Apparel and Footwear Specialist Retailers in Russia

PROSPECTS

The channel demonstrates low single-digit growth

Similar to other channels, such as electronics and appliance specialist retailers, apparel and footwear specialist retailers suffered strongly from the new pattern of consumer behaviour caused by economisation. With falling incomes, low job security and the unstable economy, consumers shifted to survival mode and purchased only immediate necessities such as groceries and medicines.

The challenge from grocery retailers

Creating perceived value for consumers has proven to be very tricky for specialist retailers in these difficult conditions, especially given the attempts by grocery retailers to broaden their offering by introducing cheap clothing and footwear to their product ranges. This has meant that the majority of consumers only shop with very low-priced, budget-oriented retailers of apparel and footwear, whilst other retailers have experienced a very challenging market environment, and this is forecast to continue.

Luxury sales experience a boost with tax-free shopping for foreigners

Positive prospects for apparel and footwear specialist retailers are at the opposite end of the price spectrum. In 2017, the Russian government introduced tax-free shopping for luxury goods in an attempt to capitalise on the weak ruble and the consequent interest of wealthy consumers from other countries – most prominently China, where luxury goods remain prohibitively highly taxed.

COMPETITIVE LANDSCAPE

Extreme fragmentation continues to characterise the channel

With the success of both the lowest-priced retailers and luxury retailers, helped by international shoppers, apparel and footwear remains a significantly fragmented channel, with only five players holding more than a 2% value share in 2018. However, the share of the extremely small players declined slightly in 2018.

International brands experience higher growth, but remain wary

In 2018, the performance of international brands with strong names, such as Springfield, Women’s Secret, H&M and Grupo Inditex’s brands, such as Zara and Stradivarius, all experienced sales growth above the channel average, which demonstrates that their strategy of careful and conservative investment in the Russian market has paid off. In the past, these retailers were sceptical of the development of apparel and footwear in the country.

Kari and H&M jump two places

The Kari brand took the lead from Gloria Jeans & Gee Jay in 2018. It saw rapid growth from the beginning of the review period, rising from 40th to first place in just five years.

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