The FINANCIAL — Interview with Kakha Khazaradze, Chairman of the Supervisory Board of ICR.
Q. What is your view about retail business in Georgia?
A. Retail business is facing certain challenges globally. Information era with its technological advances has caused a shift in customer behavior and as time passes online sales are becoming more prominent. In addition to this increased competition creates additional challenges for the retailers. As for the Georgian market, situation is more complex due to the country’s economy, fluctuation and devaluation of its local currency, which has a direct effect on the retail sector. Currency fluctuation is reflected in changes of the product pricing. Bank’s resources and credits are tied to euro and dollar as well as the rent prices which has a direct effect on the industry. Judging from this, the year of 2016 was light compared to 2015 when Georgia suffered devaluation of its currency by 30%. The last few months of 2016 were affected by the same exact reasons and caused uncertainty and difficulty for the business sector.
If we examine the components of the retail industry, first one is product itself. Nowadays, the product is diverse and the competition is growing. Customers are becoming harder to please, as they gain all the information from the Internet. Thus the information vacuum is no longer present. Due to this, service side of the industry becomes more vital, how you serve your customers affects your profits. One of the challenges for us this year will be to improve our services. We have to work on our online application and digital platforms to provide customers with an easy access to our products from home and ensure fast delivery process.
This is a general review of the retail industry and its challenges, however it is important to mention some of the shifting trends of the present times. Shopping behavior is changing; Customers are becoming more active in shopping centers, which is a growing alteration in Georgia. City center is loosing its significance due to several reasons, such as traffic jams, on street parking problem and the dispersal of the shops, which requires more time from the customer to find the right product. Due to the factors outlined above, the trends in the customer behavior are changing and one of these shifts is reflected in upsurge of popularity of the shopping centers where the customer can manage his/her time efficiently. In my opinion, demand for shopping centers is going to increase and the city center will mostly be retained by businesses focused on the service part of the industry, such as banks, drug stores, salons, small gift shops etc. The big retail companies are going to open up their stores in the shopping malls.
Q. Can you outline briefly the business climate in Georgia?
A. Business climate in Georgia is on the way to improvement, It is hard to assess the effects of the recent policies on the country’s development in a short time span. Nevertheless there are many interesting projects in place especially in the field of agriculture. I mentioned this particular sector due to my involvement and knowledge of the projects in the field. I would say that business climate is rather decent but the economic situation is unhealthy globally, which is reflected in our industry. For example, the devaluation of the currency is a reoccurring problem in Azerbaijan, where the situation is worse than in Georgia. Turkey is in the same position and due to the fact that they are our neighboring countries and trade partners, changes in their currency and economic conditions will always impact our business sector to a certain degree.
Q. What are the future plans of your company?
A. We are mostly concentrated within the shoes trade industry, where we own several retail shops focusing on different segment of the population. Our prices range from around GEL 40 to GEL 1500-2000. Our aim is to offer products to different customer segments. Considering market needs and economic environment in the country last year we have launched a new brand “Corso Italia” which offers affordable prices for mass segment.
In footwear department we have ambitious plans to expand outside Georgia. We are currently working on different franchises and are planning to reopen our stores in Azerbaijan. We had our shops in Azerbaijan around 7-8 years ago and I think currently this market has an interesting potential worth exploring. Another business line we had in the past was apparel, however due to intense competition on the market we decided to partially exit from this business and only keep “Okaidi Obaibi” clothing line for children aged from 0 to 14 years old. We think that this brand is well positioned on the market, it has loyal customer base and thus there are plans for its expansion. We are adding a new store in Batumi and opening brand’s premium line “Jacadi” store in Tbilisi by spring 2017. Apart from our shoes and apparel shops, we own accessories’ brand franchise, furniture shops and restaurants. We have Portuguese accessories’ brand “Parfois” with 9 shops in the country. As for the furniture, we operate one of the largest furniture showrooms “Laboratory My Home” and represent several Italian brands such as: “Aran”, “Colombini Casa”, “Dialma Brown”, “Tomasella.” For this business line we are in the process of researching and developing our expansion plans. Last but not least, we are in the food business and own several restaurants: “Tabla” – Georgian cuisine, “Cafe la France” – French café, “Pomodorissimo” – Italian restaurant and “Café Laboratory”. Generally, we have many interesting projects ahead of us in this sector. Nowadays, our team has 80 retail units on the market and our plan is to expand by 20-30 %, both by increasing the quantity of shops and by growing profits.
Q. In the light of recent technological advances, what are the required skills and knowledge for the future business leaders?
A. Taking into consideration recent technological advances, nowadays to be successful in business one has to have a strong academic background. Knowledge becomes an essential tool for success. When the market is overflowed with commodities it becomes crucial to know how to advertise, make the packaging, distribute and sell the product to the customers. Thus, knowledge of marketing and service industry is pivotal which automatically requires an academic background. I divide education in two parts: theoretical and practical. Theoretical knowledge might not be enough by itself but when coupled with practical experience it leads to a successful path. I would also highlight the importance of hard work and diligence in any career path one chooses to pursue.
Q. If you were to start out now and be a young entrepreneur, what type of business would you undertake and what would you change from your past?
A. I would probably change many things; because when you start a business you take part in both successful and failed ventures. For better or for worse, we learn from our own mistakes and if I had to turn back time, I would not repeat the same mistakes over again. Thus, in terms of change, I would avoid formulating the same errors but would still choose the retail industry I am currently in. I would still choose the same career path and be in the retail industry as this is what I’m passionate about and comfortable in undertaking.
Generally speaking, human being is only happy when he/she is doing what he/she is vigorous about. If business brings you joy and gratification, this means that you will be successful in your enterprise.
Q. What’s the key to success?
A. In my opinion, key to success is to have an aim, be diligent, ready for the hard work ahead and to do your very best in order to accomplish set goals. You have to do everything in your power, which is permitted by the business world where there are written and unwritten rules. Written rules are easy to comprehend and follow, while the unwritten ones are learned through years of practical experience. I would say that having a good team besides you is a crucial component of successful enterprise, as well as having the right ambitions and goals, which are grounded on your educational underpinnings. You might be able to set an aim and calculate its efficiency but without proper knowledge you can’t make it work. Hard work will be gone to waste without the knowledge and expertise.