Will Castorama find its share in DIY market in Kazan after defeat in Ufa?
The first store of the network, part of the British group, opens in Kazan in late April
The first hypermarket of construction materials and household goods of DIY format of Castorama company opens in Kazan this month. It is located directly opposite Mega shopping centre. It is Tatarstan President Rustam Minnikhanov who invited to build a store of this network in Tatarstan in 2015, and investments in the construction amounted to 1,5 billion rubles. At the same time, there are already strong competitors in the market of DIY goods in Kazan — for example, the much faster growing Leroy Merlin. Realnoe Vremya experts disagreed about the prospects of Castorama in Kazan: some believe the market is already oversaturated, the others that the new player will be able to take its place in the developing city. Read more in our material.
Castorama's opening ceremony in festive atmosphere
According to the advertisement, the hypermarket of construction materials and DIY household goods of the French company Castorama (part of the British group Kingfisher) is to open in Kazan on April 29, but later the company reported that it has not decided on the exact date of the store opening yet. It will be known after April 10, the Kazan representative of the brand informed. The hypermarket will be located at the intersection of Sakharov and Zhiganov streets, that is, directly opposite Mega shopping center. The shop area is 1,100 sq. m. A series of festive events has been prepared for the opening.
Castorama made its first attempts to open in Tatarstan back in 2004-2005, that is, before opening its first hypermarkets in Samara and St. Petersburg. After that, the French retailer opened more than 20 stores across the country (which took almost 11 years), yielding by the pace of regional expansion to its closest competitor — the French hypermarket chain Leroy Merlin (part of Groupe Auchan). The hypermarket in Kazan will become the 22nd Castorama store in Russia.
The first information about a real possibility of opening stores in Tatarstan appeared on October 2, 2015. At the time, the head of the region, Rustam Minnikhanov, offered the director for property and business development in Russia at Castorama, Michel Shez, to open stores in the Republic of Tatarstan. It happened at the investment forum in Sochi. ''A number of retail chains selling construction and household goods successfully operate in our republic. We will be glad if the large company such as Castorama will also enter the Tatarstan market,'' noted the president of Tatarstan at the time.
About how Castorama was choosing site and workers in Kazan
On the same day Minnikhanov instructed the head of Investment Development Agency, Taliya Minullina, to find a land plot in Tatarstan for the construction of Castorama stores. Among the offered options there were sites both in Kazan on Gorkovskoye highway and in Laishevsky and Zelenodolsk districts, but it was decided to choose the site next to Mega. We will add that the project of territory planning of the residential district No. 5 in the residential area Sedmoe Nebo ('Seventh Heaven' from Russian) provides for the construction next to Mega of not only Castorama, but also Metro.
According to Minullina, the declared investments volume will amount to 1,5 billion rubles. The hypermarket will also create about 200 new jobs in Kazan.
It should be added that the expansion of Castorama in the Volga Federal District was not always successful. For example, a Castorama hypermarket was closed in Ufa, which operated since 2010. According to media reports, this was due to a rent increase by the owner of the premises. Two hypermarkets Leroy Merlin and the store of the Petersburg network Maksidom remained to operate in Ufa.
''Proximity to the shopping centre Mega will allow the hypermarket to get a synergetic effect''
Expert opinions on the prospects of Castorama in Kazan have been divided. Timur Gubaydullin, senior partner of Profit group, believes that the market, which Castorama is going to enter, is already close to saturation:
''The competition will be quite strong, there are Leroy Merlin, Megastroy, OBI nearby… Most likely, they have taken it into account. Perhaps, they have some special range, they will offer something in this respect, maybe more attractive prices for the client. But in general, I think the market [of DIY] in Kazan is becoming saturated,'' he believes.
Murat Akhmerov, the director general of A-development, on the contrary believes that the DIY market will continue to grow and Castorama will find a share on it. Buyers will also benefit from this: a variety of assortment and prices.
''DIY format, a construction hypermarket, that is, first of all it's a competitor to Leroy Merlin, Megastroy… Castorama will open in Privolzhsky district, that is, it conditionally falls into the zone of influence of Megastroy. It is a fast growing district by population, 300,000 people, and there are a huge number of undeveloped fields in the area of Mega. Kazan is a large agglomeration, there are a large number of commercial, social housing constructions. The city is developing. The nearby settlements, 30-70 kilometres from Kazan, can also be taken [as potential customers].''
As for the neighborhood with Mega shopping centre, here it is necessary to compare the product range of OBI and Castorama. OBI's construction focus is not dominant, it has a lot of garden and household goods. I think the biggest competitor for Castorama is Leroy Merlin,'' Ahmerov says.
The appearance of Castorama can play into the hands of Mega. Liana Sirazetdinova, the managing director of Mega Kazan, has recently mentioned that the opening of Castorama will add traffic to Mega, and an additional enhancement of the cluster can be the opening of a Metro store next to the two hypermarkets.
Anastasia Arkhipova, an analyst of the department of market researches at CBRE, also found the neighbourhood with Mega quite beneficial:
''It is no doubt that the neighbourhood with the shopping centres Mega, Yuzhny and Megastroy will allow the hypermarket to get a synergistic effect. However, the situation with parking spaces is still unclear. It is important to remember that for buyers the price remains one of the most important conditions for purchase, and if Castorama considers this moment, then the probability of getting a share in the market of Kazan is high,'' Arkhipova stated.
The parking zone of Castorama will have 730 lots — it's not to say that a lot, the nearest competitor, Leroy Merlin, has 966 lots. However, let us remind that Mega has another 6,500 lots.