Igor GRECOV: "The recipe of the economic prosperity: the stability of the state, the discipline of the business."
Interview of the InfoMarket agency
We’ve been get used to the fact that Moldova is a specific market and this manifests itself in different ways. Another confirmation is that the German concept for the development of the Kaercher network assumes that there is one store per one million inhabitants, the population of Moldova is 3.55 million people (excluding Transnistria); there are already six stores of this kind, four of them are in the capital. The Kaercher regional office in Moldova has been operating since the end of 2009, its leader Igor Grecov has gained considerable experience during this time. Based on the company progress, headed by Igor Grecov, he told InfoMarket agency about the current trends of business development in Moldova.
InfoMarket: This spring you’ve opened the fourth Kaercher store in Chisinau. How did it happen that we have more shops than in a city with the equivalent population in Europe?
Igor GRECOV: This is a consequence of the good reputation of this brand in Moldova. Traditionally, people from almost different areas of the country go to Chisinau for our equipment, excluding Balti and Comrat, cause we have shops there. Moreover, we worked in the format of small boutiques at the beginning, but we switched to the format of Kaercher-malls now. There are larger shopping areas and full service offered. Also, we have about 150 distributors around the country.
InfoMarket: A few years ago, you said that Moldova is ranked number one in terms of sales per resident within the Kaercher corporation. The corporation had an average rate of 5 euros per customer in the world, but it is 6.5 euros per customer in Moldova. How are things today?
Igor GRECOV: We still remain number 1 in the corporation for this indicator, which also grew to almost 9 euros per person, according to the official statistics of the population. The colleagues in Germany do not even understand how we sell so much, considering our economy.
InfoMarket: Is it taking into account Transnistria?
Igor GRECOV: We hardly sell there. There are two dealers in the region, they deliver products directly from Germany, we monitor their activities and provide marketing and advertising support to preserve the reputation of the products.
InfoMarket: Do you consider yourself as a big company?
Igor GRECOV: I think so. For the third consecutive year, we are considered to be large tax payers. We employ 56 people, they are often go to study in Germany, we invest in their growth.
InfoMarket: In an interview with our agency in 2011, you said that in 2010, the annual sales amounted to 1.3 million euros and promised to double them. Did it happen?
Igor GRECOV: In 2017 this figure was 2.65 million euros, which is 25% more than in 2016. We made it happen.
InfoMarket: What is the structure of the owners of Kaercher in Moldova. Is this purely branch office?
Igor GRECOV: This is a joint venture, I personally own 10% shares stake. Generally, Moldova is an exception to the rules of the group corporation: Local companies and offices offices belong to it entirely.
InfoMarket: Which products are the most popular in-door or out-door? What direction in Moldova is more developed: Household appliances or technology for business (B2B)?
Igor GRECOV: In the out-door segment, as a rule, high-pressure devices, garage vacuum cleaners, sweepers and washing machines are in high demand. In the in-door segment, we compete with all the major manufacturers of small household appliances.
The European offices of Kaercher have the following indicator: if there are more home appliances sold, then the market is poorly developed. Unfortunately, Moldova sells more household appliances: the ratio is about 65% by 35%. In economically developed countries, the ratio is 50% by 50%. If the bank goes towards household appliances, it means that the economy is weak, people are counting on consumption, but the production and services do not grow.
InfoMarket: Is car wash equipment a big segment of your sales?
Igor GRECOV: In 2011, the main share in the B2B segment was in equipment for car wash. Today, the vector has moved into the segment of cleaning equipment: cleaning in offices, commercial premises, production is the fastest growing segment in the world, and we are going with a delay of several years. The global market of washing equipment (the segment of cleaning for maintaining cleanliness) is much larger than the car wash segment. Therefore, cleaning companies in Moldova grow fast like mushrooms after a rain: this business can start with equipment costing from 2000 euros.
InfoMarket: Your customers say that the prices for Kaercher in Moldova are lower than in Germany.
Igor GRECOV: For some categories of goods by 10-15%, even including VAT. The prices could be even lower, but ... Despite the Agreement on Moldova's association with the EU, we can not take advantage of duty-free imports from Germany. Karcher corporation is very large, its products are made of materials produced not only in the EU countries, therefore, due to the current legislation, it is not always possible to provide the corresponding certificate of origin that is needed for duty-free imports (customs preferences) . By the way, only three countries require such certificates: Bulgaria, Moldova and Georgia.
The same problem exists in the field of conformity certification: everyone knows that the Eurostandard is much higher than the Moldovan one, but we still have to pass the internal certification of the products imported from Germany. As a result, these costs affect the price level.
InfoMarket: You work a lot not only with end customers, but also with businesses. How much the market has changed in recent years? How do entrepreneurs feel now?
Igor GRECOV: I cannot say that everything has become critical. Probably, those who created the business about 15-20 years ago, like me, have already got their feet on the ground firmly and have learned to adapt to the realities of our country. The situation is not always the best. We also suffered once in 2014 when government officers came to us with a search and seized the documentation and computers.
InfoMarket: What was the reason?
Igor GRECOV: The search was conducted in the framework of a criminal case, which was initiated after the fact of the illegal activities of some companies. As far as I remember, they were suspected of organizing illegal schemes and non-payment of taxes. As a result, we were able to protect our rights and prove that our enterprise has nothing to do with either the illegal activities of these companies or respectively the criminal case. Not finding any violations, all the documentation and computers of course returned. Somewhere in three months. But the activities of our company has been greatly hampered during this period of time. I'm probably one of the few entrepreneurs in this country who received an official apology from the General Prosecutor's Office. It was important for me to prove to my German colleagues the good name of the Karcher brand.
InfoMarket: Such issues clearly do not increase the investment attractiveness of the country...
Igor GRECOV: We did not make a big fuss out of this issue. At that time, it was not fun for me at all, I had to write letters to the General Prosecutor's Office, to the parliament, and to the German Embassy. I was also with the EU ambassador, Pirka Tapiola, he was specifically involved in such cases and at the time when I came, it was the third or fourth case with foreign companies.
InfoMarket: What should local companies do in such cases?
Igor GRECOV: I had the understanding and support of both the German ambassador and foreign consultants. As an enterprise with foreign capital, we created a certain background and the officials left us alone quickly, they say, they did their work. Some of my colleagues even "envied" me a little, saying that it was necessary to open a foreign office, then in difficult times it would be easier to protect oneself. I think that local entrepreneurs should not give up in similar issues, but fight to the end and defend themselves against arbitrariness by all available legal means. Although, I’m sure those entrepreneurs who are firmly on their feet, perhaps, have already learned to work in difficult conditions. It cannot be said that everything is very bad in business. But I'm not sure that now it's easy to open something from scratch. Niches are busy and there is not always fair competition.
InfoMarket: How many of your familiars are no longer engaged in business in Moldova?
Igor GRECOV: There are people who say that you do not want anything anymore, just sell everything and leave, for example, to the Czech Republic. And, these are people who have long opened their businesses and are well on their feet.
InfoMarket: Is it fatigue?
Igor GRECOV: I think it’s the lack of stability. We are well-balanced generation of the 1990-2000s and we have been patted a lot. But there comes a time when you want stability, but it still does not exist. The authorities, strategies, vectors are always changing... There is no unified state policy and every government pulls the blanket upon itself.
InfoMarket: And besides stability, what else hinders the development of business in Moldova, what do you think?
Igor GRECOV: We have one more particularity: if someone opens his own business, he wants to recoup his investments for a maximum of 3 years. If the payback is more than 3 years, the business in Moldova is not interesting. Although in Europe, the return on business is expected to last 10-20 years. And this does not bother anyone, because there is political, economic, tax stability. Still, everything depends on stability.
InfoMarket: In Romania, there is a tendency that young people do not want to engage in entrepreneurial activities, preferring to find high-paying jobs. Can, and we already trace the same trend?
Igor GRECOV: I definitely have something to compare with - since January 2018 I am also the general director of Kaercher Romania. Maybe they are afraid to open their business because there are still a lot of obstacles and, unlike the situation of 20 years ago, there is already an alternative to getting a good job. And in Romania, it's not so simple. We were forced to open a business, and today's young people are frightened by these difficulties.
InfoMarket: So you are now working for two countries?! Where is the business situation seem to be better between two countries? And what have you already managed to achieve?
Igor GRECOV: It is difficult to compare a small market with a population of 3 million, where we have a turnover plan of 2.7 million euros and the Romanian market, where the plan is 17 million euros and a population of 24 million. However, for the first 6 months in 2018, we achieved sales growth in Romania by 51% (compared to 5 months in 2017). A considerable role in this was played by the increase of discipline. Even after settling down for a good job, a person is looking for an opportunity to shirk in the absence of proper control. // 10.07.2018 - InfoMarket.