Real Estate Show Rooms in Russia

Marketing specialists often complain that Russian business has been spoiled by the oil dollar and company owners do not think they need to pay much attention to marketing. All too often marketing is just associated with prestige and status and the practical benefits are overlooked. The first real Russian estate development show rooms have now opened their doors although it would seem that here too that the focus is on prestige and luxury.

Today show rooms have become a permanent feature of Russian business. With a few reservations the world’s largest showroom could be regarded as the Google Map which presents the entire planet. Then there’s VDNKh (Exhibition of Economic Achievements) which was the first and most grandiose show room of the Soviet era. The first modern show rooms appeared in Russia about ten years ago for the retail sector. “They quickly caught on and are developing very fast. The retail industry is developing all over the world and we will see more and more touchpoint retail instruments. The reason why show rooms are catching on so fast is the high degree of knowledge behind them and convenience of use. A show room is an exhibition space and sales room in one . You can look at products, evaluate services, view demo materials and obtain a consultation. At the forefront are car show rooms, fashionable brands and household goods retailers. In other words companies which are promoting Western products and Western standards for working with target markets,” says Alexei Vanchugov, general director of Mall Marketing.

While product show rooms are already quite widespread show room services are still quite new. In the development sector they only appeared recently and even today the total number of show rooms can be counted on the figures of one hand. And as for show room events – this product is virtually unknown in the Russian market. “Internationally you can find things like show rooms for skiing competitions which display the slopes and routes and show rooms for car shows which provide detailed information about where different models are located and how the exhibition works. Unfortunately I haven’t seen anything like that here,” says Dmitry Ryzhakov, development director at Step by Step.

The purpose of a show room is to effectively present products. As well as information clients also receive visual information which creates an emotional perception of the product. “Every company which wants to present its products properly should have a show room. It is an ideal location for presentations and meetings. Show rooms can vary widely according to the interior and technical specifications but the dominating idea is reflecting product values. For example visitors to our show room immediately become aware that we specialize in teenage clothing,” says the development director at Brand House, Vera Fedotova.

Show room design depends on the product and the number of show room employees, “For example in Italy I saw a chocolate show room inside an ordinary supermarket. One show room employee talked to shoppers and demonstrated the best way to make hot chocolate and which spices to use and then sold all the ingredients. He juggled ladles, smiled and blew kisses to shoppers. They managed to include a stove, displays and chocolate sculptures in an area of 16 square meters recalls Mr Vanchugov. “Obviously for car show rooms you need a minimum area which is much larger than for computers,” he goes on to add.

There only a few basic requirements for show room design:

• it must follow the brand book,
• working area and amenities for sales consultants
• a client relaxation area
• toilets,
• reasonably spacious.

Getting the Message Across
According to experts interest in show rooms from Russian developers is growing steadily although we have yet to see a sharp increase. “One of the first real estate show rooms in Russia was the Krylatskye Kholmy Business Park which included a meeting room containing models and plasma screens for presentations. Today the most well know show room was created by Mirax and it includes a replica of an entire floor of the Federation tower,” says Elena Alpatova, deputy head of the office real estate department at Cushman & Wakefield Stiles & Riabokobylko.
In the West show rooms are built in large numbers. According to Vitaly, Kuznetsov, executive director of Russia IA MGM Mirage in America show room budgets start at $2 million and can run up to several tens of million dollars. The most expensive show rooms are for casinos and hotels. In Russia the gaming industry is still quite closed and experts comment that hotels do not require show rooms. The only exception to this rule is holiday parks but even here they only function on a B2C (Business to consumer) level. Taking into account record occupancy levels for Russian office retail it’s not hard to see why this segment also doesn’t need show rooms. One segment where they can have a big impact though is retail real estate.
“Today the greatest need for showrooms can be found in shopping centers. I am absolutely convinced that if Evropark or Fifth Avenue had enough professional show rooms it would make them more attractive in the eyes of potential tenants. A professional show room can demonstrate the movement of flows of shoppers and convince a potential tenant of the benefits of a specific retail area. Brokerage problems often arise because sites have not been presented properly and there isn’t a proper format for providing information to tenants like a show room or other source of basic information,” says Mr Ryzhakov.

Palaces and Cabins
There are some general guiding principles when it comes to show rooms, which if truth were told are not always followed in Russia. The first of these is that the class of show room should correspond to the class of the product being displayed. “At the moment we are building a new project in America which will include a $25-million dollar showroom. The total area of the building is approximately 4,000 sqm,” says Mr Kuznetsov. This kind of project will no doubt include large very detailed models, a lot of meeting rooms and presentation screens. Another standard feature for that type of project is a free bar. Staff uniforms are custom-tailored and the show room should include exact copies of areas in the future building and perhaps even a recreation of the views.
“People are often influenced by emotional as well as logical factors. When someone can see with their own eyes how a building will look when it is completed it makes them much more willing to invest substantial sums,” asserts Mr Kuznetsov. Psychologists are often consulted to provide recommendation as to how to make the environment as pleasant and comfortable as possible for clients. A distinctive feature of show rooms is very high ceilings and this is no coincidence, it has been scientifically proven that high ceilings make people feel more at ease.
Show rooms are less common in Russia than in the West. “Usually show rooms are makeshift cabins containing models and samples of materials or plasma screens for video presentations,” says Ms. Alpatova describing a standard Russian showroom. In her view even this type of very modest show room can product results. After all without a show room potential tenants would need to be shown round muddy cold construction sites.
A lot can depend upon the design of a show room. “The main requirement is that the architectural design and interior corresponds to the values of the brand. Usually neutral interiors work best because it is the product, catalogue and employee uniforms that should establish the brand,” says Mr Vanchugov. This view is backed up by Mr Kuznetsov who comments the when planning a show room you should focus on creating the most pleasant and comfortable atmosphere possible for the visitors. You should avoid bright colors and radical interior designs which although they may look attractive might prevent visitors from relaxing.
An important aspect of modern show rooms is interactive technology. “I visited an American shopping center with an interactive showroom. It had a large 3D screen which modeling shoppers flows and even showed gender. It was all so visually effective that it made it easy (even without any research) to find the best store location and work out what the pay back period would be. Of course interactive systems are very expensive, but they do work. I think shopping centers should make use of all the possibilities offered by modern interactive technology, 3 D animation and real time traffic monitoring,” says Mr Ryzhakov. In his view new technology does not catch on quickly in Russia. “In Western countries people are used to obtaining information whenever they want it. Our culture is not as technologically oriented. I would describe the concept of a show room as providing the client with the maximum amount of information in the most convenient format. Our businessmen appreciate comfort and convenience but do not always pay enough attention to the reliability of information. This is evident in the way stores are opened and then quickly close. It is not uncommon for a show room model to be different to what is actually built and some changes are even made during the construction process itself,” he adds.
After the building is sold the fate of the show room can vary. “If my view show rooms are like exhibitions they are mobile. For example if a show room is organized directly in the building the area can then be used for administrative purpose or even better sold,” says Mr Vanchugov. According to Mr Kuznetsov In America after the building is delivered show room premises are usually used as service areas. In Russia budgets are more restricted so it is harder to predict how high quality areas will be used.
“Only very rarely are buildings built specifically to house show rooms. So far the only example is Mirax and Park City where an entire building will be used to house the sales office for the project. Today it is hard to say how show rooms in Russia will fare but I hope that developers will pay more attention to this issue,” says Ms Alpatova. According to Mr Ryzhakov it is a mistake to close a show room after all the areas are rented. Instead it should be reduced in size while maintaining its functionality. After all high quality presentations are also required for the secondary market.

Show Rooms with a Human Face
Modern buildings with multi-million dollars budgets require highly qualified personnel. “A developer show room is essentially an office with presentation elements including architectural models, floors plans, lists of partners and photographs. The key to success is the skill, professionalism and motivation of personnel. While the impact of presentations can be carefully analyzed the human factor can be the weak link Conversely, the right personnel can emphasize a company’s status and believe me this is worth a lot,” says Mr Vanchugov..
“There is a misunderstanding buffer: the show room manager doesn’t listen to the executives and hopes that все спустится на тормозах. The experience of the person that created the set up is greater than that of the managers so sometimes the procedure is more accurate than a personal opinion. In a number of companies the golden rule is to set up a meeting with whoever applies. However managers often decide for themselves who to meet with and who not. There can also be administrative failures like for example, like attractive hand out material running out unexpectedly,” says Mr Ryzhakov.
One aspect which illustrates the way we work with clients is the degree of openness in show rooms in Russia as compared with the West. “In order to go into a show room you need to agree everything in advance. This makes sense if you are talking about presentations but it means that there are no casual visitors in the show room. It is always easy to see if a person is really interested in buying the premises or has just come to take a look,” says Ms Alpatova.
In order to visit a showroom in America you don’t need to convince anyway about your financial status. “Traditionally show rooms operate every day of the week until late in the evening (12 hours per day) to be convenient for everyone’s schedule. Huge signs are put up near the show room and convenient pathways are built. You don’t have to agree anything in advance you just show up and a manager will speak with you. If all the specialists are busy you can wait in the bar. Anyone can attend a presentation and they understand that even if a visitor doesn’t plan to invest any money he will talk about the presentation with work colleagues and neighbors and this will help create a positive image of the project. We cannot refuse to let someone in and damage our company reputation,” says Mr Kuznetsov.
A show room is an attractive calling card which not only influences consumer choice but also the atmosphere within a company. “Every employee should watch a presentation. It will give them an idea about the scale of the activities of the company which will without doubt, increase loyalty. Also anyone might be asked questions about the project and a visit to the show room means that employees can answer the questions of clients properly, says Mr Kuznetsov. Show rooms can also be used for presentations for brokers. “We take our brokers into the show room for training purposes so they can see how everything is organized and talk to the owners. It is our business and we should know what is happening in every building and with every project so that we can tell clients,” says Ms Alpatova.

Brand Building
Some modern Russian show rooms are the work of Western companies. “Western retail brands engage Western specialists and those who understand that in Russia there are virtually no specialists with this combination of marketing and design knowledge - that is to say virtually everyone. In any case only Western experience is used because there is no other,” says Mr Vanchugov.
Usually show rooms are developed as part of brand formation. “In Russia companies traditionally try to reduce costs but for very high profile projects like the Krylatyskye Kholmy Business Park and City Park large branding companies are used. Marketing specialists create the overall brand concept for the project which will be reflected in everything from the brochure to the show room,” says Ms Alpatova.
The potential role of a show room in brand formation is large. “It is another touch point and the potential of show rooms is large – it is an area which can be used for a large number of events from fashion shows to press conferences while surrounding clients with the atmosphere of the company. This makes show rooms one of the best way of transmitting brand values. After all the influence of status can always be felt, especially in Russia,” says Mr Vanchugov.
In Russia show rooms are still only regarded as a way of increasing a project’s status. Experts comment that it is wrong to say that show rooms are not relevant for our business environment, it’s just that the potential benefit has not yet been calculated. “There exists the view that show rooms are only needed when there is strong competition. In Russia the market is just warming up, supply is small and demand is big. However in our experience projects that win out are the ones that pay a lot of attention to marketing. Show rooms can create a positive relationship with clients even before construction is complete and as a result areas are rented earlier,” says Ms Alpatova.
The B2B (business to business) has still not woken up to the possibilities offered by show rooms. Experts insist that the market needs to learn from successful examples. All it will take is for a few companies to create modern show rooms for every large project