16 Nov 2016
Russian Retailers Embrace Childrenswear as Menswear Spend Plummets
With the fashion retail market stabilising, a very different clothing sector is emerging to that of the pre-recession days.
Although the Russian fashion retail market is gradually normalising, there is no expectation that the halcyon days of the pre-sanction period will come again anytime soon. Indeed, there are some who believe there is little prospect that such a market – once characterised by an annual double digit growth in sales, dozens of brands and retailers ever willing to enter the sector and new shopping malls 100% leased months before their official opening – will ever be seen again. Gone too, it seems, is a situation where both premium and mid-market brands command an impressive margin.
Instead, this new reality has seen the menswear market contract significantly, while the ladieswear sector has stayed stable and childrenswear has expanded to consume the spend once allocated to adult male purchases. At present, this sees ladieswear account for 63% of the market, while childrenswear takes up 21%, leaving menswear with just 16%.
As a result, a number of the larger nationwide retail chains – notably Fashion Continent, Podium and Fashion Bazaar – have scrapped plans for their 2017 men's collection, opting instead to focus on childrenswear. With several fashion chains never having ventured into this sector before, they are now obliged to play catch-up, rapidly rethinking the design and decor of their outlets in line with their new – and far younger – target market. The prime example here is the Incity Fashion chain, which has hugely increased its investment in its Incity Boys & Girls sub-brand.
This has seen the company launch its first four dedicated Incity Boys & Girls stores – two in Moscow and one each in St Petersburg and Voronezh. All of these new outlets target children in the 3-12 age range and primarily offer clothing lines sourced from China.
This represents a fundamental turnaround by the chain, with children's clothing having previously been relegated to just a small corner of a typical store. This was based on the belief that offering children's clothing had little positive impact on the sale of adult garments, while failing to be a profit centre in its own right. At present, 90 of the larger Incity stores have a small Incity Boys & Girls display area, although such departments contribute less than 10% of the group's overall turnover.
Now, a number of Incity managers have been briefed to determine just which outlets can be reformatted into two smaller stores – one specialising in ladieswear and the other in childrenswear. Over the next few months, the impact of these changes is to be monitored and analysed. Assuming a positive outcome, the plan is to launch up to 300 smaller new stores under the Incity Boys & Girls branding. The hope is that such an initiative will give the chain first-mover advantage, something seen as vital in this hugely competitive sector.
At present, every Russian fashion retailer is struggling to compete with Auchan, Carousel and O'Key, the country's leading hypermarket operators, which came to dominate the clothing sector during the darkest months of the economic crisis. This saw not only cash-strapped bargain hunters resorting to the cut-price clothing and footwear offered by the hypermarkets, but also saw the country's middle-class consumers overcoming their existing prejudices and settling for the more modestly priced shirts, underwear and knitwear on offer from these giant outlets.
The situation has been exacerbated by many of Russia's larger sportswear chains, including Decathlon, Sportmaster and InterSport, adding casual footwear and knitwear to their existing ranges. With both global and own-label brands on offer, many consumers have found purchasing from such outlets more palatable than resorting to the hypermarkets.
Leonid Orlov, Moscow Consultant