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Russia’s IKEA MEGA Centers Looking to American Brands and New Technology

IKEA Centres Russia, the largest shopping centre operator in Russia took part at ICSC ReCon Las Vegas.
During the recent ICSC RECon event in Las Vegas we sat down for a chat with Milen Gentchev, who is the Deputy General Director of the chain of IKEA MEGA centers in Russia.

We started off by asking about the company’s goals in the US and their connections with American brands. Milen confirmed that in their current 14 shopping centers spread across Russia they already have over 50 US brands present.

American Brands a Good Fit for Russia

He went on to say that US companies can be “quite a good fit and quite a good partner” for the Russian market. He feels that it is a market with customers that are looking for “fashionable new brands”, which is something that can be found in the US.

 Looking to the future, Milen wants to “make this connection with US retailers”. He said that there are a number of US brands which are “extremely popular and wanted in Russia” and that aren’t yet present there.

 He believes that it is the duty of MEGA centers to bring these brands to Russia for the benefit of their customers. He also stressed that as well as the big Americans brands they are also focused on European and national brands too.

 We asked Milen what kind of brands they are looking at and he confirmed that “fashion is our primary focus”. However, given the strength of their food and beverage offering they are also interested in finding brands in this sector that could be interested in entering Russia. US brands such as McDonalds, Burger King, and KFC are already present in the country.

 He stated that “year after year we are bringing new brands to the Russian market” and that American brands will definitely be among the new names added to their shopping centers.

Ikea Shopping Centre

The interesting subject of the presence of Armani Exchange in Russia was also covered. This world famous brand is a recent addition to their portfolio with some of their first ever Russian stores added to MEGA Centers in Moscow. Other new brands that are signed up include chocolate specialists Lindt and lingerie firm Undiz. Another first from the MEGA Centers is the fact that they have the first Russian mall with a Magnolia Bakery in it.

Supporting Their Retailers for a Good Ambience

The conversation then turned to IKEA’s new investment program to support international retailers making the move into Russia. The idea behind this scheme is that the mall company has the idea of acting as the host between the tenant and the customer. Because of this they aim to create the best possible ambience in their shopping centers, to strengthen that bond and make everyone feel good while there.

Milen said that a lot of money will go into “commercial upgrades” and other measures aimed at extending current premises and starting new projects.

We then asked whether American brands and other global retailers are most interested in opening stores in Moscow, St Petersburg, or in other locations across the country. The answer was that international brands will typically look to Moscow first of all when taking their first steps in the country.

 However, it was pointed out to us that there are other great opportunities across Russia, with 15 cities having more than a million inhabitants in them. The residents of many of these cities are “very interested in new brands or new developments”. They, therefore, advise new retailers to not just focus on Moscow. Kazan was given as a good example of a city where the people are “hungry for new, fashionable brands” right now.

fashionable brands

Omsk is another Russian city where he feels that international retailers might be surprised at the number of people living here who are interested in purchasing high quality brands. After hearing about a couple of the success stories of foreign retailers who have moved into the Russian market, we asked about their strategy for attracting global brands to Russia at this challenging time in the country’s history.

He said that the economy is getting better and that they always discuss the long-term approach with their new partners anyway, looking at the perspective over some 5 to 10 years. As for the MEGA Centers themselves, their idea is to look ahead on an even longer term basis. He believes that there are “good dynamics” in the country and mentioned that other retailers have successfully entered Russia during more difficult periods in the past.

We then asked whether their work involves promoting Russia as a whole, as well as promoting their own MEGA centers. The reply was what they are offering is very much about the lifestyle and the “very friendly environment” there - “people enjoy their lives” - rather than being specifically about just promoting their own centers. 

New Technology and the Accelerator Initiative

At this point we asked about the company’s ideas on new technology. We were told that there is a “big focus on different technologies”. He went on to say that there is a lot of talent in Russia in this respect and that their mission is to use this to bring the best value to their customers.

Milen then talked about the need to combine online and offline shopping approaches and how to use new technology such as virtual reality and 3D printing to “leverage the brand”. A good example of their plans comes with the MEGA Accelerator initiative, which was designed to help them identify innovative local startup companies to work with.

The results announcing the winning team under this exciting scheme will be out in June. At the moment, the best ideas are being piloted in their shopping centers. This includes technology such as virtual fitting rooms and virtual touchscreens. In this way, customers are already giving their feedback on the new technology that is being tested.

This is part of the socially responsible approach by IKEA MEGA centers, as this initiative supports young Russian entrepreneurs. Overall, he classed this project as being a very positive experience.

To finish things off, he stated that the MEGA Center philosophy is to “think about the customer first” and then the success will come.

More about shopping malls in Russia

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