Local authorities will find him a “usable” site

The Yekaterinburg company SCM Development intends to build a specialized hypermarket in the DIY format (“Do it Yourself”) in Saratov. Kommersant was informed about this by the government of the Saratov region. The planned volume of investment in the construction of the facility will be at least $15 million. The project will take place on the condition that the Ural construction materials chain Stroy Arsenal (along with SKM Development, part of SKM Holding) will become the anchor tenant. Market participants and analysts consider it promising due to the growing DIY market, but do not rule out that the developer, and, consequently, the retailer will have to face a shortage of quality sites for construction. As Kommersant was told in the government of the Saratov region, a letter on behalf of the head of the SCM-Development project (part of SCM Holding) Alexey Maltsev arrived on April 2. In the appeal, the company proposes for consideration a project to build a hypermarket in Saratov with an area of about 20 thousand square meters. The planned investment volume will be at least $15 million. According to investors' forecasts, during the implementation of the project, trade turnover is expected to increase by $120 million, and VAT will be at least $6 million per year for every 10 thousand square meters. “The hypermarket is aimed at domestic and foreign retail chains. The DIY hypermarket StroyArsenal will be presented as the main anchor tenant,” the letter states. As co-owner of SCM Development Nikolai Lantukh told Kommersant, the company is implementing similar projects in other regions: Naberezhnye Chelny, Izhevsk, Nizhny Novgorod, Ufa, Perm.

Executive Director of Trest SCM (includes the SuperStroy and StroyArsenal chains of construction stores, part of SCM Holding) Renat Mukhametvaliev said: “We continue to form a federal network. The DIY market is far from saturated, so there is no intense competition yet: and under these conditions, we are easily exploring new regions.” Mr. Mukhametvaliev also said that the format of StroyArsenal stores involves the sale of high-quality goods at low prices. “We offer the same products as, for example, the OBI global network, but we are ready to work with less profitability,” he clarified. It is worth noting that in addition to developing the network through leasing in shopping centers, the company began developing a franchising system in 2007: the first franchisee store will open in the Perm region on April 7.

Trest SKM includes the chains of construction supermarkets SuperStroy and StroyArsenal and is part of SKM Holding. The company now has 26 stores. For 2007, the company plans to double their number. Now the chain stores are open in Yekaterinburg and the Sverdlovsk region, Perm, Ufa, Tyumen. The company's turnover for 2007 is planned at $200 million. The turnover of the Russian market in the DIY segment in 2006, according to company estimates, amounted to $7-10 billion. The annual volume of the construction materials market in the Saratov region is more than $100 million. Market participants and industry analysts consider the project of the Ural promising businessmen. According to the first, the market for finishing materials has not yet been formed in Saratov, and except for the stores of the Starik Hottabych chain, no one is represented in this segment in the region. Last fall, the St. Petersburg chain Maximdom announced its entry into the market, but has not yet begun construction of its hypermarkets.

“Thanks to the construction boom and the spread of the practice of delivering houses with minimal finishing, the construction materials trade sector is growing by 15-20% per year. But on average, effective operation of building materials malls is possible if their number does not exceed one unit per 250 thousand people,” says Vladislav Isaev, an analyst at Finam Investment Company. His colleague from Uralsib Investment Company Andrey Nikitin also notes the good growth potential of the DIY market. “In this sector, companies have a margin of profitability, since now the product line of such chains is mainly composed of goods with low added value,” explained Mr. Nikitin.

However, Saratov market participants note that the retailer and developer may encounter difficulties in the local market when implementing their plans due to the lack of free land in the city. “It’s not very easy in Saratov to find high-quality sites suitable for modern retail formats. “With this factor, most federal companies are forced to adjust their strategic plans to penetrate our market,” Maxim Samsonov, deputy general director of the Povolzhye shopping center, is convinced. “SCM Development will not be able to avoid this either.”

But the government of the Saratov region told Kommersant that they were ready to help the Ural company, which asked to allocate a plot of land “at the intersection of transport routes and roundabouts.” “We are ready to meet with investors and assist them in choosing a site,” explained a government source.

Olesya Ratoshnyuk, Tatyana Nikitina, Saratov

Kommersant (Ekaterinburg) No. 56 from 04/05/2007

"SCM Development" reached Saratov