COVER STORY
Russia as a manufacturing hub Gender-wise break-up of market share
Considering the various pro-industry steps taken by the Government as well Russian Ruble ’ s weak standing against the major global currencies thereby leading to lower costs , a host of world ’ s leading retailers have shifted or are considering relocation of their production facilities to Russia , which includes names such as Zara , Pull & Bear and Massimo Dutti brands .
Other manufacturers , including H & M , IKEA and Decathlon are also reportedly considering Russia as a potential production destination .
As per Deputy Industry and Trade Minister Viktor Yevtukhov , the Russian authorities have invited foreign clothing brands to localize their production in the country with new factories being offered long-term tax breaks until 2025 .
The Industry and Trade Ministry further guarantees manufacturers , who accept the invitation , a share of the market from the state procurement order .
According to Yevtukhov , the state support programme currently envisages subsidies for partially recovering the costs of materials , technical upgrades and new investment projects .
Inditex , a Spanish corporation owning the prominent brand Zara , is going to launch production in Russia . Two contracts have already been executed in this direction – one to deal with the manufacturing of Zara Home items and the second to produce Zara clothes .
According to the Head of Infoline- Research Mikhail Burmistrov , given the rise in unemployment and manpower availability , the situation from the point of view of retail production is becoming more interesting .
Even the local brands – including Gloria Jeans and Sela , which have so far been making their clothes at Asian factories – are also reportedly planning to shift production back to Russia .
China ’ s rising labour cost is helping the cause further . According to data from the information and analysis agency Infoline , the monthly cost of a textile factory worker in China is now US $ 250-300 , whereas in Russia , it is just around US $ 200 . In these circumstances , the drive to develop the country ’ s textile industry is an intelligent move on the part of the Russian authorities , experts feel .
The Government impetus
Rising oil prices and warmer relations with the West have underpinned Russia ’ s economic recovery and strengthened the Russian Ruble , leading to a broadbased upturn in consumer and business confidence , which has received a further impulsion with the Government putting in motion several steps to boost the economy and trade .
If on the one hand , it has allowed enterprises and individuals to trade without special registration – a far cry from the days of protectionism – which would allow individual / entities to import nearly all products , the Government on the other hand has been proactively looking at reducing tariffs on a wide range of products , being in sync with the WTO specifications .
Apart from cutting tariffs , it has also agreed to enhance trading and regulatory environment , raising hopes of augmenting the transparency and predictability of the country ’ s regulatory regime and enforcement procedures .
“ The only bottlenecks I would say are the cumbersome documentation processes including those needing to qualify for the FTA-related tax deductions as well as the stringent measures adopted by the Russian Import-Export authorities to take goods through the Russia borders …,” underlines Chris Walker- Marketing Manager-Thai Son SP Sewing Factory , Vietnam , who exports basic items like T-shirts , polos , etc . to clients like Baon , Finnflaire , Steinberg and Sportmaster in Russia .
Market dynamics
The Russian apparel market stood at US $ 43.2 billion ( in 2016 ) and is expected to touch an astounding US $ 105 billion
■ Ladieswear
■ Childrenswear
■ Menswear
by 2025 ( at 8 per cent CAGR growthaccording to Statista ) with almost 80-85 % of the apparel market occupied by foreign producers . 65 % of Russian clothing market consists of low-cost imports from Asian countries , 15-20 % of the market is for Russian products and 15 % branded clothing are by Russian and foreign companies .
In woven , women ’ s dresses and suits are in huge demand while jerseys , pullovers and cardigans are the much sought-after items in the knit category .
At present , ladieswear accounts for around 63 % of the market , while childrenswear takes up 21 %, leaving menswear with just 16 % – an indication of its apparent shrinkage , lately .
World Cup adds to the euphoria
The 21st FIFA World Cup scheduled to take place in Russia from 14 June to 15 July 2018 , being played out across 11 cities , has now added a new dimension to the retail market .
Considering the overwhelming inflow of foreign and mainland tourists to enjoy the quadrennial extravaganza , the Russian Government has decided to introduce tax-free shopping for overseas visitors for the first time . This scheme is anticipated to have significant uptake among the country ’ s ever-growing number of overseas visitors besides giving a huge boost to the overall economy and the muchneeded thrust that the retail sector has been waiting for .
With demand all set to soar and supply opportunities already in the horizon , not only retailers but also apparel exporters from all prominent manufacturing destinations are gearing up to lap up this big-big opportunity .
18 Apparel Online Bangladesh | MARCH 2018 | www . apparelresources . com