Andreas Schmeidler isn’t looking for revolution in Russia. The chairman of Tsum has been in the job for less than a year and his strategies are seemingly uncomplicated: Invest, focus on the Russian clientele and make sure the online experience is as compelling as the off-line one.
“We’re not talking about a big revolution,” said Schmeidler. “Our DNA is retail, and we need to develop that. We’re not about concessions — on the contrary. Our aim is to serve the brands and develop an exquisite store online and off-line, something unique to Tsum, unique to Moscow.”
The Russian clientele is so important to Tsum right now that Schmeidler compares the store not to Harrods or Selfridges or even to Galeries Lafayette, where he says the focus is largely on tourists, but to Paris’ Le Bon Marché — and calls it “an institution for Moscow and the domestic market.”
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The largest department store in Eastern Europe — and one of the largest in the West — Tsum stretches across 70,000 square meters, or 750,000 square feet, a bit smaller than Harrods and on a par with Galeries Lafayette Haussmann in Paris.
Founded in 1907 as Muir and Mirrielees and built next to the Bolshoi Theatre by the Russian architect R.I. Klein, the store stocked myriad types of merchandise and made deliveries across the empire, which stretched over three continents, from the Arctic Ocean to the Black Sea, and from the Baltic Sea to the Pacific.
It was Russia’s first department store: A seven-story building done in European gothic style with Art Nouveau elements, two high-speed elevators and a perfumery department — the latter of which was unheard of at the time.
Following the revolution of 1917 and later the formation of the Soviet Union, the store was renamed Tsum, or Central Department Store, and was the property of the Russian state. After the collapse of the Soviet Union, Tsum became one of Russia’s first joint stock companies and in 2002, it came under the management of the Mercury Group, the country’s largest luxury goods distributor.
Size still matters to Tsum’s principals — as does the domestic market — one reason Schmeidler is looking to build off-line and online together, with the aim of creating a single offer and an online platform that can serve the expanse of Russia.
Online sales account for 10 percent of Tsum’s annual revenue, and that percentage could double this year as the retailer attempts to dissolve the boundaries between online and off-line with a slick, intuitive web site that reads like a glossy magazine.
Although Schmeidler declined to confirm any numbers, media outlets have put Tsum’s annual sales at between 500 million euros and 700 million euros.
The store is also investing in mobile and video in a bid to tempt the millions of Russians outside Moscow who may not be familiar with the new Tsum. It is telling that Tsum’s Riccardo Tortato has two titles: fashion director for men’s collections and for the whole of tsum.ru.
He works with Alla Verber, vice president of Mercury Group and the store’s fashion director, and Natasha Goldenberg, Tsum’s creative director.
Online retail also happens to be Schmeidler’s field of expertise, having consulted for Tsum on digital before taking up the chairman’s role. From 2010 to 2016, he served as Italy country manager for Vente Privee, the French e-commerce company that specializes in online flash sales.
He said online sales are growing in the triple digits, while overall turnover at the store has been growing 20 to 30 percent each season since 2015, powered by the big brands including Valentino, Dolce & Gabbana and Moncler.
To mark its 110th anniversary last year, the store created a number of exclusives and limited editions from brands including Valentino, Pucci, Loro Piana, Bottega Veneta, Tom Ford, Marni and Sergio Rossi, that were available both off-line and online.
In addition, Tsum has introduced click-and-collect services in store, same-day delivery service in Moscow and Saint Petersburg and deliveries outside the big cities, with an average delivery time of three days.
The store has also been taking pains to modernize and appeal to customers even in the face of major macro-economic challenges.
Mercury continued to invest in Tsum even during Russia’s recent dark days after the oil price crash, international economic sanctions and the subsequent devaluation of the ruble.
“They were not scared to spend, and when times got tough they invested more,” said Schmeidler. “It wasn’t easy, but they had the right vision for the store, and today the environment is changing and advancing. There is so much opportunity and Moscow itself has nothing to envy other cities.”
Tsum has begun reaping the benefits of plans put into place in those bleak years, which appear to be well and truly over. The World Bank is projecting that Russia’s economy will grow 1.7 percent in 2017 and 2018, and 1.8 percent in 2019.
In 2015, when the Russians stopped traveling and shopping abroad, the store slashed its prices to match those in Milan and Paris and introduced the notion of “best price” for each season’s hottest items, with the store sometimes offering lower prices than those in Europe.
Now that the country is emerging from the hard years, the Russians have continued to shop at Tsum — and abroad, too. In the first quarter of 2017, Russians’ foreign spending rose by 40 percent, according to Global Blue, with the number of transactions increasing by a third in March, and the average spend in foreign countries at 1,000 euros, versus 600 euros in 2016.
While Russian luxury clients have begun to spend abroad once again, Tsum also has been working on attracting foreign tourists. Ten percent of turnover comes from overseas clients, with Tsum offering in-store navigation in English and Chinese, and special bonus programs for international shoppers as well as Apple Pay, AliPay and mobile point of sale.
About 10 percent of tourist traffic comes from the Chinese, while at Tsum’s sister store DLT, or Leningrad Trade House, in Saint Petersburg, that figure is 25 percent.
Oxana Kozhina, senior manager, Tax & Legal at Deloitte, said in a recent report that Russia’s luxury market, which stabilized during the last year, continues to grow because of the influx of tourists and to loyal local customers.
“The key reasons are increased tourist flow (mainly from China), price control and price reduction (in some cases) by retailers as well as increased shopping by Russian consumers who used to buy luxury products abroad,” Kozhina wrote.
Tsum’s principals have been pushing for a tax-free program similar to what the big stores in Europe and Asia have, and early this year the retailer will become the pilot store to offer tax-free refunds under a dedicated government program.
“The value in Tsum lies in making it ever more international, and there is strong potential for growth from tourists,” said Roberto Eggs, chief operating officer of Moncler, one of Tsum’s biggest clients. “Moscow has a lot to offer. It’s a fascinating city and similar to Paris in terms of the space and the roads. It will be a destination, and should see strong tourism in years to come.”
For Schmeidler, the future won’t be about geographical expansion, but about going deeper in the Moscow store and on digital, with “new products, events, pop-up shops and fashion shows.
He said Tsum plans to add four new restaurants and a hair salon in 2018 and mark the 100th anniversary of DLT. Most importantly, he said, “we want to be driven by the fashion brands.”