Kazakhstan: Luxury’s Next Golden Market

The oil-rich country bordering the Caspian Sea and Russia is attracting a slew of designers and retailers.

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Everyone seems to be headed to Kazakhstan.

This story first appeared in the August 10, 2012 issue of WWD.  Subscribe Today.

The oil-rich country bordering the Caspian Sea and Russia is attracting a slew of designers and retailers eager to tap into its newly wealthy consumers. Saks Fifth Avenue will open a store there this fall, while brands such as Hermès, Louis Vuitton, Eskandar, Ralph Rucci, De Beers, Tiffany and Harry Winston are sold there or have their own stores. Even Children’s Place and Steve Madden have opened stores in the country, the world’s ninth largest in terms of area.

They all see Kazakhstan as a fertile market, up there with China and Brazil. A.T. Kearney’s 11th Global Retail Development Index earlier this year ranked the country as the 19th most attractive market for retail development which, while down from 14th the previous year, was still ahead of Russia at 26th.

“It’s probably what Russia represented to brands eight to 10 years ago,” said Robert Burke of Robert Burke Associates. “It will be a very good market for luxury brands.”

Burke said that only about 5 percent of the market for luxury in Kazakhstan is from tourists, meaning most of the sales are to residents. Consumers there travel a lot, so they are aware of luxury brands and are becoming increasingly sophisticated fashion consumers. “When I first went there four or five years ago, every major brand was represented — Alexander McQueen, Giambattista Valli and others weren’t so far off what you would see in a U.S. department store. Kiton probably had 250 to 300 sleeves hanging.”

In 2011, salaries grew 7.5 percent in real terms compared with 2010, reaching 77,464 tenge ($532), according to Kazakhstan State Statistics. Workers in the financial, insurance, scientific, technical and mining industries often earn more than twice the national average (from 158,600 tenge for financiers to 142,900 tenge for miners).

According to Dana Akhtayeva, a stylist based in Karaganda, the economic upswing is not the only reason Kazakhs are spending on fashion. “Along with economic growth, and despite the [economic] crisis, people in Kazakhstan have begun to understand the psychological aspects of self-image,” Akhtayeva said.

“Buyers, especially women, are active in learning about brands and trends. Still, often the brand name plays a crucial role.…Some want the brand names front and center, in the most visible spot on their bags, T-shirts, jeans, etc.”

Customers in cities around the country can find the names they crave at multibrand boutiques, but Almaty is still the fashion capital of Kazakhstan.

Almaty is the country’s largest city with a population of almost 2 million. It was Kazakhstan’s capital from 1929 to 1991, and is still considered the commercial and cultural heart. Current capital Astana is the second-largest city with a population of about 700,000. Almaty is to Astana what Istanbul is to Ankara in Turkey, according to local experts.

The country has numerous smaller cities where shoppers can find international brand names. Jack Geula, the owner of Muschel GmbH & Co. KG, which has more than two decades of experience representing European designers in the former Soviet Union, said, “If you compare Kazakhstan to any of the other countries in the region — Armenia, Georgia, Uzbekistan, Mongolia — business there only happens in the capital cities. Kazakhstan has been developing for the past 10 years easy and there is a wider structure available.

“Almaty is still the top,” added Geula. “Astana is catching up, and then there is a wider gap after that.”

Mining capital Shymkent, oil-rich Aktobe, and industrial center Pavlodar are just a few of the Kazakh cities where multibrand stores sell premium brands.

J Brand, which distributes through its showroom in Milan, now sells in cities including Almaty, Astana and Aktobe. Kazakhstan is the third-most important country in the Commonwealth of Independent States in terms of turnover for the American denim maker. Muschel distributes brands like Just Cavalli, Lagerfeld and Cerruti in many Kazakh cities.

Cerruti is one of the most popular brands at the Cosmo boutique in Pavlodar, according to owner Natalia Russkih. “Our customers buy those brands that advertise in magazines,” she said. “If there aren’t ads, then there isn’t much interest.”

Shoppers in Kazakhstan have different tastes than their Western counterparts. “While having the brand name visible might be poor form in Europe, when Kazakh customers buy something Cerruti they want the brand front and center,” she said. The majority of Cosmo’s customers are women aged between 25 and 40, who are fashionable and on trend. “Our men are still conservative, but women are stylish and look for fashion. If one color is trendy, they want that color.”

For men, tailored clothing is more important than it is in Russia and Europe, as the casualization of men’s wear has yet to take on. “In terms of men’s wear, suits and blazers are still a very important part of business,” said Guela.

For women, religion and culture play a role in dress length. At Cosmo, customers are not likely to buy floor-length dresses, but they stay away from short hemlines. “Dresses are very popular here, but rarely do women buy dresses above the knee. They prefer dresses to the knee, or maybe a bit under the knee,” said Russkih.

Designer brands including Rick Owens still find more success in Almaty than in smaller cities. Luca Ruggeri, the designer’s commercial director, said the company “tried to propose our products in Astana, but in that city the collection was less capturing” than in Almaty. Still, Owens views the market in Kazakhstan as “quite relevant, despite the fact that we basically have business relationships only with Rush and the soon-to-open Saks Fifth Avenue in Almaty.”

Other brands that multibrand boutique Rush distributes include Comme des Garçons, Jean Paul Gaultier, Vivienne Westwood and Miu Miu.

The Saks Fifth Avenue that will open in the new Esentai Mall in Almaty in mid-October will be the retailer’s first in the former Soviet Union. The three-story, 87,615-square-foot store is a licensing partnership with Kazakh luxury distributor and retailer Viled Group. Viled, which is the largest retailer of jewelry and watches in Kazakhstan, also distributes brands including Cartier and Christian Dior in Almaty and Astana.

Developed by Capital Partners and designed by Skidmore, Owings and Merrill architects, Esentai provides a new shopping experience for the region. Capital Partners marketing director Sandrine Moreau said, “The mall is the first of its kind in Central Asia.” Esentai is unique in its fit out — black marble floors, the latest lighting technology — and the brands that it offers. The first floor is dedicated to luxury, with Fendi, Gucci, Lanvin, Dolce & Gabbana, Burberry, Hugo Boss and Louis Vuitton stores.

The Vuitton store, designed by Peter Marino, is the brand’s sixth in the CIS region — with four in Russia and one in Ukraine — and its first in Kazakhstan.

“We are bringing something very modern into the market, and some of the best customers are in Kazakhstan. While they are hungry for something new, they are also very, very attached to their country, to their land. It is an interesting challenge to try find the right balance,” Moreau said.

Esentai’s advertising campaign integrates Kazakh culture with luxury clothing and accessories. The billboards feature Kazakh models posing in front of some of Almaty’s most famous sights, as well as the country’s rolling steppes and scenic mountains.

For those brands looking to enter the market, Almaty is home to the region’s most important fashion trade show, Central Asia Fashion. The ninth CAF brought 105 exhibitors and 1,500 buyers together. Italian nonprofit Entre Moda Italia, or EMI, which promotes the country’s fashion around the world, participated in the show for the first time in March.

“The Central Asian economy is growing strongly and we thought that it was important to find a fashion fair that would help us to make the right contacts,” EMI president Antonio Gavazzeni said. The company had about 30 firms exhibiting at CAF compared to 330 brands at the equivalent show in Russia, Collection Premier Moscow.

Still, Gavazzeni views the markets as complementary, “Moscow is historically the hub of the distribution system for all the CIS countries. Most Italian companies are already well established there and the level of competition is growing….The level of competition in Kazakhstan is lower,” he said. “Companies who decide to go there are real pioneers.”


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