Kazakhstan acquires taste for luxury

The face of retail in the post-Soviet state is changing. A new $450m mall spanning six floors has opened in Almaty complete with all of the glitz and glamour usually associated with the UAE.

Models prepare for the launch party of the $450 million Esentai Mall in Almaty. Christopher Pike / The National
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With its red carpet, flashy car parked out in front and even a supermodel guest appearance, the event would have looked right at home in the Emirates.

However, this VIP party took place in a country not normally associated with such glitz and glamour - the post-Soviet state of Kazakhstan. And it was held to celebrate the arrival of something the UAE is well acquainted with: luxury shopping.

"With these words, I declare [Esentai] Mall officially open," announced Eva Herzigova, a friend of the partner of Burak Oymen, who is a co-founder of Capital Partners, the developer behind the US$450 million (Dh1.65 billion) project.

The supermodel was one of about 1,000 guests at the recent launch party in Almaty, who included tall, glamorous women with short, sharply-dressed men and many others wearing bow ties, top hats, fur coats and dripping in jewels.

The developers claim the mall will change the face of shopping in the former Kazakh capital, which has until now been home only to mass-market stores.

The size of the retail market in Kazakhstan is tiny in comparison with some countries at $29.7m last year, according to Euromonitor, but some of its residents have a lot of money to spend.

The oil-rich landlocked country, where the per capita GDP rose tenfold between the mid-1990s and 2010, has five billionaires and 12,000 millionaires, 140 of whom are worth in excess of $30m.

Work on the mall, which was originally due to open in late 2008 or early 2009, was postponed during the economic downturn and restarted only last year.

"We were committed to the project. The brands were committed to the project. It was clear this was the right project to do," says Mr Oymen.

"The decision to restart was a matter of lining up all the necessary resources together."

The six-floor, 52,000 square metre mall is part of a mixed-use project, which will include apartments, offices and a Ritz-Carlton hotel and is expected to attract between 10 million to 12 million visitors in the first year.

It is home to both high-street and luxury stores, including the first Saks Fifth Avenue, Louis Vuitton and Fendi outlets in Central Asia.

"These brands are wholly-owned brands. They are not coming through franchises," says Mr Oymen, who is originally from Turkey.

"The difference between here and the high street is you will get the new collection here at the same time as anywhere else in the world," he adds.

Edouard Faure, Louis Vuitton's general manager for Eastern Europe, says the company has had some "very good" results already with Kazakh customers in its stores around the world and felt that it was time to enter the market directly.

"The mall has an impressive environment. I think when entering it one can feel immediately that this is a very modern and luxury mall, combining quality and creativity," he adds.

But building the development, which was financed purely by Kazakh investors, was made more difficult because it lies in a seismically active area on a major fault line.

In 1911, a 7.7 magnitude earthquake destroyed more than 770 buildings, which made up almost the entire city.

The Esentai project includes the tallest tower in Almaty and the company had to comply with a strict construction code.

"We had to use a very high-quality concrete. The cement for the concrete came from Finland," says Mr Oymen.

However, Capital Partners, which also built the city's financial district, is making the most of one aspect of Almaty's geography, just 25km from the city centre.

About 2,260 metres above sea level in the Tien Shan mountain range to the south of Almaty lies another of the company's projects: Shymbulak, a former Soviet downhill ski training centre that was a venue for last year's Asian Winter Games.

The company is in the middle of transforming it into a major ski resort. "When we took at a look at Shymbulak we saw that there was lots of potential and this was a way to help diversify the Kazakh economy," says Mr Oymen.

"One of the greatest challenges Kazakhstan has faced, and one it has been aware of and worked towards addressing, has been the fact that natural resources make up such a large proportion of the Kazakh economy."

The financial sector, Esentai development and Shymbulak are all part of the same plan, he adds.

Since buying the resort, which originally had only one chair lift, Capital Partners has built a gondola ski connection - the third longest monocable in the world - a base station to house restaurants, a ski school and rental area and created 30km of runs served by six lifts.

"Our intention is to expand this and the potential for the mountains is to expand it to the size of Les Trois Vallées [in France]," says Mr Oymen.

"Les Trois Vallées has 500km of runs. So there is Courchevel, Maribel and Val Thorens. It is the largest ski resort in Europe and it's a tremendous tourism centre. The mountains here represent the potential to do the same here," he adds.

And the number of visitors to the Kazakh resort is expected to grow fast. During its first full season last year, Shymbulak attracted 350,000 visitors, of whom about 82,000 were skiers. It hopes to attract some 400,000 visitors this year, a quarter of whom are likely to be skiers.

Most of the visitors are expected to be from within Kazakhstan but to keep on expanding to the size of Les Trois Vallées, Capital Partners knows it will have to start attracting more skiers from abroad. And to do so it will have to replace the aged Soviet-era hotel at the site, something it aims to do within the next three years.

"Bringing people right now may be a bit too early. Of course, the adventurous guy would love it but when you are speaking about the family who wants a lot of comfort it's still a bit early. In two or three years we should be there," says, Lucas Marchand, the resort's managing director.

Mr Oymen admits achieving the ambition of expanding Shymbulak into a major resort will take time, possibly 10 to 15 years. But the company has already expanded its original 5km of runs to 30km and plans to steadily build on that.

But who will come?

Mr Oymen stresses the ski resort will cater to a range of tourists, not just those with the resources to shop in the luxury boutiques of Esentai Mall.

He points out a flight to Almaty from anywhere in Kazakhstan, or from western China or India takes no more than three hours. Another hour adds Moscow and the UAE to the list of potential markets.

"There's a tremendous population in this region and there are no ski resorts, so in terms of … a captive market, the captive market is huge," he says.

"How many people will ski, how many people are interested to ski and how many people will actually turn up remains to be seen."

The country also has to contend with an image problem created by the comedian Sacha Baron Cohen and his alter-ego, Borat, a fictitious Kazakh journalist who travels through America in the eponymous 2006 Hollywood film.

"Nobody really asks why Kazakhstan. The Borat question I don't like very much. I have spent a lot of time here," says Mr Oymen.

"I consider this to be my second home. I know how kind Kazakhs are and how young a society this is in reality and how young an independent state this is," he added.

Capital Partners may aim to attract international visitors through its ski resort but that is not its intention for Esentai Mall.

"This is not Dubai," says Mr Oymen. "We're not creating a shopping destination, at all.

"This is Almaty, a complete city, which offers a lot, including the ability to go and buy luxury goods if you wish to."