Some Russian sporting goods suppliers are considering moving away from working with marketplaces, citing fierce competition, rising fees and risk of losing identity.
Alpindustria, a prominent brand of outdoor goods, faces a dilemma regarding whether to sell its goods through marketplaces, Vitaly Kalaida, Deputy Head of the Alpindustria commercial department, outlined during the Sport Casual Moscow conference. “Some attempts to do business in this direction have been made, but I’m increasingly inclined that we need to move away from it. The main competition out there is on price. And in this war, the one with the cheapest product wins,” Kalaida explained. He added that Alpindustria primarily manufactures goods for mountain sports. “Our philosophy is about equipment when you go to the mountains and come back alive,” he said. Such products can’t be cheap, by definition. Besides, trying to expand your brand at marketplaces is a quick and easy way for a brand to lose its identity.
Alexey Grebtsov, Director of the Russian outdoor brand Start-1, agreed that excessive efforts in marketplace development come with certain risks. He explained that companies struggle against the temptation to expand their range for the sake of higher revenues. “These companies do that because they want money. They used to be high-tech companies for climbers – and they switched to T-shirts and shorts. But in this case, you start competing with T-shirts and shorts, and the top things start to fall out. People stop believing you. This happened to many brands that turned into nothing,” he stated. Grebtsov said that this problem is not unique to Russia; similar problems have occurred with prominent Western brands. “We spend crazy amounts of money to ensure the brand remains a brand. It is not the jacket that sells the product but what is written on it. When you turn everything that we have been doing for twenty years into ashes, it is frustrating. And this is the reason why some companies are leaving marketplaces,” he indicated. Grebtsov noted that there is a common misconception in Russia that working through marketplaces is easier than working through a brick-and-mortar store. In reality, he added, mandatory discount policies pursued by the largest marketplaces “squeeze the last out of the sellers.”
Maxim Vinogradov, VP of Russia’s retailer Kant, also warned about growing seller fees at the Russian largest marketplaces. “Making a million-dollar turnover on marketplaces is not a problem at all. Profit is a problem. How not to go broke?” he questioned. In the past, marketplaces could be used to get rid of product stocks, but with rising fees, this is no longer a viable strategy. As a result, Vinogradov disclosed that Kant’s key development priority is launching brick-and-mortar stores in Russian provinces. Vinogradov said this trend is further bolstered by the rise in the popularity of domestic tourism and the massive construction of ski resorts in Russia.
Vitaly Ivanov, the owner of the Russian sporting goods brand Versta, recalled that at the beginning of the era of marketplaces, the idea of using this channel caused euphoria among market players. “But the idea of great freedom turned into the idea of totalitarian oppression. There is a big player who dictates the rules,” he said, criticizing the policy of mandatory discounts. “All your efforts and the huge money invested in marketing are killed by the desire of the guy who sits on analytics and does not want to get a scolding from the boss for falling sales,” Ivanov indicated.
Image: Victor Martianov on Unsplash
