

AllTime.ru

bestwatch.ru

miuz.ru

среднее

Average Growth Rate: 7,5%


Average Growth Rate: -3,1%


AllTime.ru

Bestwatch.ru

Miuz.ru

Average





ONLINE RETAILERS PRODUCT RANGE PRODUCT MIX

PRODUCT RANGE BREAKDOWN * BY MATERIAL TYPEin accordance with the sku available on the online retailers websites

KEY FACTS

The largest amount of commodity categories by type of material takes Products with precious stones (63% of the product range *)

* According to monitoring of internet retailers by CSR Enter in March 2013. Selection – «Sunlight», «Almaz-holding.ru», «Magicgold.ru», «Miuz.ru» websites


42

JEWELRY WITHOUT STONES

JEWELRY WITH ARTIFICIAL GEMSTONES

13%

13%

11% 63%

JEWELRY WITH SEMI-PRECIOUS STONES

JEWELRY WITH PRECIOUS STONES



KEY FACTS

The majority of products (among available for purchase SKU on the selected websites) are rings (44% of the product range*), earrings (34%) and neckwear (15%), which together account for 93% of the product mix

43

ONLINE RETAILERS PRODUCT RANGE PRODUCT MIX

PRODUCT RANGE BREAKDOWN * BY PRODUCT TYPEin accordance with the sku available on the online retailers websites



34% 44%

15%

3% 4%

NECKWEAR

EARRINGS

CHAINS WRISTWEAR

RINGS

44

ECONOMY 9%

MID 37%

PREMIUM 33%

LUXURY 21%

Economy 6%

Mid 34%

Luxury 8%

Premium 43%

Mid 44%

Premium 31%

Mid 36%

Luxury 35%

Premium 25%

Economy 3%

SUNLIGHT MAGICGOLD MIUZ ALMAZ

HOLDING

Economy 19%

Premium 33%

Luxury 18%

THE MARKET* Luxury 2%

Mid 25%

Economy 38%

ENTER.RU

Luxury 22%

Premium 35%

Economy 4%

Mid 31%


The classification is disclosed on «methodology» slide

* According to total number of SKU of the following companies: «Enter.ru», «Sunlight», «Almaz-holding.ru», «Magicgold.ru», «Miuz.ru»


ENTER OUTLOOK

Conservatism is the major feature of the Russian jewelry industry and its players. JUNWEX, the main industry exhibition, demonstrates it perfectly. The key Russian producers are not keen to make any design experiments, price making experiments and year by year the produce the same best-selling SKUs, which are actually sold in the very same stores for the very same target audience. It’s obvious that the Tiffany-style ring will always stay up-to-date as little black dress by Chanel. Nevertheless I’m sure that those players who could «gain the time» will win. As the jewelry purchase is not an investment anymore. It’s proved by active growth of 17-sided diamonds sales share in comparison to the traditional 57-sided diamonds; sales of 375 standard jewelry, and silver jewelry with diamonds.

In contrast to the most Russian producers, Hong Kong manufacturers optimize the self-cost of jewelry using computer modeling, the latest technology in the

production, and reducing «manual» work. The Italian companies do make experiments with the design without increasing the weight of products (and therefore its price), and using tricks such as, for example, less weighted gold.

I think that the future of the jewelry industry in Russia belongs to the manufacturers which could take into account jewelry production cost-optimizing technologies, change the design and involve young and talented designers, working with the latest promotion channels.

By now the major sales are made offline. However, based on 2012 results consumers can and are ready to purchase jewelry online in case of: a) Trusted website b) Interesting in and convenient offer (lack of time for offline shopping). Time, correct product range, professional e-marketing will drive the online segment.

OFELIA SAMEDOVADirector of «Jewelry, Watches & Perfumes» Department

45

SEGMENTANALYSIS

FURNITURE

GET NOWSEGMENT ANALYSIS OF INTERNATIONAL & RUSSIAN RETAIL [email protected]

47

METHODOLOGY

«Worldwide markets» section is based on the data provided by National Statistical Services: US Census («Furniture stores» category) and National Bureau of Statistics of China («Furniture» category). Historical sales are calculated in current prices (including inflation), the forecast sales are calculated according to Euromonitor estimations.

«Online-retailers product range» section is based on the analysis of 12 selected companies: «Hoff», «HomeMe.ru», «Mebelrama.ru», «Mnogomeb.ru», «Toris.ru», «Aquaton», «Dyatkovo», «Ormatek», «Stolline», «Stolplit», «Shature.com», «Enter.ru» – in accordance with the SKU available on the website. Price ranges are calculated according to present classification:

Economy Mid - Mid Mid+ Premium

Mattresses < 7 000 7 001 -  12 000 12 001 -  20 000 20 001 -  30 000 > 30 001

Furniture set for bathroom < 10 000 10 001 -  18 000 18 001 -  36 000 36 001 -  50 000 > 50 001

Furniture set for living room < 10 000 10 001 -  20 000 20 001 -  40 000 40 001 -  80 000 > 80 001

Furniture set for children room < 10 000 10 001 -  20 000 20 001 -  30 000 30 001 -  50 000 > 50 001

Office chairs < 3 000 3 001 -  8 000 8 001 -  15 000 15 001 -  25 000 > 25 001

Computer desk < 1 000 1 001 -  3 000 3 001 -  8 000 8 001 -  15 000 > 15 001

Furniture set for kitchen < 8 000 8 001 -  15 000 15 001 -  35 000 35 001 -  60 000 > 60 001

Soft furniture (Sofas) < 15 000 15 001 -  25 000 25 001 -  45 000 45 001 -  70 000 > 70 001

Furniture set for dining room (table+ 4 chairs) < 5 000 5 001 -  10 000 10 001 -  20 000 20 001 -  40 000 > 40 001

Bedrooms (bed + 2 bedside tables, wardrobe, bureau, mirror)

< 20 000 20 001 -  40 000 40 001 -  70 000 70 001 -  100 000 > 100 001

48

WORLDWIDE MARKETS

FURNITURE MARKET IN THE US


Share of Furniture in Non-Food Retail

While the projected CAGR of total furniture sales in the USs is 3% in 2012-2016, the same rate for Internet sales is almost twice higher (6%).


Источники: US Census, Euromonitor, analysis of CSR Enter

KEY FACTS

4,2%

2012

86.1 87.2 88.8 95.6 98.7 101.9 105.2 108.6

2.8% 2.9% 3.0% 3.0% 3.1% 3.2% 3.3% 3.4%

2009 2010 2011 2012 2013 2014 2015 2016


CAGR 2009-2012 = 4% CAGR 2012-2016 = 3%


2013F 2014F 2015F 2016F

49

WORLDWIDE MARKETS

FURNITURE MARKET IN CHINA


KEY FACTS

The projected CAGR of total furniture sales in China is 16% for the period of 2012-2016, meanwhile the same ratio for Internet sales is about 42%, which indicated that online segment of this market in China is growing 2.5 times faster than the whole market.

* In current prices (including inflation). Forecast sales are based on the growth rates at constant prices (Euromonitor) and inflation (NBSC).

Exchange rate: 1 USD = 6,3091 RMB.


Share of Furniture in Non-Food Retail 5,8%

2012

47.5 55.0 63.8

73.7 85.3

98.6 114.0

131.8

0.2% 0.6% 1.1% 1.2% 1.5% 1.9% 2.3%

2.8%

2009 2010 2011 2012 2013 2014 2015 2016


CAGR 2009-2012 = 16% CAGR 2012-2016 = 16%


2013F 2014F 2015F 2016F

FURNITURE MARKET IN RUSSIA

SALES AND GROWTH RATES

KEY FACTS

The projected CAGR of total furniture sales in Russia is about 12% for the period of 2012-2016, while Internet sales are to grow by 20% per year.



Share of Furniture in Non-Food Retail 3,1%

2012

RUSSIARetail Sales in current prices*, USD bln

50

7.9 8.6 9.8

11.3 12.7

14.3 16.1

18.1

2009 2010 2011 2012П 2013П 2014П 2015П 2016П

CAGR 2009-2012 = 13% CAGR 2012-2016 = 12%

2013F 2014F 2015F 2016F

51





1Q 2012 to 1Q 2011 1Q 2013 to 1Q 2012



n/a*

20.1%

10.7%

8.8%

3.0%

6.5%

9.6%

5.2%

3.4%

3.0%

37.5%

28.1%

24.4%

13.1%

11.8%

11.7%

11.3%

10.0%

7.4%

9.5%

8.8%

-1.9%

7.3%

14.2%

9.8%

8.3%

3.5%

24.4%

19.8%

14.9%

22.7%

14.0%

17.1%

14.9%

12.6%






БТиЭ


Мебель


Auto Parts

Sports & Outdoor

Toys & Games

Jewelry & Watches




Furniture

Clothes & Footwear


SHARE OF DISTANT SALES

KEY SALES CHANNELS,*%

KEY FACTS

The share of furniture sales through Internet channel in Russia is only about 4% (Projected CAGR for the period of 2012-2016 is about 20%).

Sources: analysis by CSR Enter, Euromonitor

52

INTERNET

OTHER RETAILERS Mixed product range retailers Retailers specialized in Household goods Supermarkets

SPESIALIST FURNITURE RETAILERS

~ 4%

~ 62%

~ 34%

53


SEASONALITY


KEY FACTS

Peak sales of furniture are traditionally autumn and New Year period, from September to the end of the year when the market generates nearly half of annual sales.

The period of the most notable decline is summer, due to the long holydays.

Source: analysis by CSR Enter* One «unit» stands for the arithmetic mean value of market sales per annum divided into 12 months. Consequently the diagram illustrates real distribution of annual sales by months.

0.9 0.8 0.8 0.7 0.7 0.7

0.8

1.0 1.1

1.3 1.5

1.7

Janua

ry

Februa

ry

March

April

May

June

July

Augu

st

Septem

ber

October

Novem

ber

Decem

ber

54


MARKET STRUCTURE

SALES BREAKDOWN2012

KEY FACTS

According to CSR Enter estimation, the structure of the furniture market remains fairly stable. Thus, the share of soft and cabinet furniture is over 70%, meanwhile sales of kitchen furniture are actively developing (share for the 2012 — about 15%).


KITCHEN FURNITURE

CABINET FURNITURE SOFT FURNITURE

37% 36%

15% 12% OTHERS

55

Specialist online-retailers without

showrooms

Manufacturers with retail stores

Retailers without production capacities


KEY TYPES OF THE MARKET PLAYERS


Spec

ialis

t Re

taile

rs

Mix

ed P

rodu

ct R

ange

Ret

aile

rs




Multichannel retailers

ENTER IKEA

HomeMe.ru Stolplit

Shatura Lazurit

Maria

Kuhnistroy

Stokdivanov.ru

Mnogomeb.ru Miass-mebel

Hoff

А-stil Mebelrama.ru

Yuterra

56


FURNITURE

Kids’ Products

Household Goods

Sports & Outdoor

Jewelry


-‐3%

-‐2%

-‐1%

0%

1%

2%

3%

4%

5%

6% Average = 922

200 900 100 2000 3000




Aver

age

grow

th r

ate

of w

eekl

y tr

affi

c w

ithin

fir

st 1

3 w

eeks

in 2

013,

%

* Traffic of retail segments is estimated by top-3 companies in each segment. Source: monitoring of internet retailers by CSR Enter

Auto Parts


Clothes & Footwear

Mixed Product Range

Average = 2,4%




57

84 93

106 98

122 117 105 109

111 103

110

126 132

1 2 3 4 5 6 7 8 9 10 11 12 13 Number of a week

Mebelrama.ru

askona.ru

shatura.com

среднее





Mebelrama.ru

Askona.ru

Shatura (shatura.ru)

Average





58

18%

16%

14% 13%

11%

9%

6%

5% 5%

2% 1% Мягкая мебель

Мебель для спальни

Мебель для кухни

Мебель для гостиной

Мебель для домашнего кабинета

Мебель для прихожей

Мебель для детской

Мебель для ванной

Матрасы

Шкафы-купе

Мебель из ротанга

Soft furniture

Bedroom furniture

Kitchen furniture

Living room furniture

Home office furniture

Hall furniture

Children room furniture

Bathroom furniture

Matrasses

Wardrobes

Rattan furniture

ONLINE RETAILERS PRODUCT RANGE STRUCTURE

PRODUCT RANGE BREAKDOWN *in accordance with the sku available on the online retailers websites

KEY FACTS

The basic amount of product types available for purchase on selected websites are «soft furniture» (18% of the product range*), «Bedroom furniture» (16%) and «Kitchen furniture» (15%) which together account for almost 50% of the product range.

* According to monitoring of internet retailers by CSR Enter in March 2013. Selection – «Hoff», «Mebelrama.ru», «HomeMe.ru» websites



59

ECONOMY 15%

MID– 22%

MID 28%

PREMIUM 16%

MID + 19%

Economy 6%

Mid– 13%

Premium 13%

Mid + 32%

Economy 15%

Mid– 18%

Mid + 22%

Mid– 39%

Mid 16%

Economy 40%

SHATURA MEBELRAMA.RU HOMEME.RU HOFF

Economy 8%

Mid– 18%

Mid 21%

Mid + 16%

Premium 37%

THE MARKET*

Mid 37%

Mid + 14%

Mid 35%

Mid– 32%

Economy 17%

ENTER.RU

Premium 15%

Mid 30%

Mid + 4% Premium 1% Premium 2%

Mid + 24%

Mid 32%

Mid– 31%

Economy 12%

STOLLINE

Премиум 2% Premium 1%

Mid 32%

Mid– 37%

Economy 24%

STOLPLIT

Премиум 2% Premium 1%

Mid + 6%


The classification is disclosed on «methodology» slide

* According to total number of SKU of the following companies: «Enter.ru», «Hoff», «HomeMe.ru», «Mebelrama.ru», «Mnogomeb.ru», «Toris.ru», «Aquaton», «Dyatkovo», «Ormatek», «Stolline», «Stolplit», «Shature».


ENTER OUTLOOK

Today multichannel (offline and online) sales of furniture develop rapidly. The perspectives of the furniture market in Internet are obvious. Both producers and retailers continue to develop e-sales. Medium and small companies of the market consider Internet-related projects mainly as a «trial» and try to catch the trend, while federal players already demonstrate positive results both in cabinet furniture and soft furniture.

Enter’s furniture sales breakdown is practically the same as the market average. This allows to conclude that most consumers have no significant prejudice buying through internet, terminal, contact-center or catalogue.

ANTON TERENTYEVDirector of «Furniture» Department

60

SPECIAL FOCUS:

WORLDWIDEBEST-PRACTICES

BUSINESS MODELS

KEY TRENDS

PROFILES OF KEY INTERNATIONAL PLAYERS

GET NOWANALYSIS OF INTERNATIONAL BEST-PRACTICES ANDRETAIL STRATEGIES [email protected]

62

INCREASING SHARE OF HIGH-MARGIN PRODUCTS

Quick product range extension and expansion to different sales channels

WORLDWIDE BEST-PRACTICES RETAIL STRATEGIES

MIXED PRODUCT RANGE RETAILERS SPECIALIST RETAILERS

Product range extension and sales channels diversification

Product range extension due to acquisitions of retailers specialized on different products

Expansion to different markets (В2В, С2С, loan facilities etc.)

Target, Dangdang

Sears, Amazon

Tesco, Walmart

Product range extension in related product categories

Adding with extra services related to the products the company sells

Carpetright, Leroy Merlin

Ulta, Blue Nile

IKEA

DEVELOPING WITHIN CHOSEN MARKET SEGMENTS

63

Revenue Structure of Target (2012)

Revenue Structure of Sears Holdings (2012)

Gradual increasing share of high-margin product categories («Perfumes & Cosmetics», «Apparel & Footwear», «Jewelry») due to decreasing share of low-margin categories

WORLDWIDE BEST-PRACTICES RETAIL STRATEGIES - MIXED PRODUCT RANGE RETAILERS

22% 20% 19% 18%

23% 24% 25% 25%

20% 20% 19% 19%

16% 17% 19% 20%

19% 19% 19% 18%

2009 2010 2011 2012

Home Furnishings & Décor

Food & Pet Supplies

Apparel & Accessories, Jewelry & Costume Jewelry

Health, Beauty & Household Essentials

Electronics & Home Appliances, Sport & outdoor, Toys

49% 49% 49% 47%

28% 29% 29% 30%

14% 14% 14% 14%

8% 8% 8% 10%

2009 2010 2011 2012

Service and Other

Food and Drug

Apparel & Footwear, Jewelry, Costume Jewelry

Electronics & Home Appliances, Auto Parts, Sport & outdoor, Toys

64

ULTA SALON

CHILDREN’S PLACE BLUE NILE

BETER BED

Wide range of extra services in the company outlets

Unique service of providing customized products

Wide range of stores (different locations); wide product range

Purchase convenience and confidence in retailer

LOYALTY

Gaining client’s trust

Forming a habit to purchase exactly in this company To meet client’s needs in

self-actualization

Customer acquisition

WORLDWIDE BEST-PRACTICES RETAIL STRATEGIES – SPECIALIST RETAILERS

65

WORLDWIDE BEST-PRACTICESPERFUMES & COSMETICS MARKET — KEY BUSINESS MODELS

CHARACTERISTICSBUSINESS MODELS *

Majority of products — private labels The main sales channel — chain of sales representatives (brokers) Lack of personal stationary retail outlets Internet — additional secondary sales channel with informational function (delivery — outsourcing)

PRODUCERS PRACTICING DIRECT SALES & MULTI-LEVEL MARKETING Avon, Amway, Mary Kay, Faberlic

TRADITIONAL OFFLINE RETAILERS DEVELOPING INTERNET SALES CHANNEL Sasa, Ulta Salon, Sephora, Perfumania

Wide chain of offline owned stores Internet — valuable sales channel (wide product range) Online sales is growing comparably with total sales or faster

ONLINE RETAILERS, «GROUP OF INTERNET SHOPS» Drugstore.com, Quidsi.com

Umbrella brand for specialized internet websites within one large holding Each separate website has its own brand and product range Selling 3rd parties products; Lack of private labels

* Without mixed product range retailers Source: analysis by CSR Enter

66

WORLDWIDE BEST-PRACTICESPERFUMES & COSMETICS MARKET – TRENDS

CUSTOMER LOYALTY PROGRAM & GIFT CERTIFICATESStimulate customers to purchase more to get additional discounts, bonuses etc.1FREE SAMPLES & GIFTSFree offer to try new production; Gifts after reaching the level of receipt2RELATED PRODUCTS’ SETSMaking a purchase much more easier for a customer (sometimes with offering additional discount)3CUSTOMER COACHING Introducing the product range to costumers on special seminars, trainings and through specialized mass media (website, catalogue etc.)

4ADDITIONAL PRIVATE CONSULTATING & BEAUTY SHOP SERVICESAttracting potential customers by relevant (to the product) services professional consultants, visagistes etc.

5Source: analysis by CSR Enter

67

Revenue – $2,2 bln 2012 *

Capitalization – $6,2 bln By the end of 2012 *

Number of countries – 1 Number of stores – 550 Number of employees: 16 000 By the end of 2012 *

Specialization: Perfumes & Cosmetics, Beauty& Health products and services

Revenue Structure:

q  According to overall results in 2011 online sales increased by 27% to 2010

q  Share of online sales in the company revenue in 2011 came to 2%

q  According to overall results in 2012 gross profit margin came to 38%

q More than 50% of total sales accounts for 11 million active users of the customer loyalty program

q  10% of total area in the company stores is taken for beauty shops

* 52 weeks within the year ended 02.02. Sources: the company official website http://www.ulta.com, Internetretailer.com, Bloomberg.com, analysis by CSR Enter

Online Offline 2%

98%

1,085 1,223 1,455

1,776

2,220

46 68 119 196 280

4.3% 5.6%

8.2%

11.0% 12.6%

-3,0%

-1,0%

1,0%

3,0%

5,0%

7,0%

9,0%

11,0%

13,0%

-

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

2008 2009 2010 2011 2012

Revenue, mln USD Operational profit, mln USD Operational profit margin, %

WORLDWIDE BEST-PRACTICES ULTA SALON, COSMETICS & FRAGRANCES

68

WORLDWIDE BEST-PRACTICESJEWELRY & WATCHES MARKET – KEY BUSINESS MODELS


Customization of purchase (a customer can make his own individual product: for instance to choose characteristics (such a setting) of a brilliant Focus on quality: providing certificates after purchase

«INDIVIDUAL APPROACH»Blue Nile, Ross Simons, Zale

«AUCTION TRADE»Bidz.com, JTV Auctions, Fallingstarauctions.com

Focus on auctions (lasting several hours) – as a result increasing traffic on the companies’ websites English open auction (ascending-price action) – start from 1$ Dutch auction – start from maximum price, declining till somebody’s purchase

«DISCOUNTING»Jewelry.com

Majority of products are sold at a reduced price (comparing with prices in a store) sometimes with discount 30-50% Liquidation sales with discounts more than 50%

* Without mixed product range retailers Source: analysis by CSR Enter

69

INTERNATIONAL BEST-PRACTICESJEWELRY & WATCHES MARKET – TRENDS

CUSTOMER COACHINGInforming clients about jewelry through specialized website section – some kind of a library with information about, for instance, kinds of brilliants, gems etc.

1CUSTOMIZED OFFERSA customer can chose any characteristics thus make his own individual product2EXTRA JEWELRY SALON SERVICESTo increase customer loyalty companies offer relevant care services or insurance3PAWNSHOPAttracting new clients offering new service — change old jewelry to new one4VISUALIZATION Focus on website interface as on one of the main sales channels — adding 3D review, attaching deep product characteristics and certificates

5Source: analysis by CSR Enter

70

Revenue – $400 mln 2012 *

Capitalization – $478 mln By the end of 2012 *

Number of countries – 45**

Number of employees – 241 By the end of 2012 *

Specialization: Jewelry

Revenue Structure:

q  According to overall results in 2012 total sales increased by 15% comparing to 2011

q  By the end of 2012 gross profit margin came to 19%

q  1/3 of the company website traffic in 4th quarter 2012 came from mobile devices

q  The company website interface gets capability to order customized product

q  From 2013 Xiu.com is to sell Blue Nile products in China

* 52 weeks within the year ended 30.12. ** Countries the company deliver to

Sources: the company official website http://www.bluenile.com, Internetretailer.com, Bloomberg.com, analysis by CSR Enter

ONLINE

100%

WORLDWIDE BEST-PRACTICES BLUE NILE

295 302 333 348 400

16 19 21 17 12

5.4%

6.4% 6.4%

4.9%

3.1%

-3,0%

-2,0%

-1,0%

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

6,0%

7,0%

0

100

200

300

400

500

600

700

800

900

1000

2008 2009 2010 2011 2012


71

WORLDWIDE BEST-PRACTICESFURNITURE MARKET – KEY BUSINESS MODELS


Only Internet sales – direct delivery to the client

Collaboration with local partners for the quick delivery from their stores

ONLINE RETAILERS SELLING OWN AND PARTNERS PRODUCTSFurniture.com

TRADITIONAL OFFLINE RETAILERS DEVELOPING INTERNET SALES CHANNELHaverty’s (USA), Carpetright (Great Britain), Cost plus Sofas (Great Britain), The Brick (Canada)

PRODUCERS WITH OWN STORES, ALSO DEVELOPING INTERNET SALES CHANNELIKEA, Rooms To Go (USA), Crate&Barrel (USA)

Wide chain of offline personal stores

Internet – valuable sales channel (wide product range)

Online sales is growing comparably with total sales or faster

Majority of products - private labels

The main sales channel – chain of own stores

Internet – additional secondary sales channel with informational function (delivery – outsourcing)


72

INTERNATIONAL BEST-PRACTICESFURNITURE MARKET – TRENDS

ROOM DESIGININGSeparate section of website – specialized service that helps to make arrangement of furniture before purchase

1CUSTOMIZED OFFERSA customer can chose any characteristics thus make his own individual product (material, size, color etc.)

2WEB SEARCH CONVENIENCE Capability to search and sort goods by any index: by type, size, color, style etc. 3SMALL SPACE SOLUTIONS Separate website section – consolidation of all the solution for small apartments4INCREASING OF RELEVANT PRODUCT MIXAdding to product range new related products: household goods, garden furniture etc. 5


73

Revenue– $519 mln 2012 *

Capitalization – not quoted By the end of 2012 *

Number of countries – 7 Number of stores – 1 219 Number of employees –2 500 By the end of 2012 * Specialization: Beds, matrasses

Revenue Structure:

q  In 2012 online sales came to 5% of the company revenue

q  By the end of 2012 gross profit margin came to 56%

q  The company website entered top-100 of the most convenient for customers in Holland in 2012

q % of just-in-time deliveries came to 95% in 2012 in Holland

* 52 weeks within the year ended 31.12. Sources: the company official website www.beterbedholding.com, Internetretailer.com,

Bloomberg.com, analysis by CSR Enter

Online Offline

WORLDWIDE BEST-PRACTICES BETER BED

5%

95%

469 473 490 519 519

41 43 49 50 31

8.7% 9.0% 10.0% 9.6%

6.0%

-3,0%

-1,0%

1,0%

3,0%

5,0%

7,0%

9,0%

11,0%

-

200

400

600

800

1 000

1 200

2008 2009 2010 2011 2012


МЫ ДАРИМ ВРЕМЯ ДЛЯ НАСТОЯЩЕГО.ЧЕСТНО. С ЛЮБОВЬЮ. КАК ДЛЯ СЕБЯ.

Electronic publication by Enter.ru «Worldwide and Russian Retail 2009-2016. Making conclusions, building plans».

Editorial office: 11/10 Ordjonikidze street. Managing editor: Kolotenko Andrei Vladimirovich.

Authors: Center of Strategic Research of Enter. Release date: 11.06.2013.

Certificate of mass media registration: Эл. №ФС77-48467, date of issue: 06.02.2012.

Issued by Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications.

This research was conducted by «Enter» LLC exclusively for the purpose of informing and designed for private use. Any copying and utilization of materials of this research is welcomed and allowed without written consent upon condition of mentioning CSR Enter (ЦСИ Enter, ЦСИ Энтер) as a source.

All the information presented in this research is collected from publicly available sources. Editorial staff took all possible measures to ensure accuracy and actuality of information provided in this research.

Editorial staff do not incur liabilities in case of any economic losses and damages resulted from utilization of materials of this research by third parties.

Any additional information can be provided on demand. All trademarks belong to their rights holders and used according to legislation of Russian Federation.

Copyright © ООО «Энтер»

This research was conducted by CSR Enter team: Timur Gabdrahimov, Igor Kulyukhin, Zhanna Bogdashina, Pavel Bulankin, Dmitry Pozdnyakov, Danila Okishev, Andrei Karalin, Petr Yakovlev, Mark Khlynov.

We also thank our experts, Ofelia Samedova, Anton Terentyev, and our partner of this research — «Lucas-zoloto» company.

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