The history of NG2 Group, a leading producer and distributor of footwear in Poland, is over ten years long. The beginning of the company dates back to the mid ‘90s. During all these years it has been established in the consciousness of the clients as CCC Company. The CCC trade concept was launched in 1999 as a platform to cooperate with franchisees. These three letters stand for Polish Cena Czyni Cuda – Price Makes Miracles and CCC is still one of the best recognised brands in Poland. In 2002 the sale of footwear commenced in their own stores and a nationwide advertising campaign was launched to build an awareness of the brand. Successful IPO in December 2004 enabled the company to continue their investments in their own retail network, increasing the efficiency and profitability. The year 2006 marked a completely new chapter in the history of the company. It was not only a period of lively development for CCC, towards the end of that year NG2 introduced two new distinct brands into the market: Quazi – offering leather footwear to women conscious of themselves and their style as well as BOTI – directing products to clients with more modest tastes, located in average and small towns. A crucial date was January 24, 2007 when through the decision of the shareholders, the name was changed from CCC to NG2 (New Gate Group). This was a specific consequence of company’s expansion on the domestic market, aiming for better identification of particular brands and sales channels.
According to Datamonitor, the footwear market value in Poland is expected to increase to PLN 8.2 billion in 2009E (2.3 percent up year on year) while the market volume should rise to PLN 129.5 billion pairs. With a population of around 38 million, the Polish footwear market is one of the least concentrated among the EU countries. Moreover, the Polish footwear market is one of the least saturated markets among those in the EU, with an average of 3.5 pairs of shoes per inhabitant while in the EU this ratio is two times higher (approx. 6.0 in 2008). With a 12 percent stake in the market, NG2 is a market leader offering shoes and accessories in 700 locations – 585 owned and 115 franchised – 350 CCC stores, 300 BOTI shops and 50 Quazi boutiques.
The CCC store format is developed as a “house of brands” in both proprietary and franchisee distribution channels. Most CCC products are positioned in low and medium price segment, which is reflected by an average price ranging from USD6 to USD100. Stores are located in both the most attractive locations in the biggest cities and “second tier” locations around Poland. Due to the fact that CCC retail chain contributes to 80 percent of total NG2 sales and it has a strong brand awareness among the customers, the retail chain will be gradually developed in coming years.
Both BOTI and QUAZI are relatively young brands, which were launched in 2007 and 2006, respectively. Accordingly, the store concept of BOTI is dedicated to clients looking for cheap shoes at a reasonable price (prices range from USD6 to USD60), the brand is targeted at low income customers in cities of every kind. In contrast to CCC and BOTI, QUAZI brand is positioned in medium price segment (prices range from USD30 to USD200). NG2 entered a higher price segment as a part of a differentiation strategy, which allowed the brand to penetrate other niches and gain some additional profits.
Salons in all three sales network have a uniform internal and external fit-out. The Group makes sure that both its own and franchised stores characterise each brand with a suitable arrangement of the interior and shop window. Within the scope of its brands the network applies seasonal image changes. Twice a year, for the autumn-winter period and spring-summer, the salons undergo a fundamental metamorphosis. All changes create a coherent notice for the consumer, they are clear and attract attention.
NG2 has its own production facility located in Poland which manufactures around 10 percent of total supplies. The remaining 90 percent of production is outsourced, mainly to China and India. Supplies from these sources account for 80 percent and ten percent of all supplies, respectively.
We can already say that NG2 Group avoided the negative consequences of economic slowdown. This was possible thanks to adopting wise development tactics. The NG2 business model in its own right is defensive, since middle and lower shelf products sell just fine at the time of possible recession. Precisely set budget and successive reduction of costs at the level of negotiating prices with contractors constituted the significant factor of defence against the crisis. And last, but not least, NG2 concentrated in the past on the domestic market and based its strategy on the organic growth rejecting all M&A proposals. CEO and founder of the company, Dariusz Milek, believed strongly in NG2 business model and managed to avoid expensive acquisitions.
After strong performance in the years 2007 – 2009, when the number of NG2 stores doubled and floor space was tripled, the company intends to continue the robust development. High profitability combined with low leverage provide NG2 Group with the unique opportunity to invest in new locations and increase the market share.
NG2 believes that through new openings of proprietary stores it will be able to reach the strategic goals. The company, with its limited exposure to foreign markets and focus on the low- and middle segments of the market, is capable of strengthening its leading position and doubling its market share to 25 percent by 2014.
