The Russian Fashion Retail Market - Igedo Company

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claims that the environmental disaster will Russia push back by several months in its attempt to overcome the global economic and financial crisis. His opinion is shared by experts saying that the economic recovery will be delayed because higher cost for anything related to food, energy supplies and telecommunication will be put on the shoulders of the public, beginning in autumn of this year. 1.8. European clothing suppliers to Russia cut losses by half September 2010, European Fashion and Textile Export Council (EFTEC) Exports of textile apparel and accessories from the 27 member states of the European Union to Russia kept declining by 15 per cent over the first six months of this year reaching an ex factory value of € 0,958 mn. Last year shipments had to face a decline of 29 per cent representing a total of € 2.1985,5 mn. This means that European clothing suppliers to Russia were in a position to cut their losses almost by half. Over the delivery period of the first quarter of 2010, clothing exports from the EU to Russia saw a decrease of 20 per cent. The European Fashion and Textile Export Council (EFTEC), monitoring export development of European clothing to Russia on a quarterly basis for each member state and for 33 main product categories since 2002, expects a return from "red" to "black" export figures after the first semester of 2011. 2) Consumer Characteristics 2.1. Consumer Demand up by 3,4 per cent over first semester 2010 September 2010, cisstat Measured against officially registered retail trade turnover, consumer spending in Russia at the points of sale rose by 1,3 per cent over the first quarter of 2010 and by 3,4 per cent during the first semester of this year. From 2002 till 2007,over the boom phase in Russia retail turnover rose at an average annual rate of 12 percent The peak was reached in 2007 when retail turnover increased by 16 per cent against the previous year. In 2008 growth declined to 13 per cent and in 2009 retail turnover plunged by an overall rate of 5,5 per cent. According to Anna Lebsak-Kleimans, CEO of Fashion Consulting Group (FCG), retail turnover for textile clothing and accessories reached a value of US $ 27,4 bn in 2008. In 2009 the retail market value declined by 8 per cent to US $ 25,4 bn less a balance of US $ 2,7 bn for inventories of unsold merchandise. This reduction has brought the clothing retail turnover to a suggested US $ 22,7 bn in 2009. FCG reckons with a new growth emerging in 2010 of up to 4 per cent bringing the total to US $ 23,6 bn. 2.2. Real income rose by 13,4 per cent until May 2010 3 rd Quarter 2010, The Global Blue Perspectives According to the World Bank, Russia is experiencing a "bumpy" recovery. Domestic demand is on the rise and budget execution is better than anticipated due to higher oil prices at around US $ 78 per barrel. This is much more than the US $ 57 per barrel, planned by the Russian Ministry of Finance for this year's budget. In May 2010 inflation was at 3,6 per cent and the real income of the population increased by 6,2 per cent against the month before. During the first five months of this year the average salary was up by 13,4 per cent in comparison with the same period of last year. Employers in Moscow are getting more aware of the necessity to increase wages and salaries to keep their workforce staying in their companies. 4
2.3. Strong recovery of demand for new automobiles September 2010, Bloomberg Corporate Executive Board Research Car sales, an important indicator for consumer sentiment, reached their peak in Russia in April 2008, when around 300.000 cars were sold. Since then, there was a constant decline in sales of cars. The bottom line was reached in January 2010, when just 75.000 cars found customers. At the end of April 2010 car sales increased by 20 per cent against the same month of last year. In June 2010 car dealers reported a surge of 57 per cent compared to June 2009. 2.4. Share of private clothing expenditures abroad on the rise August 2010, Global Blue Perspectives According to Tatiana Komissarova, Head of Higher School of Economics (HSE), Moscow, the numbers of Russians who prefer to buy clothes abroad are "vigorously" growing from a suggested 20 per cent of consumers in 2009 to 30 per cent in 2010. Preferred places for Russians for shopping outside of Russia are single retail stores, shopping malls and outlet centres. The most popular shopping destinations for fashion abroad are Italy with an increase of 27 % against last year, Germany (+22%), Finland (+18%), France (+9%), Austria (+18%) and the United Kingdom (+11%). As it was stated by CitiBank from a study, 70 per cent of the payments for fashion abroad are paid by credit cards, owned by a male. Men more actively buy watches and jewellery costing more than € 1,000 per unit and often pay for women in luxury fashion stores. Fashion products are the most popular products to buy. The average Russian consumer has returned to spend 15-17 per cent of monthly income on fashion, compared to 7-9 per cent spent by average Europeans. The Russian Federal Tourism Agency confirmed that more than 6,64 mn Russians headed abroad during the first quarter of 2010, an 11 per cent increase compared to the first quarter of 2009. According to the Federal Agency of Air Transport, the highest number of passengers to outside Russia destinations are recorded at Moscow airports in June 2010 totalling 2,462 mn people, a 23 per cent increase against June 2009. There are several reasons for the surge of Russians travelling abroad: the perceived end of the crisis, pent-up demands, the increased value of the Rouble and easier travel rules. Spain for example now issues six month multiple visas and Italy and Greece announced similar steps. Turkey for any Russian and Eastern traveller, is a visa free destination likewise Egypt and the United Arab Emirates. 3) Retail Development 3.1. Rents for retail premises to move up in autumn July 6, 2010, shopandmall.ru According to Elena Afanayeva, head of the commercial real estate agency Prime Time Reality, she observes an upward trend in lease rates for retail stores which are estimated to increase by 10 to 15 per cent in autumn 2010. Landlords already signalled since July to revise rents in shopping centres and malls, in particular, for which demand at this time of market awakening is feasibly rising. Prospective tenants are said to be very active in catching the last competitively priced store facilities. The most attractive objects are still those of the middle market segment at leases going from € 500 to a maximum of € 2,000 per sq. meter per year. 5
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The Russian Fashion Retail Market - Igedo Company

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