Star Company: from supermarket to supermarket
ArmInfo News Agency
2007-05-14 13:32:00
Interview with Executive Officer of Star Company
The first grocery store of Star Company that opened in the place of
the former `Voentorg’ shop in Amiryan street in 1998 differed from
other so-called self-service grocery stores not so much. The idea of
supermarkets occurred in our ordinary life just in late 90s. However,
comparing with their western and even Russian analogues, the Armenian
supermarkets were just `big stores’ as to their assortment, service
culture, food safety, and business procedures. Only few of their
owners went to the heart of the word `super’ then, and just those few
people are now building their own industry of network grocery
retail. Among the few trade networks specializing in grocery, the
self-service supermarkets `Star’ are especially popular. Those, who
for instance live in the communities Avan and Avan Arinj, have already
appreciated all the privileges of the new supermarket that opened in
the place of the old plain self-service store. Within the current year
alone, `Star’ company plans to open six new supermarkets in Yerevan to
bring their total number to ten. The company’s turnover is growing at
a geometric rate. `The further ` the more. However, it is necessary to
secure rear support,’ Vahan Kerobyan, executive officer of ` Star’
Company, who agreed to give an interview to ArmInfo, believes.
– Six years passed since opening of the first store in 1998 and before
the first supermarket was put into service. What made the shareholders
of `Star’ Company start implementing such a large-scale
business-program as creation of a trade network of supermarkets?
– The grocery retail was rapidly developing then. Relatively
qualitative products from the West, Russia and Ukraine rushed into the
market, on the one hand, and the local producers started ousting the
Iranian and Turkish dubious goods, on the other hand. The most
important is that the purchasing capacity of the population and demand
for high quality goods and service considerably grew. Tired of
everyday shopping in search of high quality goods, the people wanted
to enter one store and find there everything they needed. The
international experience in management of trade network retail had
been accumulated during dozens of years and that experience hinted at
the right direction to work. The experience of new Russia and other
developing countries of the former socialist camp had already been
evident then.
– It is assumed that trading is very individual and rather shady, at
least in Armenia. And quite unexpectedly, the European Bank for
Reconstruction and Development becomes a shareholder of `Star’
Company.
– Making a strategic decision to create a network of supermarkets,
Henrik Zakharyan, a shareholder of `Star’ Company, was aware that one
cannot build a trade empire without a serious investor. It requires
not only big investments, but also new work methods meeting high
international business standards. That is why the leadership of
`Star` Company started searching for serious partnership. We have
started negotiating with several potential investors, including,
European Bank. The negotiations were successfully completed in the
October of 2006. European Bank became a shareholder of our network
having paid $4 million for 28.3 percent stock of the company.
– What procedures did the company undergo to get the institutional
investor?
– At first, we prepared a business-plan, made forecasts of market
development, and submitted them to the investor. In addition, we
informed the investor of the potential of both the market and the
company in the long-term outlook. The information was based on
serious marketing surveys. In the January of 2006, the first stage of
negotiations was successfully completed in London. The company
received a preliminary approval. Later, the financial condition of the
company was studied and the juridical documents were examined. At
last, the transaction was concluded. It was the first transaction of
the European Bank in the trade sphere of Armenia’s economy.
– What is the investment program on extension of the network of
supermarkets?
– Within the coming two years, we intend to invest some $16 million in
the business. Half of this amount will be used to extend the network
of supermarkets, the next half to establish the logistic distribution
centre. The centre must secure uninterrupted supply of goods to all
the supermarkets. It is a very important task for us as the
geopolitical and logistic plans on which Armenia is supplied with
goods are quite unstable for some different reasons. As you know,
disorder of Ilyichevsk train-ferry alone can cause an acute deficit of
goods as two-third of products in our supermarkets are imported. It is
the façade of the problem. However, there are problems also
with internal logistics, ineffective work of the
producer-store-customer chain. Thus, following the international
experience, we decided to create our own logistic distribution centre
to ensure accurate operation of our network, to speed-up good
turnover, and to increase the level of
inventory-management. Generally, good turnover is the best factor in
retail. As to this factor, English Tesco is acknowledged as one of the
best in the world. Tesco sales its reserves in 9 days, while this
cycle in Armenia is 36 days. We have invited specialists from Tesco
with a help of European Bank. The specialists help us create work
schedules and procedures of the future Logistic Centre. We suppose
that the Centre will be put into operation next year. However, it will
not happen at once. These are modular constructions and their number
can be increased if necessary. I’d like to mention that there are no
such centres in Armenia.
– If people trade in supermarkets, they are first of all interested in
the quality of the products. What is the system of control over the
quality of products in `Star’ supermarkets? How seriously are the
suppliers selected?
– Good question. Of course, there is a state agency on certification
of goods. However, we know that the agency does not test product
profoundly enough. In accordance with international practice, our
network has a department responsible for management of product
categories. Every specialist is responsible only for his category of
goods: quality, turnover and profitability. We pay a great attention
to safety of products. Thus, we cooperate with authoritative foreign
suppliers and such international organizations as USAID, World Bank,
as well as governmental structures and public organisations. A special
attention is paid to training of specialists, especially, managers. We
hold training to raise the efficiency of the work and the quality of
service. Our marketing managers attend relevant courses, seminars and
conferences in abroad to get first hand view of the achievements in
marketing management. We have established close contacts with
marketing specialists of Moscow, many of them are Armenians who share
their experience and projects with us. It is not surprising that work
efficiency in the USA exceeds our indicators several times. The point
is in lacking of a proper system of business management and not in
hardworking or abilities.
– Retail chains develop in Armenia. Would you assess the competition
in the sphere of grocery retail?
– Now, one can see entrepreneurs having long-term plans and interests
in the market. These businessmen are not satisfied with what they have
and take effective steps to extend their business. They have healthy
ambitious plans as they have experience in the sphere. This
competition rehabilitates the market and we are glad to have such
rivals. As the share of supermarkets in the total trade turnover in
the country does not reach even 5%, there is no tough competition in
the market so far and retail chains are rather like-minders
introducing the idea of civilized trade in public than rivals. We will
become rivals when we occupy at least 50% of the market.
– Are you going to extend the network outside Yerevan?
– Over 70% of the total volume of grocery retail is concentrated in
Yerevan. That is why, it would not be effective so far, although, we
have such a prospect. At first, we shall open as many supermarkets in
the capital city as possible and then start acting in the big towns of
the country. However, it is untimely to speak of this now.
– There are sections in your stores that belong to other grocery
networks. Is this a special policy?
– Supermarkets are interesting for other networks at least by their
target audience and customers. We work with the companies `Alpha
Pharm,’ the Russian `Euroset’ (`Euronet’) and even with the network of
cafes `Jazzve.’ In this context, we seek for the leading companies in
the market that have their stable position and, at the same time,
increase the number of customers of supermarkets. –
– What is the pricing policy in the `Star’ network? Your supermarkets
are said to have relatively low prices.
– We are for fair prices. It does not mean that our prices are low. It
means that the quality and the price of a product must be adequate. It
is quite another matter that we often announce various
promotion-actions and discounts for our customers.
– Do you mean discount cards that are rather an attribute of civilized
trade and attention to customers than discount?
– We have started a dialogue with customers with impersonal discount
cards. Demand for them was very high. We even had no time to prepare
them. Now, we have entered the next stage making another advance to
customers. Thus, jointly with HSBC-Armenia Bank, we have issued
individual debit-credit cards sharing all the possible following risks
of this innovation with the bank. Now we build relations with our
regular customers on an individual and mutually-advantageous
basis. Marketing information is collected for us by means of the card,
on the one hand, and we extend the sphere of services and privileges,
on the other hand. Now, the number of these co-branding cards reaches
5,000. We hope to at least double their number by the end of the
year. The credit line given to cardholders may reach 300,000 AMD
depending on the buying activity in ` Star’ supermarkets and on the
credit history of a client. The cards are issued free of charge. The
network has assumed these expenses. Moreover, we consider cardholders
as members of `Star’ Club and will shortly publish and deliver them a
special weekly aimed to stimulate sales. The weekly will contain all
the news and specialties from `Star,’ information on promo-actions and
special offers. This interview may also be published in the weekly.
– Thank you.