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Clothing retail market is set for steady growth
10
Nov '11
After hitting hard times during the global economic crisis, the Russian clothing retail market is forecast to grow by 3-5% in 2011 and by about 6% per annum during 2012-13, according to a report in the latest issue of Global Apparel Markets, which is published quarterly by the business information company Textiles Intelligence.

Growth is spurring investment by foreign brands, which in recent years have come to dominate the market in Russia. Indeed, six of the world's ten largest apparel retailers—namely C&A Europe, Fast Retailing, Gap, H&M (Hennes & Mauritz), Inditex and Next—have entered the Russian clothing market and found success.

Although women's clothing has the largest share of the market, the most promising sector in terms of growth prospects is that of men's clothing. Indeed, this sector is forecast to grow at double digit growth rates until at least 2013. Russian men have become more selective in their clothing choices and are demanding higher quality products. Such demand grew when the economic situation in the country improved during 2000-08, and has grown again since.

Also promising is the children's clothing sector. The average amount of money spent on children's clothing in Russia has grown significantly since 2008, and the market is expected to grow by 10% per annum until 2013.

However, one of the most promising and fastest growing categories in the Russian clothing market is that of sportswear. Indeed, this is expected to grow at an average growth rate of 16-19% per annum during 2010-17. Recently, Adidas announced that it planned to increase the number of stores within the region during 2011-15.

While some companies are expanding into Russia through franchise agreements, a number of brands are entering the market independently. However, companies planning on entering and expanding in the market without a Russian partner could face serious problems when faced with political obstacles and widespread corruption within the industry's business practices.

Many analysts believe that the best way of developing foreign clothing brands further in Russia is to invest in the department store format, as this is relatively underdeveloped. A number of buildings are unoccupied and could potentially be renovated and developed as department stores.

New foreign brands are expected to focus on brand development in the provincial regions where rents are significantly lower and markets less saturated than in Moscow, St Petersburg and other large cities.

In an attempt to strengthen domestic producers and increase their competitiveness relative to imports and foreign brands, the Russian government has formed a Strategy for Development of Light Industry of Russia until 2020. Under the strategy, there are plans to modernise existing production facilities with a view to improving the quality of domestic manufacturing. The authorities hope, perhaps optimistically, that more than half of the clothing sold in Russia will be produced within the country by 2020.

In the meantime, the Russian market is expected to become more open once the country has joined the World Trade Organization (WTO). With WTO accession likely to take place before the end of 2011, the time is right for international brands to look at the potential of expanding into the Russian market.

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