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