The presence in Romania of representatives of H&M, one ofthe world's leading clothing retailers, to gather information on apotential direct entry onto the Romanian market reveals thesignificant long-term potential of the Romanian clothing market.Direct entry onto the Romanian fashion retail market is aprofitable venture from the first or second year, unlike theconsumer goods sector, where investments, which are much moresignificant, take more than three-four years to recoup.
Over the last two years, the big companies made their way intothe Romanian market using "their own weapons", without resorting tolocal operators, as used to happen before. Advantages such asmaking a high profit "as quickly as possible", better control overlocal development and a better visibility of the brand overshadowthe risks, especially since they don't come into play unless thecompany decides to exit the market - in such a case losses arehigher than if the company relinquished a franchise agreement.
Spanish retailer Inditex, holder of Zara, has as its maindevelopment strategy the opening of stores that it will manage onits own. Although it entered the Romanian market in 2004 with twoof its eight brands, Zara and Pull & Bear through AzaliTrading, two years ago it decided to do away with its franchisingcontract and operate directly. Over a short period of time, itreached 37 stores in Bucharest, Cluj-Napoca, Constanta, Iasi andTimisoara with nine Zara stores, seven Pull & Bear ones, sixBershka and Stradivarius stores each, four Oysho stores, twoMassimo Dutti and three Zara Home stores. "On small markets or onculturally different markets the group expands its store networkthrough franchise agreements with local leaders of the retailsector. In 2007, however, considering the significant demand forour products and the growth potential on this market, we decided tooperate directly in Romania," say representatives of the Spanishretailer, whose 2008 sales were 87% generated by the company's ownstores.
Clothing retailer Mango, Zara's direct competitor, also took thefirst step this year by opening its first store in Cotroceni Park,although it collaborates with two companies registered on theRomanian market - Solmar Trading and Peeraj Group.
"The franchise model has showed us that a store becomesprofitable as early as in its first or second year. Our directentry on the Romanian market was image-related rather than anythingelse, because Cotroceni Park is an important project, but we willcontinue to expand on a franchise basis," explains Gonzalo Llaras,Head of Area International Franchise and Expansion of Mango.
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