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Collective Brands Inc. is expected to announce Tuesday that it is expanding its Payless ShoeSource retail chain into Russia with franchise partner M.H. Alshaya.

The Topeka, Kan., footwear company, known for its affordable line of shoes by top fashion designers, plans to open stores beginning in 2010 in Russia. The agreement calls for between 95 and 150 stores to be built within five years. Alshaya will own and operate the stores, but Collective Brands has the option to buy into them.

At the end of the first quarter, the company, which also owns the Stride-Rite chain, operated more than 4,500 stores in more than a dozen countries, including Canada and nations throughout Central America, the Caribbean, South America and the Middle East. The retailer’s sales have fallen in the recession despite its discount prices.

The company first began franchising its stores this year in the United Arab Emirates, Saudi Arabia and Kuwait.

“Emerging markets such as Russia and the Middle East have two common traits — income growth and real [gross domestic product] growth,” said Chief Executive Matthew Rubel.

M.H. Alshaya Co. is the retail business of the Alshaya Group, which has interests in hotels, real estate and investments that was founded in Kuwait in 1890.

A FEW weeks after Waitrose opened its first Scottish store in Edinburgh, a rumour spread through the City that the residents of one particularly well-heeled district were actually dressing up for their weekly visit to the Morningside Road branch. The reaction among the chattering classes of the West End of Glasgow may be a little different. But the John Lewis-owned chain commands such high esteem that its plans, announced last week, to open in the west of Scotland received the sort of attenti

on normally reserved for a major national news story.

The firm will take over the existing Somerfield on Byres Road in Glasgow in August. After converting the premises, it is expected to begin trading by November. Whereas an air of suspicion surrounds the growth of the big four supermarkets, openings of Waitrose stores tend to be celebrated events, as it has grown into a trusted brand. It is this trust that Waitrose commercial director Richard Hodgson is looking to capture as he rolls out the chain across Scotland. Speaking from Inverness, on a busy round of supplier visits, he says the early logistical problems have been overcome and Scotland is now one of the key areas of growth for the group.

“We are constantly on the lookout for more suitable sites,” he says. “In the next seven years we have a very aggressive growth strategy, to double in size, but to date we have been able to identify limited opportunities. Where I am now, Inverness, appears to be a town dominated by Tesco and I would love to be able to give its population an opportunity to buy Waitrose food and drink. “I would be disappointed if we don’t have a fourth store in Scotland within the next 12 to 18 months. Scotland is an untapped market for us. We have 214 stores UK-wide, and with our expansion plans it makes absolute sense to focus on Scotland. I can see us getting up to half a dozen very quickly.”

The move is part of a wider strategy by the group to increase its commercial footprint and become a more aggressive business. Several UK store acquisitions from retailers such as Morrisons and Somerfield have significantly bolstered its operational scale in the UK. It is also trialling three convenience store formats in Bristol, Nottingham and London’s Crouch End. The strategy is to get these stores within service stations in what is direct competition with Marks & Spencer’s conveniece-store format. It is a move which Hodgson says is designed to grow the business and make the Waitrose brand more accessible to more people in the UK. If successful it will be part of the landscape in Scotland.

Waitrose has also looked overseas for expansion. It has signed a licensing agreement to open more than 20 sites in the Gulf by 2010. By then, Spinneys, Waitrose’s partner in the Gulf, will open three new-build Waitrose stores as well as converting 20 of its existing stores to the Waitrose fascia. This move comes on the back of the chain distributing its own-brand products to partners in countries ranging from Thailand and Japan to India and Finland. Franchising in India is booming, Way2Franchise.com, a leading portal on Franchising, reports there are already 468+ Franchise Brands. Waitrose will face tough domestic competition

As well as the Middle East, analysts at Verdict research say Waitrose is reported to be interested in increasing its presence in India as well as entering the Chinese, South African and US markets on a franchise basis in a move that could lead to the launch of Waitrose in these markets.

“The history of the John Lewis Partnership has been relativity conservative,” says Hodgson. “Our gearing is very low and we have been very prudent so there is investment for the right opportunities. The difference now between Waitrose and mainstream supermarkets has never been better.” Figures for the year to January 2008 show that Waitrose sales were up £251.6 million, or 6.8%, to just under £4 billion which Hodgson wants to grow to £8bn by 2016.

It does seem a little counterintuitive that an upmarket supermarket chain is expanding during one of the worst downturns for 50 years. Last year it was reported, and subsequently dismissed by Waitrose, that it was losing shoppers to its cheaper rivals. “We are actually seeing a number of people trading up,” says Hodgson. “There is a growing consensus that things are not quite as bad as previously thought. The difference between what we offer and what our competitors sell is around a few pounds a week.”

Hodgson points to the success of the Essential Waitrose discount range which is intended to ensure that customers remain loyal to the store as the recession deepens. “Overall our sales growth is 15 per cent and the biggest driver of that is Essential Waitrose, which is up 27 per cent year on year. Wine sales have been up 19 per cent in volume. The smoking ban has obviously helped as more people are drinking at home.”

Tags: Waitrose, UK Franchise, Supermarkets, Spinneys, Franchise India