Reinhard E.

Dpfer
Chairman of European Fashion and Textile Export Council
(EFTEC)

CLOTHING MARKET REPORT RUSSIA 2013

The competitive Environment of the Russian Market of
Textile Clothing & Accessories in Autumn 2013

Presentation held on Thursday, September 5, 2013, 11:00 a.m.

at the Press Lounge, Mezzanine Floor of Pavilion 8/1
Krasnaya Presnya Expocentr, Moscow

VITA OF THE AUTHOR

_______________________________________________________________________________________________________________________
VITA OF THE AUTHOR

TABLE OF CONTENT

Reinhard E. Dpfer a master of Macro-Economics who graduated at University of

Gttingen, Germany, is an expert In international trade of textile and clothing
having set a focus on international export marketing over a period of more than
30 years. At present he works in several leading positions as Chairman of the
European Fashion and Textile Export Council (EFTEC) founded in Brussels as an
export promotion organisation for the European Industry in 1987, as Managing
Partner of ITMM GmbH, International Textile Marketing and Management
Consultancy, Stuttgart, as Senior Export Strategy Consultant to the German
Fashion Association, Cologne and as Senior Strategy Advisor to Igedo Company
for the development of CPM.
His expertise on the Russian textile and fashion Market goes back to the year
1989 when he organized the first direct sales show of apparel to the Russian
public in St. Petersburg, right at the beginning of introduction of market
economy in Russia. He was a co-founder of the first specialized fashion trade fair
launched by Crocus International in fall 1994 under the title of Moda Moscow
and accompanied this exhibition permanently as European co-ordinator and
senior strategy advisor until spring 2003. When Collection Premiere Moscow
(CPM) was founded by Igedo as a successor to Moda Moscow in fall 2003,
Reinhard E. Dpfer took responsibility for market research and strategic
development of all consecutive events of this trade show up till the present 21st
edition. In the framework of his cooperation with Igedo Company, he published
market research studies on the Russian Lingerie & Legwear Market, the Russian
Men's Wear market, the mid-to-long term development of the Russian Women's
Wear, Men's Wear, Lingerie, Hosiery and Active Wear markets. In April 2007 he
founded "Task Force Fashion Market Russia", a group of 30 leading German
fashion brands meeting bi-annually to exchange experience on key issues of
retail and distribution of fashion in Russia and the CIS Markets. Since July 2009
he is editorin-chief of the bi-mensual market monitor The Russian/CIS Fashion
Retail Market published and circulated by Igedo as a free marketing support
tool for CPM exhibitors.

1. CPM celebrating its 10th anniversary Development of

the Russian Retail Market Value of Apparel from 2003
till 2012
2. Benchmark of the Development of Apparel Exports
from EU-27, China, Italy, Germany and France to Russia
since Crisis Year 2009 till 2012, 2013p
3. Variation of Shares of main Product Categories of Mens
Wear, Womens Wear and Intimate Apparel against
EU-27 total Subsector Exports, Comparison 2012
against Crisis Year 2009
4. Changes in Consumer Behavior: Less Money spent on
Clothing
5. EFTEC-Estimate on Development Tendencies of the
main six Clothing Retail Channels of Apparel
6. Projection of the Russian Market Pyramid of Apparel
7. Persistent ERP, CRM & HRM Deficits in Russian
independent multi-brand Retail: Lack of know-how
8. Growth Prospects in the Russian Regions through
Shopping Mall Development
9. Market Access Conditions for imported Apparel
remaining difficult
10. Macro-Economic Review & Outlook on Russia

PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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Development of the Russian Retail Market Value of textile Clothing & Accessories
(HS Codes Chapters 61 & 62) 2003-2012, 2013-2015 projection, in 1.000 Million
1.000 mn.

1.

50

46

Organic Growth Phase

of nominally 10 % p.a.

42

40
38,2

Boom
Phase

35
32

37,4

33

30

27,4

29,1

Financial Crisis

20

China Market Entry 2004

10

CPM
Take Off 2003
4,0
3,0
0
2003

2005

Source/Copyright: EFTEC

2007

2009

2011

2013

2015

PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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2.
mn.

Development of Exports of textile Apparel and Accessories from EU-27 and China to
Russia at ex-works prices in Million , 2008 till 2012, 2013/2014 p
5.000

4.000
4.000

3.645

3.815
3.314

3.630

3.057

3.105

3.300

3.000

2.570

3.017

2.778

2.734

2.198

EU-27
China

2.242
2.000

1.690
1.000

0
2007

2008

2009

2010

2011

2012

2013

2014

Source Eu-27: EuroStat/C.I.T.H. Source China: UnComTrade ECB average annual currency exchange rates against US $

PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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2.1. Benchmark of the Development of Exports of textile Clothing & Accessories from
the three leading EU-Supplier Nations to Russia, Comparison Year 2013p to Peak Year 2008
mn.

3.500
3.300 (+ 9 %)

3.017(+ 10%)

3.105 (+ 12%)
3.000

2.242 (+ 2%)

2.500

2.734 (+ 22%)

2.199 (-29%)

2.000

EU-27

Italy
Germany

1.500

1.318(+ 10%)

France

1.312 (+ 9%)
901 (- 31%)

1.000

1.040 (+ 16%)

757 (+ 8%)

897 (- 1%)
536 (- 29%)

500

277 (+ 4 %)

1.144 (+ 10%)

189 (- 32 %)

571(+ 19%)

659 (+ 15 %)

725 (+ 10%)

481(- 11%)
173 (- 9 %)

198 (+ 9%)

210 (+ 6 %)
215(+ 2%)

0
2008

Source/Copyright: EFTEC

2009

2010

2011

2012

2013 p

PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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million

2.2. Benchmark of the Development of Exports of textile Clothing & Accessories from
eight leading EU-Supplier Nations to Russia, Comparison Year 2012 to Peak Year 2009
1300
1200

1.144 (+27 %)

1100
1000
901
900

800
700

659 (+ 23%)

600

2009
2012

536

500
400
300
197 (+ 4 %)
189

200

182 (+ 119%)
83

100

178 (+ 50%)
119

124 (+ 80 %)

110 (+ 358 %)

69
24

0
Italy

Germany

Source/Copyright: EFTEC

France

Spain

Lithuania

U.K.

Latvia

106 (+ 112%)
50
Finland

PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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3.1. Share of main Product Categories of Mens and Boys knitted and woven Outerwear against total
EU-27 Mens and Boys Outerwear Exports to Russia, Comparison Year 2012 against
Crisis Year 2009

502,6 Million

Polo Shirts
2,0%
Indoor
Jackets
6,3 %
Business

Other Men's
Wear 6,6%

740,1 Million (+ 49 %) *

Trousers
24%

Shirts
9,50%
Denim
Trousers
9,6%

Indoor Jackets
6%

Polo-Shirts
2,6%

Other Men's
Wear 9%

Trousers
(excl.Denim)
26,5%

Business
Shirts
10%

Sweaters/
Cardigans
10%

Sweaters &
Cardigans
11%
Suits 15%

Outdoor
Jackets &
Coats 16%

Denim Trousers
9,4%

2009

Suits
11,2%

Outdoor Jackets
& Coats
15,3%

2012
7

Source/ Copyright: EFTEC, * average annual growth over three years since 2009 = 16,3 %

PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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3.2. Share of main Product Categories of Womens and Girls knitted and woven Outerwear against total
EU-27 Womens and Girls Outerwear Exports to Russia, Comparison Year 2012p against
Crisis Year 2009, in mn.

1.107 Million

Blouses
8,4%

Outdoor
Jackets/Coats
11,4%

Denim
Trousers
3,30%

1.522 Million (+ 37%) *

Outdoor
Jackets/Coats
10,6%

Other
Women's
Wear
16,0 %

Blouses
8%

Denim Trousers
3,1%

Other Women's
Wear 16%
Trousers 15,1%

Dresses
12,5%

Trousers
17,3%
Costumes
15,40%

Sweaters/
Cardigans
15,7%

Dresses
18,8%

Sweaters/
Cardigans 12,4%

Costumes
16,1%

2009
Source/ Copyright: EFTEC, average annual growth over three years since 2009: 12,3 %

2012
8

PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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3.3. Shares of main Product Categories of Intimate Apparel against total EU-27 Intimate
Apparel Exports to Russia, Comparison between Year 2012p and Year 2009

343,5 Million

Homewear/
Bathrobes
for females
and males
7,2%

Day
Underwear
for males
6,7%

Other
Underwear
(Nightwear)
3,1%

Swimwear
for females
and males
9,7%

Brassieres,
Corsetry,
Shapewear
15,2%

418,6 Million (+ 22 %)*

Homewear/
Bathrobes for
females & males
fell
from 7,2% to
Day Underwear
3,7 %
for males
increased from 6,7
% to 9 %

Nightwear
fell from 6,7 % to
4,5 %

Tights fell from

42,8 % to 24,8 %

Swimwear for
females and males
increased from
9,7 % to 9,8 %

Day
Underwear
for females
15,3%

Tights 42,8%

Brassieres,
Corsetry &
Shapewear
increased from
15,2 % to 22,4 %

2009
Source/Copyright: EFTEC, average annual growth over three years since 2009: 7,3 %

Day Underwear
for females
increased from
15,3 % to
26 %

2012
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PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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4.

Changes in Consumer Behavior: Less Money spent on Clothing

Dramatic Changes in consumer behavior for Clothing: now rational against past emotional
What is the fair price for a piece of garment? Price-Quality awareness rising
Clothing and brands do not confer status anymore, replaced by iphones, ipads, handbags, jewelry
Purchasing decisions get delayed until the discount phases: the smart shopper conquers retail
Shopping of Premium and Luxury clothing transferred to foreign destinations: half price saving
opportunities
Online-purchases from international and national e-commerce platforms keep surging
Distribution of monthly average per capita income in the Russian Federation 2012/2011, in Percent of Working Population
2011
Share of Income Class in Percent

2012

Share Income Class in Percent

Period/Income Class in
Rubles
Total Working Population

1st Semester

9 months

Year 2011

1st Quarter

1st Semester

100 mn.

100 mn.

100 mn.

100 mn.

100 mn.

up to 3500.0

3,1

3,1

2,8

2,9

2,7

3.500,1-5.000,0

5,2

5,0

4,6

5,0

4,5

5.000,1-7.000,0

9,1

8,9

8,1

8,9

8,2

7.000,1-10.000,0

14,8

14,4

13,5

14,6

13,7

10.000,1-15.000,0

21,0

20,5

19,8

21,0

20,2

15.000,1-25.000,0

24,5

24,5

24,8

24,8

25,0

25.000,1-35.000,0

11,0

11,3

12,1

11,2

12,0

Over 35.000,0

11,3

12,3

14,3

11,6

13,7

10

PRESS DOSSIER 20th CPM, Moscow, FEBRUARY 26 MARCH 1, 2013

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5. EFTEC-Estimate on the Development Tendencies of the main six clothing Retail Channels in Russia,
Projection 2013
Projection on Categorization of Retail Channels, Price Level, Market Share, numbers of operating P.O.S.
and Development Tendency at Year-End 2012, based on a textile Clothing Retail Market Value of
35.000 Million
Category

Price
Level

Market Share

P.O.S. Numbers
Estimate

Tendency

Open Markets, Mass Market, Trade Centers and Kiosks

Low

20 %

> 3.500

Multi-Label mixed apparel discount stores and hypermarkets

METRO, REAL, MARKTKAUF and Russian Discounters, Russian low
budget casual wear and family clothing chains like SELA,
new: TAKKO FASHION

Lower
medium

19 %

> 2.000

Mono-Brand affiliated apparel retail chains, foreign and domestic

(ZARA, H&M, MANGO, BENETTON, RESERVED, NAF NAF, OLSEN,
NEW YORKER, TVOE, OODJI, GLANCE, INCITY, SAVAGE, BAON,
OSTIN, GLOOM, MODIS, BEEFREE/ZARINA, VESH)

LowerMediumToMedium

24 %

> 5.000
(thereof 1.000
foreign)

Multi-Brand affiliated retail chains and Department Stores

(HOLDING CENTER, LADY & GENTLEMAN CITY,PODIUM, FASHION
CONTINENT, SNOW QUEEN, MODAMO, MOSKOVSKIY,
PROKOVSKIY, MARKS+ SPENCER, new: DEBENHAMS)

Medium
- to Upper medium

15 %

> 600

(GUM, TSUM, LEIPZIG, VESNA, CALIGULA)

premium
- to luxury

8%

Independent privately owned multi brand specialty shops &

boutiques, smaller regional chains

Upper medium

12 %

> 3.000

Distance Retail, Mail Order Catalogues and B2C online retail (Otto
Group, KupiVIP, lamoda.ru, wildberries)

medium

2%

> 15

Source/ Copyright: EFTEC

11

PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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2012

198

110
114

30

55
46

81

70

116

120
48
54

123

161

148
103

186
216
173

142
173
34

53

71
26

82

123

174

180

182

260
239

302

298
330

80

120

125

179

180

222

219

353

388
287

250

300

380
62

2010

462

2007

420

479

494

525

536
560

5.1. Retail Channel Russian monobrand affiliated Clothing Chains:

Tremendous Growth of Store Networks in the lower medium-to-medium priced
Russian Clothing Market

Number of Store Expansion of Russian Store Networks

Source: Fashion Consulting Group (FCG), Moscow

12

PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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153

5.2. Retail Channel International monobrand affiliated Clothing Chains:

Moderate Growth of Store Networks in the medium priced Russian Clothing Market

2012

114

2010

Number of Store Expansion of International Store Networks in Russia

Source: Fashion Consulting Group (FCG), Moscow

0
2
2

9
0
2

11

13
13

12
18
0

26
30
24

13
17

23

37

37

39

47
29

47
26

15

30

50

53

72
64

58
31
39

52
43

51

63

67

83

100

114

122

138

2007

13

PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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6.

Projection of the Market Pyramid of textile Clothing & Accessories in Russia, 2012
(Total: 35.000 mn.)
Retail Market Value per Segment, Market Share, Average Retail Price Points, Category of Retail Channels,
Main Supplier Countries
Luxury Luxury monobrand stores
RUB 14.000 and multibrand boutiques
Luxury monobrand stores
Premium
and multibrand boutiques
RUB. 7.000

5.250 mn. = 14 %

RUB 6.900

7.000 mn. = 20 %

Upper Medium
RUB 3.000

10.500 mn. = 30 %

Medium priced market

RUB 1.000
RUB 900

8.750 mn = 25 %

Lower Medium priced market

(25 % by value / 35 % by volume)
RUB 500

3.500 mn.= 10 %

RUB 400

Italy, France
Germany,
Switzerland

Monobrand & multibrand

specialty stores, department
stores, shop-in-shops,
independents

RUB 2.900

Low priced mass market

(10 % by value/ 30 % by volume)

Italy,

Italy, Germany
France,
UK, Finland,
Austria

Domestic & international

mono-brand and
multibrand retail
chains, department
stores, independents,
distance retailers
Domestic
monobrand
retail chains &
discounters
Open markets,
TCs

Russia, Spain, Sweden,

Germany, Italy, Spain,
France, Turkey
UK, Finland, USA,
Poland

Russia/China, Turkey
Belarus, Ukraine,
Eastern EU

China, Turkey
Russia, Central
Asia

RUB 200
Source/Copyright : EFTEC

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PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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7. Persistant ERP, CRM & HRM Deficits in Russian independent multi-brand Retail:
lack of know-how
According to a survey conducted in January 2013 by ITMM GmbH among leading German
clothing suppliers the following deficits are currently under debate:
Unsufficient systematic monitoring of sell-off results and automatic information
to Suppliers/Agents, at least monthly
Planning of seasonal pre-order budgets per brand carried in brand-portfolio
Fast replenishment to increase turn-over velocity per square meter
Correct full-cost calculation of selling-prices to control effective margins
over the four discount phases
Application of recommended retail-selling prices proposed by suppliers
Brand-oriented visual merchandising (less is more)
Window decoration as trend promotion
Capacitation of sales personnel (materials, visual quality criteria, fashion trend content,
styling, wearing comfort). This is necessary to explain price-awareness of a garment.

60 percent of respondents said, that awareness on curing such deficits is either unsufficiently
developed or implementation seems difficult due to various mental or financial barriers

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8.1. Growth Prospects in the Russian Regions through Shopping Mall Development

According to a recent survey of ITMM GmbH, evaluation of Sell-Off Results* over the Apparel Retail
Seasons S/S in the main 9 federal Districts proves a harmonization trend of retail climate, comparison
in between July 2011, 2012 and 2013.

Moscow City
Moscow Region
Northwest-Region
Central Russia
Volga
South-Russia
Ural
West-Siberia
Far North/East

July 2011

July 2012

July 2013

Tendency

2,5
2,4
2,6
3,0
3,2
3,3
3,1
3,1
3,3

2,3
1,9
2,4
2,8
2,8
2,6
2,4
2,1
3,1

2,1
2,9
3,0
3,0
2,9
2,5
2,7
2,6
2,8

Reason for the balancing of apparel retail climate is the ongoing investments in Shopping and
Entertainment Centers in provincial capitals and large cities of in between 500.000 and 750.000
inhabitants. The new trend is encompassing even smaller towns of a population of more than 100.000.
Cities and Towns belonging to Moscow Region and Central Russia are the most favoured hot spots for new
shopping center allocations.
indicated by German school note-scores from 1,0 (very good) down to 6,0 (very bad)
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PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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8.2. KEY CITIES IN THE RUSSIAN FEDERETION ,

ATTRACTING SHOPPING CENTER INVESTMENTS

Moscow, Saint Petersburg and

Yekaterinburg consume over 50% of
whole apparel market:
Moscow 27%
Saint Petersburg 13%
Yekaterinburg - 9% of the market.

High potential (more than 1 000 000 population)

Medium potential (more than 500 000 population)

Developing cities (more than 300 000 population)

Moscow and Saint-Petersburg - currently the prime focus of retail activity and are highly
saturated and competitive.
Another 11 secondary cities with population of 1 -1.5 million have been the first point of
entry for retailers expanding beyond Moscow and St Petersburg.

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PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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9.

Market Access Conditions for imported Apparel remaining difficult

Market entry in Russia has become more difficult over the past three years due to
Mandatory registration of economically active companies and legal entities at the Register
of the Attorney General of Russia until December 31, 2009
Foundation of the Eurasian Customs Union (EAC) between Russia, Belarus and Kazakhstan in 2010
WTO Access of Russia after DUMA-ratification in August 2012.
Consolidation of Consumer Safety Rules and Regulations in one unified Technical Regulation
replacing the former GOST-R Certification by the EAC Conformity Declaration and Hygiene
Certification, Baby- and Childrenswear Safety Certification and Product Labeling, entering in force for
Clothing-Products on July 1, 2014

Players affected by such legislative changes are:

foreign suppliers, smaller and medium size European brands (SMEs) in particular which sell directly to
retail clients in the EAC-area
Fashion agencies and import distributors operating as Representative Offices but not registered as
OOO (LLC, SrL, GmbH)
customers residing in the three member-states of the Customs Union which do not provide the legal
status of a registered OOO (LLC, SrL, GmbH) and which are not accredited at the Attorney Generals
Company Register (most of the privately owned multi-brand shops and boutiques)
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PRESS DOSSIER 21st CPM, Moscow, SEPTEMBER 4-7, 2013

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9.

Market Access Conditions for imported Apparel remaining difficult

The new legislative environment together with strong rising competition in the Russian apparel market
forces every foreign supplier to think twice about their past, present and future contractual relationship
with their customers in Russia, Belarus and Kazakhstan. For instance, orders, written on order-forms of the
supplier brand are not legally binding purchasing contracts, according to Russian legislation.
Dominant market players like TRIUMPH INTERNATIONAL, STOCKMANN, HENNES & MAURITZ,
CALZEDONIA/INTIMISSIMI all INDITEX brands such as online-providers like OTTO GROUP, KupiVIP,
lamoda.ru and others operate their own OOOs, purchasing from their sources in Rubles and selling to their
customers or points of sale in Rubles, all-complying with the rules & regulations applied by the Eurasian
Customs Union
To challenge the competitive advantage of the big players, foreign individual medium-to-smaller apparel
brands should get aware about the following alternatives:

Either to convince their agents/distributors to found a legal OOO entity and to act as contractual partner reponsible for
prior conformity declaration/ certification, compliance-oriented shipping, insurance, electronically pre-registered
customs clearing and import tax payments, furnishing individual retailers on the basis of pre-payments and full balance
payments prior to delivery in Rubles and to convert Rubles in ot US $ for bank transfer to the supplier.
Or to take initiative to establish their own OOO in Russia, or to contract to an accredited chartered accountant/law firm
with the objective to host foundation and day-to-day administrative work including accounting of an own OOO.
Or to co-operate with a technical importer providing a legally accredited OOO status, acting as a mediator of all
transactions necessary to supply apparel to the final retailer for payment in Rubles. In addition to authorize technical
importer to apply to the Competent Authority to obtain EAC Conformity Declarations and Hygiene Certificates, if
applicable, and to take care of the necessary sampling procedure accompanying the application procedure.

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10. Macro-Economic Review & Outlook on Russia

The output index for Russias key economic activities performed rather badly during the first four months.
Growth over the first quarter decreased by 0,6 percent. In April the indicator improved at 1,9 percent increase.
Reason for the weak economic development is zero output growth in agriculture over the first-quarter. In April
output increased at 2,3 percent. Moreover industrial output, which rose at 0,6 percent during the first three
months, picked up at a low 1,9 percent in April. Another important indicator, fixed capital investment,
registered a minimal rise over the first quarter at 0,1 percent and depreciated in April by 0,7 percent. Russias
consumer price index, indicator for inflation, reached a 7,1 % high at the end of the first quarter and continued
to rise at 7,2 percent in April and at 7,4 percent in May against the same periods of last year. Inflation obviously
drives Russians to consume on the basis of increases of real disposable money income, which rose at 5,3
percent over the first quarter and at 7,3 percent in April 2013.
Retail Trade Turnover appreciated at 3,9 percent over the first three months of this year and it progressed at
4,1 % in April. The rate of unemployment continued to fall from 6 percent of population at working age in
January to 5,6 percent in April.
The trade balance of Russia reached a surplus of US $ 49,8 billion at the end of the first three months. In April
trade balance development signaled a declining trend at a registered monthly surplus of US $ 14,2 billion. The
nominal exchange rate of US $ against Ruble reached its lowest level in February 2012 at RUR 28,95 for one US
$, its peak in June 2012 and ended up at RUR 30,37 in December of 2012. This rate almost matches the
exchange rate valid in January 2012 figuring at RUR 30,36 against US $. The nominal exchange rate of against
Ruble departed from RUR 39,97 in January 2012, depreciated to its lowest level in February 2012 at RUR 38,91
and reached its peak in June 2012 at RUR 41,32. In December 2012 the -exchange rate accounted for RUR
40,23. Given such results, conclusion is that the Russian Ruble remained extremely stable in between the
beginning and the end of 2012. All rumors about a strong depreciation of the Ruble of up to 15 percent, which
arose in May 2012 did not come true. This encourages more and more foreign fashion suppliers to sell their
products to their Russian customers in Rubles. The outlook on the Russian economy in 2013 is reluctantly
positive with an expected GDP-Growth of 3,5 percent, at real terms, which was revised downwards from 4
percent (World Bank).
20