Why several luxury brands close in Romania
High rents have indeed affected luxury monobrand stores before the crisis. International luxury brands cannot consider relocating in mass market malls and neither high street locations, with very strict franchise agreements that do not permit such actions. The decrease in prices for rents have helped these franchises, yet this does not mean products can be sold at a lower price. We are talking about RRP (reccommended retail price) and as in the case of perfumery, there are strict limits for varying the price. Unfortunately the decrease in prices for rents also brought drops in sales, yet a balance has been created, maintaining some luxury brands in the green. Here we can mention Canali, Max Mara, Ermenegildo Zegna, Paul & Shark, Hugo Boss, Cerutti etc.
Concerning multibrand stores on Calea Victoriei and Calea Dorobanti, these could have indeed applied to cutting sale prices once the level of rent diminished, yet they preffered to sell their stock in outlet stores. This is the case for Victoria 46 who opened an outlet store in Baneasa Mall. Other players like Mengotti and The Place Concept Store have maintained the prices partly due to the fact that they needed to compensate for the low sales. The Place even closed down its location dedicated to men’s fashion and accessories, concentrating on the main market. Sources in the market have confirmed Solmar’s intention to sell Victoria 46. In our opinion, the low level customer service and brand mix are responsible for the decrease in sales for Victoria 46.
The closing down of Hugo Boss and Escada on Calea Victoriei has nothing to do with the crisis. Firstly, we are talking about bad management and lack of experience of the franchisee, and in the case of Escada, also a mismatch with the Romanian consumer profile. This is also a cause for the closing of M Missoni in Baneasa Mall.
We are confident that Hugo Boss will be successful in Constanta; apparently the new owners have the experience necessary to re-launch the brand and manage it accordingly.