Since the 2009 recession, when the Russian retail market dropped, a positive trend has been observed. In 2012, the clothing market exceeded 39 billion euros, an increase of 22% over 2009, meaning that the Russian market recovered much faster than the European. Moreover, experts anticipate sales to increase to 1,290,600,000 items by 2015.
Broken down by sex and age, the Russian clothing market has the following structure. On the basis of calculations by Fashion Consulting Group, FCG (its report “Russian Clothing Market 2012”), women’s clothing accounts for about 50% of the entire clothing market in money terms, whereas the men’s and children’s clothing markets account for 27% and 23% of the total, respectively.
The men’s clothing market has the biggest growth potential of all, with experts forecasting double-digit growth figures in 2013, whereas the women’s clothing segment is nearing saturation while retaining the biggest market share. Furthermore, the children’s clothing segment remains very attractive, with the average family spending on children’s garments going up by 50% over the last two years.
On the basis of reports by the Russian Ministry of Industry and Trade, the clothing market can be divided into three categories: the low-price segment ($5-$30 per item) with 85% of the market, the medium-price segment ($30-$100) with 10% and the premium segment ($100+ per item). The low-price segment mostly consists of Turkish- and Chinese-made products. The medium-price segment is formed by Chinese, Indonesian, Polish and some Russian brands (such as Gloria Jeans (Rostov-on-Don) with Gloria Jeans and Gee Jay brands, Mir detstva (Moscow) with Mir detstva, Etti-Detti, Sela, Malenkaya feya, and Gulliver brands).
Another obvious market trend is the growing potential of the sportswear segment. According to the Directory of the Sports Industry for Specialists, the market for sports articles amounted to $4 billion in 2012. Specialists anticipate an average annual growth between 16% and 19% in this segment in 2010-2017.
Children’s clothing and sportswear thus remain the most attractive market segments for businesses. Yet, when operating in Russia, a retailer should take into account some of the inconspicuous peculiarities of the local market.
How Russia is peculiar
First off, on-line retailers are growing faster than regular retailers. InSales analysts estimate the Russian Internet retail market at 244.6 billion roubles. According to a report by the Public Opinion Foundation’s World of Internet project, the most high-demand goods bought from Internet retailers are clothing and footwear (23%), which suggests a substantial growth potential, given the rapid expansion of the Internet audience (3%-5% every quarter). Incidentally, a recent Cushman & Wakefield survey showed that foreign investments in Russian projects totalled $7.9 billion in 2012 and most of them were Internet projects.
Second, the market is consolidating around big players (which mostly focus on the mass market). This is a direct result of the increased consumer activity and, most importantly, the selectivity factor. In other words, the 45+ generation, which is inclined to buy at markets, is being replaced by the 25-45 generation, whose preferences were formed during the period when high-quality clothing retail was in the making. This audience’s service requirements are stringent enough for this generation to prefer “civilised” retailers, which is why big chains are becoming increasingly popular and making their way to the regions to attract additional consumers.
The most advanced fashion retail locations in Russia are Moscow and St Petersburg; yet these two markets are already close to saturation. According to a report by Jones Lang LaSalle, which analysed the business of 250 retailers in 57 European countries, Moscow is the third most attractive European city for retailers after Paris and London. Of the 250 retailers analysed, 235 operate in London, 217 have stores in Paris, and 196 work in Moscow.
FCG analysts believe that the regions will account for most of the market growth in the near future, whereas the regional pattern of the clothing market will become more even. Moscow accounted for only 18% of the country’s retail turnover in the first quarter of 2012, down from 22% in 2011.
Another important clothing market trend in the last few years is the slower growth in buying activity. Consumption remains the highest in Europe; even so, the Russian buyer is now harder to please, more style-savvy and demands better execution.
According to statistical reports, most Russians would prefer garments that serve longer when it comes to buying criteria. Interestingly, the emotional component of the purchase is becoming increasingly significant. To succeed on the Russian retail market, a clothing company should combine a multi-channel sales model (offline and online sales) with an active marketing policy and invest in its brands. Brand loyalty is the third most important buying criterion — following quality and price — for the coveted Russian buyer.
Inna Fyodorova is an analyst with the Fashion Consulting Group, Russia’s oldest fashion industry consultant.
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