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12.03.2019

RUSSIAN ONLINE RETAILERS ARE FOUNDING LOCAL AMAZONS

  • E-Commerce Market continues to grow rapidly

Russia's online retailers are entering into strategic alliances. The market is maturing and consolidating. German suppliers must prepare themselves for tougher competition.
Russia's online trade continues to record strong growth rates. In 2018, sales increased by 19 percent year-on-year to around Rubel 1.2 billion (EUR 15.5 billion; 1 EUR = 74.04
Rubles, annual average exchange rate 2018). This corresponded to about 290 million orders, according to Data Insight's analysis. By the end of 2023, the investment bank Morgan Stanley expects annual growth of 25 percent to Rubles 3.5 billion. In 2018, the cross-border Internet trade increased by 29 percent to the equivalent of EUR 4.7 billion.

  • E-Commerce Market continues to grow rapidly

Russia's online retailers are entering into strategic alliances. The market is maturing and consolidating. German suppliers must prepare themselves for tougher competition.
Russia's online trade continues to record strong growth rates. In 2018, sales increased by 19 percent year-on-year to around Rubel 1.2 billion (EUR 15.5 billion; 1 EUR = 74.04
Rubles, annual average exchange rate 2018). This corresponded to about 290 million orders, according to Data Insight's analysis. By the end of 2023, the investment bank Morgan Stanley expects annual growth of 25 percent to Rubles 3.5 billion. In 2018, the cross-border Internet trade increased by 29 percent to the equivalent of EUR 4.7 billion.

Development of the Russian online trade
  2014 2015 2016 2017 2018
Sales (Bn. Rubel) 1) 560 650 805 965 1.150
Change (in %) 2) 34.9 16.1 23.0 20.0 19.0


1) Physical goods only; excluding cross-border trade, deliveries of ready meals, tickets for transport and events, coupons, consumer-to-consumer and multi-level marketing;
2) Nominal year-on-year; variance due to rounding.
Sources: Market research institute Data Insight; Association of Online Retailers (NAMO)

The share of e-commerce in retail sales is currently still around 5 percent. With the "Strategy for the Development of Online Trade by 2025", the government wants to increase this up to 20 percent. The conditions for further growth are good, as Russian consumers are Internet-savvy and open to technical innovations. Already 76 percent of all Russians have an Internet connection. According to the national "Digital Economy" project, broadband Internet penetration is expected to reach 97 percent by 2024.
 
Growth potential far from exhausted
Russia's online retailers are following this trend by modernizing their websites and are investing in goods logistics. Electronic marketplaces are becoming increasingly popular. This is because they offer smaller Internet retailers in particular the opportunity to assert themselves against the market leaders.
In the Forbes ranking of the 20 most valuable Internet companies in Russia, online retailers Wildberries and Ozon rank fourth and fifth respectively. The Russian fashion mail order company Lamoda - a foundation of the German Rocket Internet - is in ninth place.     
The Otto Group realigned its business model in Russia in 2018 and removed its subsidiaries Quelle and Otto from the market. The Hamburg-based group relies on the online brands Bonprix and Witt as well as on the eSolutions platform, which offers B2B services in the areas of marketing, sales, logistics and IT.

Leading online retailers in Russia
Company Productportfolio Sales 2017 (Bn. Rubel) Change 2017/2016 (in %) Number of orders (in Mio.)
Wildberries Clothing, Shoes,
Accessoires
63.8 40.0 39.8
Citilink Goods of all kind 55.2 35.0 5.2
DNS-Shop / Technopoint Entertainment electronics,
Household appliances
38.9 61.0 5.8
M.Video Entertainment electronics,
Household appliances
36.7 41.0 3.6
Eldorado Entertainment electronics,
Household appliances
23.7 2.0 4.3
Lamoda Clothing, Shoes,
Accessoires
23.6 6.0 4.0
Ozon Goods of all kind 23.4 44.0 8.6
Ulmart Goods of all kind 23.1 -37.0 5.9
Bonprix Clothing, Accessoires 16.5 10.0 4.0
Svyaznoy Entertainment electronics,
Household appliances
15.7 35.0 1.5

Source: Data Insight (http://datainsight.ru/top100/)

Russia gets two "local Amazons" at once 
Russian online trading is already firmly in the hands of a few large players who are continuing to expand their market presence. The market leader Wildberries added electronics and household appliances to its range in 2018. AFK Sistema Holding of the oligarch Yevgeny Yevtushenkov has increased its stake in the online retailer Ozon and is investing in the construction of new logistics centers In addition, Ozon started selling medicines, jewellery and ready meals.  

In April 2018, the Russian technology group Yandex and Sberbank agreed to establish the Beru and Bringly online marketplaces. The aim is to further develop the Yandex.Market platform into a "Russian Amazon". Russia's largest bank brings in the customer data of 100 million account holders.
Beru and Bringly's range mainly includes high-priced goods such as electronics, clothing, shoes and cosmetics. Bringly cooperates with the British cosmetics chain Feelunique, among others. In September 2018, Yandex.Market also concluded a cooperation agreement with Hepsiburada, Turkey's largest online marketplace. 

Alibaba expands its market presence in Russia
In September 2018, the next major merger in Russian online trading was announced: The Mail.ru Group and Megafon (part of the company empire of the oligarch Alisher Usmanow), the Russian Fund for Direct Investments and the Chinese technology group Alibaba intend to establish a joint online marketplace by the end of the first quarter of 2019. Alibaba intends to expand its presence on the Russian market.
The Mail.ru Group provides access to the data records of around 100 million users - an enormous new customer potential for the Chinese online giant. On March 5th  2019, AliExpress, the Russian subsidiary of Alibaba, also launched a platform for the sale of passenger cars of the Chinese brand Chery.

Duty-free limit continues to fall
Two thirds of Russian online buyers also order goods from foreign traders. 90 percent of the deliveries come from China. If the price and weight of the product are within the exemption limits, no sales tax is payable. On 1 January 2019, the exemption limit for cross-border online trading was halved to EUR 500 and the weight limit was lowered from 31 to 25 kilograms. From January 1st   2020, the tax-free allowance will fall to EUR 200.  However, this measure is unlikely to generate any additional revenue for the Russian State. In 86 percent of cross-border online purchases, the maximum value of goods is at about USD 22.

Above all, capacity bottlenecks in the delivery of online orders are currently putting the brakes on sector. VTB-Bank is therefore investing around EUR 410 million in the construction of 40 logistics and distribution centers for the Russian Post Office (Potschta Rossii) by 2021. The state-owned company intends to profit from the growth in the online commerce and increase its revenue from parcel services for e-commerce to Rubel 122 billion by 2023. Since September 2018, the Russian Post has been distributing deliveries from China via hubs in Siberia and the Far East.
The logistics service provider DPD has been working with the Avito advertising portal since October 2018. In future Its customers will be able to collect their parcels at around 1,500 DPD stations. Since June 2018 DHL and eBay have been working together on logistics services in Russia.

The development of B2B platforms is becoming increasingly important in Russia's online trade. The potential is huge: the Russian B2B online market amounts to around USD 20 billion - and the trend is rising. Pioneers such as Sewerstal, Alrosa or Technonikol already rely on B2B platforms to sell directly to their end customers. In 2018, the Chinese Fosun Group acquired around 20 percent of the shares in the B2B platform Prod.Center, on which agricultural products are traded.

More information:
Russia E-Commerce
Source:

Hans-Jürgen Wittmann, Germany Trade & Invest www.gtai.de

RUSSIAN GOVERNMENT SETS DEVELOPMENT PROGRAM UNTIL 2025 FOR THE TEXTILE INDUSTRY © Jerzy Sawluk / pixelio.de
28.06.2016

RUSSIAN GOVERNMENT SETS DEVELOPMENT PROGRAM UNTIL 2025 FOR THE TEXTILE INDUSTRY

  • Anticrisis Plan provides grants of nearly Ruble 1.5 Billion 

Moscow (GTAI) – In spring 2016 the Russian government has decided a "Strategy for the development of the light industry until 2025" and a "Federal program to support enterprises of the light industry" (anticrisis plan). Hence the Russian textile enterprises should be supported in the crisis. It is the aim of the Ministry of Industry and Trade to double the share of domestic producers on the clothing market from currently 25% to 50% in the year 2025.

  • Anticrisis Plan provides grants of nearly Ruble 1.5 Billion 

Moscow (GTAI) – In spring 2016 the Russian government has decided a "Strategy for the development of the light industry until 2025" and a "Federal program to support enterprises of the light industry" (anticrisis plan). Hence the Russian textile enterprises should be supported in the crisis. It is the aim of the Ministry of Industry and Trade to double the share of domestic producers on the clothing market from currently 25% to 50% in the year 2025.

According to the Ministry of Industry and Trade 14,000 companies (including 200 large enterprises) of the Russian light industry are producing clothing, textiles, footwear and leather goods. They generate annually a turnover of Ruble 270 billion. Of that 653 large and medium and 4,000 small businesses are operating in the yarn and textile industry. Because the purchasing power and consumer demand fell, the light industry slowed its production in 2015 by 12%.

To give the clothing and textile factories more security, the Russian government adopted in spring 2016 a "Strategy for the development of the light industry until 2025" and a "Federal program to support enterprises of the light industry" (anticrisis plan). It is the aim of the Ministry of Industry and Trade to double the share of domestic producers on the clothing market from currently 25% to 50% in the year 2025.  In this context up to 330,000 additional jobs should be achieved.

Anticrisis plan provides subsidies of Ruble 1.475 billion
In the anticrisis plan Ruble 1.475 billion will be granted. This should especially support manufacturers of school uniforms, children's apparel and textile factories that work on government orders. The financial support includes: subsidies for producers of school uniforms for the lower classes made out of Russian worsted fabrics (Ruble 600 million), subsidies for working capital loans to support purchases of raw materials (Ruble 800 million), subsidies for investment loans for technical modernization of enterprises (Ruble 75 million).

As part of the development program for the light industry an own development bank for the textile and clothing industry will be set up – following the example of the Rosselkhozbank. The hitherto in agriculture specialized state leasing company Rosagroleasing should accompany the technical modernization of the textile and clothing companies. In addition, the government ordinance no. 791 prohibits, as in  
the version of February, 17th 2016 on all three government levels (federal, regional, municipal), government procurement of imported textiles and garments when there are offers from domestic Producers.

Industrial parks and clusters for the light industry are growing
In addition, two industrial parks for the clothing and textile industry will be set up in the areas of Ivanovo and St. Petersburg. In addition, a regional cluster of the light industry in the Chelyabinsk region of the South Ural is growing. The fund for the development of the Russian industry promotes investments with low interest rates on credits, for example the project of Praimteks (Primetex) in the Ivanovo region for the production of textiles using digital textile printing (credit: Rubles 466 million rubles).

Further, the domestic producers of clothing and footwear should gain access in future to the funding instruments of the federal association for the development of small and medium-sized enterprises. Critics complain, that the subsidies reach mostly large companies only and above all companies working with government contracts.

Capacity building for chemical fibers 
Export opportunities are seen by the Ministry of Industry in synthetic fibers. In the textile cluster Ivanovo (http://invest-ivanovo.ru/data/prog.pdf) a chemical fiber plant is growing with public aid, scheduled to begin production from 2018. With that 250,000 t chemical fibers would additionally annually be available. Until now both manufac-turers Komitex and Wladimirski Polyefir produce together 33,000 t chemical fibers per anno. Viscose is currently not being produced at all in Russia. The import share of polyester is 74%, of polyamide 88%. 

In future the synthetic fibers may be supplied to BTK Textile and other customers. The production complex of BTK Textile in the textile City Shakhty in the Rostov region, was inaugurated in June 2015. The company manufactures high-tech textiles and knitwear made out of synthetic fibers of which work-wear, sport-wear and ski-wear are being sewn. BTK Textile has fabric production capacities of about 12 million square meters per year, General Director Sergey Bazoev says. Up to now BTK Textile has to buy the synthetic fibers and yarns predominantly in Asia. That could change soon. The BTK Group is the largest Russian manufacturer of men's clothing and uniforms.

Building new production facilities in Russia is not so easy: equipment of domestic manufacturing is not available and imported technology became very expensive due to the Ruble devaluation. So the technical facilities of BKT for manufacturing, impregnation or coating of fabrics and for apparel sewing (in total 250 units) are coming from Italy, Denmark, Germany, Switzerland and France. Long-term loans of over 8 to 12 years are not available and if - only at high interest rates. The lack of a variety of technologies and materials (establishing of extensive fabric and accessories inventories is too expensive) remains the main problem for Russian textile companies. Therefore, the number of new projects in the light industry is not yet clear.
Russian Federation - production of textiles and clothing (change in %)
Description 2015 Change 2015/2014
Cotton fiber (mio. bales) 111.0 4.4
Chemical fibers (mio. bales) 66.0 -4.5
Fabrics (mio. sqm) 4,542 14.7
.thereof from: :    
.Silk (1,000 sqm) 253,0 31.8
.Wool (1,000 sqm) 9.262,0 -20.9
.Linen 25,9 -26,6
.Cotton 1.176,0 -4,5
.Chemical fibers 237,0 14,2
Fabrics made out of other materials 3.084,0 25,1
Fabrics with plastic impregnation (mio. sqm) 32,3 14,6
Bed-linen (mio. pieces) 59,8 -9,6
Carpets (mio. sqm) 22,6 -3,7
Knitwear (1,000 t) 14,2 29,8
Stockings (mio. pair) 199 -5,6
Coats (1,000 pieces) 989 -22,1
Lined jackets (1,000 pieces) 1.887 -45,4
Suits (1,000 pieces) 4.690 -12,6
Men’s jackets and blazer (1,000 pieces) 870 14,1
Women’s coats with fur collar (pieces) 5.543 -46,1
Clothing made out of artificial fur (1,000 pieces) 24,5 21,0
Uniforms and workwear (mio. pieces) 20,7 -8,2
Work- and protective clothing (mio. pieces) 99,8 14,6
Overalls (1,000 pieces) 733 -62,4

Source: Rosstat 2016

Russian Federation - production of textiles and clothing (change in %)
Description 1st Quarter 2016 Change
1st Quarter 2016 / 1st Quarter 2015
Sewing thread made out of synthetic fibers (mio. reels)   14,0 -0,6
Fabrics (mio sqm) 1,2 23,3
Bed linen (mio pieces) 14,7 -7,7
Knitted stockings (mio. pairs) 55,4 34,0
Knitwear (mio. pieces) 24,8 -6,0
Workwear, uniforms (mio. pieces) 31,1 11,2
Coats (1,000 pieces) 269 9,1

Source: Rosstat 2016


Contact addresses:
Ministry of Industry and Trade

Department of Light Industry
Denis Klimentewitsch Pak, Director of the Department
109074 Moskau, Kitajgorodskij proesd 7
Tel.: 007 495/632 8004 (Sekretariat), Fax: -632 88 65
E-Mail: dgrvt@minprom.gov.ru, Internet: http://minpromtorg.gov.ru

(Sub) department of Light Industry: Director: Irina Alekseewna Iwanowa,
Tel.: -632 87 31, -346 04 73; E-Mail: ivanovaia@minprom.gov.ru
Internet: http://minpromtorg.gov.ru/ministry/dep/#!9&click_tab_vp_ind=1
"Strategy for the development of Light Industry until 2025."
http://www.kptf.ru/images/company/Presentation.pdf (Presentation of the strategy)
http://minpromtorg.gov.ru/docs/#!strategiya_razvitiya_legkoy_promyshlennosti_rossii_na_period_do_2025_goda (Text of the strategy and action plan)

Russian Union of Entrepreneurs of Textile and Light Industry
107023 Moskau, uliza Malaja Semenowskaja 3
Tel.: 007 495/280 15 48, Fax: -280 10 85
E-Mail: info@souzlegprom.ru, Internet: http://www.souzlegprom.ru

 

CRISIS HITS RUSSIAN FASHION MARKET HARD © derProjektor / pixelio.de
24.05.2016

CRISIS HITS RUSSIAN FASHION MARKET HARD

  • Sales decreases
  • Middle Price Segments affected most
  • Online Sale of Clothing growing

Moscow (GTAI) - Sales of apparel and home furnishings will continue to decline in 2016. Lower real income leads to falling demand. Russian customers buy fewer clothes and are increasingly watching the price. Most sales shrink in the medium price segment. Fashion chains react on the declining market volume by closing stores and focus on profitable locations. In contrast, the online trade is growing. In comparison to the year before Russia's clothing market shrank in 2015 year by 9% to a volume of Rubles 1.4 billion. Converted into USD the decline was even 43%. The discrepancy between the value in Rubles and in USD is due to the drastically fallen value of the Russian currency.

  • Sales decreases
  • Middle Price Segments affected most
  • Online Sale of Clothing growing

Moscow (GTAI) - Sales of apparel and home furnishings will continue to decline in 2016. Lower real income leads to falling demand. Russian customers buy fewer clothes and are increasingly watching the price. Most sales shrink in the medium price segment. Fashion chains react on the declining market volume by closing stores and focus on profitable locations. In contrast, the online trade is growing. In comparison to the year before Russia's clothing market shrank in 2015 year by 9% to a volume of Rubles 1.4 billion. Converted into USD the decline was even 43%. The discrepancy between the value in Rubles and in USD is due to the drastically fallen value of the Russian currency. For the textile and clothing industry, the Ruble devaluation means a fundamental change in the general framework: more expensive imports, lower personnel costs in Russia and rising export opportunities.
 
Customers change from the middle to the lower price segment
In addition, the real income of the Russian population declines and thus the purchasing power. Russian customers buy less clothing and watch more and more the price. Sales shrink at the most in the medium price segment. Many customers orientate themselves on low-price segments (mass market), which will increase in 2016 by 5 to10% to a share of 65 to 70%, the Fashion Consulting Group predicts. The proportion of the premium and luxury segment remains unchanged.
An average Russian household has cut its spending on clothing and home textiles by 30 to 50%, experts estimate. Especially the suppliers of imported textiles and clothing got to feel this, their prices had to be increased most, what damaged the business of foreign brand suppliers. In 2015 the Russian imports of textiles and clothing fell by 25%. This tendency continues in 2016.
    
Distribution networks in the stationary trade become thinned 
Because of the price pressure manufacturers and retailers in the fashion market shorten their staff, negotiate discounts for the shop rental, reduce the collections, simplify cuts and save on quality. While many Russian brands used to buy their materials in the EU and in Turkey, designers and producers now can only afford cheap synthetic fabrics from China. The advertising budgets were slashed in 2015 by 40 to 45%. Moreover clothing suppliers react by closing stores and concentrate on most profitable locations. Since 2014 more than eleven international brands have left the Russian market. These include Gerry Weber from the middle price segment, Laura Ashley, Chevignon and Seppälä; from the mass market segment Esprit, New Look, OVS, River Iceland and Wendys.  
 
Marks & Spencer closed 3% of its stores, Mango 7%, Gloria Jeans 12%. The largest drop in the number of stores are reported from the brands Vis-a-Vis (-65%), Motivi (-40%), Savage (-29%) and Incity (-17%). Maratex closed its franchise stores for clothing brands like Esprit, New Look, OVS and River Iceland 2015 in Russia. The Finnish Stockmann sold its seven department stores in Russia for EUR 5 million to Reviva Holdings Ltd. (owner of the franchise store chain Debenhams) and gave up the business of its brands Lindex and Seppälä.
 
Adidas has closed 2015 167 of its 1,100 shops in Russia, planned are 200. The German sportswear manufacturer acquired 2015 the central warehouse Chekhov-2 with an area of 120,000 square meters in the Moscow region. The purchase price is supposed at a total between USD 70 and 100 million. The Finnish Kesko informed in February 2016 that it wants to sell the Russian Intersport chain because of poor financial results.

The retail chain Modny continent (brands: Incity, Deseo) reduced the number of its stores by 35. At the end of the first quarter of 2016 they still owned 301 stores. The Melon Fashion Group disposed in 2015 27 unprofitable stores, for this they opened 37 new ones. Melon owned December 31st 604 stores throughout Russia (befree 234, Zarina 203, Love Republic 167), of which 134 are franchise stores (befree 56, Zarina 44, Love Republic 34). A new concept of the stores - larger retail space and more modern design – should help against the crisis.
The Spanish designer brand Desigual closed its Russian stores end of September 2015, but they remain on the market in multibrand stores. A similar course is followed by other brands. 

Eleven fashion brands enter the Russian market in the first half year of  2016
A small gleam of hope: Eleven fashion brands announced to enter the Russian market in the first half year of 2016. This happened already at the end of 2015 with budget brands like Cortefiel, Superdry and Violetta by Mango. H & M, Monki, Uniqlo and Forever 21 want to continue to expand in Russia.
Already in 2015 the number of H & M stores grew in Russia by 35% to 96 stores. On April 28th 2016 the menswear house Henderson opened a new salon in the shopping center "Zelenopark" in Zelenograd near Moscow. With this Henderson (brands: Henderson, Hayas) is now represented in 164 major shopping centers in 56 Russian cities. Hugo Boss inaugurated on April 8th 2016 a new shop in the Outlet Village Pulkovo.

The vertically integrated chain Gloria Jeans has changed it’s headquarter at the beginning of 2016 from Rostov-on-Don to Moscow and rented there 3,500 square meters in the Arma plant. Until the end of 2016 Gloria Jeans plans to extend on 5,000 square meters and further to 10,000 square meters until 2017. The capital should serve as a gateway to the world market: Gloria Jeans plans to open an office in Hong Kong. The company has eight regional offices and two large logistics complexes in Novosibirsk and Novoshakhtinsk.

International brands, planning to enter the Russian market in first half of 2016
Nr. Brand Country Profile Shopping mall Price segment
1 Demurya     France/Russia Clothing Smolenskij Passash Premium
2 John Varvatos USA Clothing Crocus City Mall Premium
3 Il Gufo Italy Clothing for children ZUM Premium
4 Barbour United Kingdom Clothing GUM upper middle
5 Armani Exchange Italy Clothing Mega, Aviapark middle
6 Veta Estland Clothing Streetretail, Kamenoostrowskij middle
7 Love Stories Netherlands Underwear Einkaufszentrum "Modny Seson" middle
8 Victorias Secret Pink USA Underwear, clothing Evropejskij middle
9 Hunkemöller Germany Underwear Mega middle
10 Undiz France Underwear Mega lower
11 Aigle France Clothing, shoes Street retail, Olimpijskij pr-t middle

Source: Retail.ru

Online sale with clothing is growing – Chinese suppliers are expanding
In contrast to the declining sales in the stationary apparel trade, the demand in outlets and on the Internet is rising. The number of visits and the average amount of receipts at the Fashion House Outlet Centre Moscow has risen by two times since July 2013, director Brendon O'Reily reports. The Fashion House Group offers online shopping since 2016.

The association of Internet trading companies (http://www.akit.ru) estimates that sales on the Internet in 2015 were Rubles 760 billion (+ 7%). The share of clothing and footwear was 35 %. Already in 2014 the online trade had grown by a third. Online stores are operated by KupiVIP, Lamoda and Finn Flare. Alone at KupiVIP the number of orders increased by 45% to a volume of Rubles 16.5 billion in 2015.

Manufacturers and distributors therefor boost the online trade. The government wants to promote the export of Russian goods and is planning a large Internet trading platform. Models are Alibaba (China) and JD.com. However Russian customers are buying increasingly from Asian webshops. Only in 2014 the popularity of online orders in China increased threefold.

Contac addresses
Fashion Consulting Group
(Consulting, Marketing, PR)
125009 Moskau, Maly Gnezdnikowskij pereulok 4
Tel.: 007 495/629 74 25, -629 76 23
E-Mail: info@fashionconsulting.ru, Internet: http://www.fashionconsulting.ru

Russian Buyers Union
119034 Moskau, ul. Prechistenka 40/2, Gebäude 3, Büro 110
Tel.: 007 499/350 51 40
E-Mail: info@buyersunion.ru, relations@buyersunion.ru
Internet: http://www.buyersunion.ru

 

BEKLEIDUNGSHERSTELLER VERLAGERN PRODUKTION NACH RUSSLAND © Florentine/ pixelio.de
17.05.2016

CLOTHING MANUFACTURERS MOVING PRODUCTION TO RUSSIA

  • Weak Ruble makes domestic Production profitable
  • Government encourages Investments

Moscow (GTAI) - Sales of textiles and clothing will continue to decline. Production in Russia however will rise. Due to the strong Ruble devaluation in the last two years, the conditions for the textile and clothing industry have completely changed. On the one hand falling real incomes lead to declining demand. On the other hand labor costs have fallen under Asian benchmarks.

  • Weak Ruble makes domestic Production profitable
  • Government encourages Investments

Moscow (GTAI) - Sales of textiles and clothing will continue to decline. Production in Russia however will rise. Due to the strong Ruble devaluation in the last two years, the conditions for the textile and clothing industry have completely changed. On the one hand falling real incomes lead to declining demand. On the other hand labor costs have fallen under Asian benchmarks.

Due to the low Ruble exchange rate it has become cheaper in 2015 for domestic and foreign textile and clothing companies to produce in Russia. Translated into US dollars, labor costs are currently due to the Ruble devaluation 10 to 15% below the reference value in the PRC. The average wage of a worker in the garment industry in China is currently USD 300 to 350, in Russian Rubles 12,000 to 15,000 (USD 185-230).
 
Relocation to Russia begins
According to a report of the newspaper "Izvestia" the first domestic and foreign clothing manufacturers of branded products have reacted and shift their production capacity from Asia to Russia or have subcontract Russian garment manufacturers.  These include companies like Roztech (brands: Dikaja Orchideja, Bjustje, Defile, Grand Defile), Sportmaster, Melon Fashion Group (befree, Zarina, Love Republic), Finn Flare and Kira Plastinina.

"A few years ago we produced 20 to 30% of our collection in Russia, last year 2015 there were already 30 to 40% and now already about 70%", the commercial director of "Kira Plastinina Style" Vladimir Romanov reported. For that the company has established its own production in an industrial park in Osery close to Moscow.

Other brand manufacturers and retailers like Zara (Inditex), Sela, Baon, Gloria Jeans, Modis, Lamoda, Lady & Gentleman, kangaroo and Sneschnaja Korolewa are looking for opportunities to relocate their production to Russia. The Ministry of Industry and Trade is in intensive discussions with Zara, H & M, Benetton, Dekatlon, Sportmaster and IKEA (home textiles) in order to convince them of the advantages of production in Russia. In future IKEA wants to get up to 40% of its products produced by Russian firms.

Roztech plans to double its production of women's underwear to up to 8 million units. Currently two sites are rented for that in the Smolensk region. For repairs and preparations for production in the rented plants Roztech will invest about  Rubles 60 million. Two other sewing factories in the area of Moscow and Smolensk are already working for Roztech. Contract productions in the PRC and in the Baltic States the company will be terminated because of this.

The franchise chain Finn Flare (Finland) has rented a factory with 500 square meters close to Moscow early 2016, renovated it and installed new equipment. For that Rubles 12 million were invested, General Director Ksenija Rjasowa said. The sewing factory is scheduled to start in May and will produce 40,000 to 60,000 pieces clothing per year. Beginning of 2016 Finn Flare possessed 143 Russian stores (54 franchised).
 
Manufacturers of sportswear increase their share of production in Russia
Since the outbreak of the Ruble crisis Sportmaster has begun to place a portion of its contracts with Russian companies. Currently 15% of the clothing and footwear is coming from Russian production. The retail chain operates shops with the brands Sportmaster - 460, Ostin - 760 and Funday - 60.

The MMD group "Vostok i Zapad", which belongs to the group of the companies Bosco di Ciliegi, intends to set up an own factory for the production of sportswear in the industrial park "Kameshkovo" in the Vladimir region. The necessary investment will amount to Rubles 1 billion, of which Rubles 200 million are own funds and about Rubles 400 million will be requested from the fund for the development of mono towns. 

Even Pierre Cardin is talking with major Russian garment manufacturers about licensed productions, designer Rodrigo Basilikati said in March 2016. So far the fashion house is based on ten own stores and licensees from Germany, Italy and the USA.

So far most sewing orders placed in China. In future one has to expect more companies and  offers from Vietnam, Bangladesh, India, Malaysia and Indonesia. The Eurasian Economic Union and Vietnam have agreed upon a free trade agreement.
 
Import dependence on fabrics and accessories as cost risk
By manufacturing in Russia the exchange rate risk and transport costs do not apply.  But one cost risk remains: For sewing of clothes in Russia  not all fabrics and materials can be sourced domestically, but need to be purchased at 65% abroad. The technical equipment needs to be imported at 100%. In the foreseeable future this remains a cost risk, depending mainly on the development of the further exchange rates.

The main suppliers of fibers, fabrics, yarn, buttons and accessories were previously the PRC and Turkey. However - since the deterioration of the state relation with Turkey Russia is working intensively to get gradually rid of this delivery dependence.
 
Anti-crisis and development program for the light industry
In the Russian light industry 14,000 companies are manufacturing clothing, textiles, footwear and leather goods. Thereof 653 large and medium and 4,000 small businesses operate in the yarn and textile industry. To give the clothing and textile factories more planning certainty, the Russian Government decided in spring 2016 a "Strategy for the development of the light industry until 2025" and a "Federal program to support  the enterprises of the light industry" (anticrisis plan).

Russian Confederation:  Production of textiles and clothing (Change in %)
Description of goods 2015 Change 2015/2014
Cotton fiber  (mio. bales) 111.0 4.4
Man-made fiber (mio roles) 66.0 -4.5
Fabrics  (mio. sqm) 4.542 14.7
thereof:    
Natural Silk (1.000 sqm) 253.0 31.8
Wool (1.000 qm) 9,262.0 -20.9
Linen 25.9 -26.6
Cotton 1,176.0 -4.5
Man-made fiber 237.0 14.2
Fabrics made of other  materials 3,084.0 25.1
Fabrics with plastic impregnations (mio. sqm) 32.3 14.6
Bed linen (mio. sets) 59.8

-9.6

Carpets (mio. sqm) 22.6 -3.7
Knitwear (1.000 t) 14.2 29.8
Hosery (Mio. Pair) 199 -5.6
Coats (1.000 pc.) 989 -22.1
Lined jackets (1.000 pc.) 1,887 -45.4
Suits (1.000 pc.) 4,690 -12.6
Mens jackets and blazer (1.000 pc.) 870 14.1
Ladies coats with fur collar  (pc.) 5,543 -46.1
Clothing made out of artificial fur (1.000 pc.) 24.5

21.0

Uniforms and workwear (mio. pc.) 20.7 -8.2
Work – and protective wear (mio. pc.) 99.8 14.6
Overalls (1.000 pc.) 733 -62.4

Source: Rosstat 2016

Russian Confederation: - Production of textiles and clothing (% Change)
Description of goods 1st Quarter 2016 1st Quarter 2016 / 1st Quarter 2015
Sewing threads- made out of synthetic fiber (mio. rolles) 14.0 -0.6
Fabrics (billion sqm) 1.2 23.2
Bed linen (mio sets) 14.1 -7.7
Knitted stockings (mio. pairs) 55.4 34.0
Knitwear (mio. pc.) 24.8 -6.0
Workwear  Uniforms (mio. pc.) 31.1 11.2
Coats (1.000 pc. ) 269 9.1

Source: Rosstat 2016

Contact addresses
Russian Union of Entrepreneurs of  the Textile and Light Industry
107023 Moskau, uliza Malaja Semenowskaja 3
Tel.: 007 495/280 15 48, Fax: -280 10 85
E-Mail: info@souzlegprom.ru, Internet: http://www.souzlegprom.ru

Ministry of Industry and Trade
Department of Light Industry
Denis Klimentewitsch Pak, Director of the Department
109074 Moskau, Kitajgorodskij proesd 7
Tel.: 007 495/632 8004 (Sekretariat), Fax: -632 88 65
E-Mail: dgrvt@minprom.gov.ru, Internet: http://minpromtorg.gov.ru

Light industry department:
Director: Irina Ivanova Alekseewna,
Tel.: -632 87 31, -346 04 73; E-Mail: ivanovaia@minprom.gov.ru
Internet: http://minpromtorg.gov.ru/ministry/dep/#!9&click_tab_vp_ind=1

"Strategie für die Entwicklung der Leichtindustrie bis zum Jahr 2025"
http://www.kptf.ru/images/company/Presentation.pdf (Präsentation zur Strategie)
http://minpromtorg.gov.ru/docs/#!strategiya_razvitiya_legkoy_promyshlennosti_rossii_na_period_do_2025_goda (text of the strategy and action plan)