THE WEST GIVES THE RUSSIANS WHAT THEY WANT
Byline: Katherine Weisman
MOSCOW — The economy may be shaky and the ruble may be weak, but the drab and dowdy days are over here. The new Russian revolution is in fashion.
Not Russian fashion, however. What the lucky few Russians who can afford the expense are longing for is Western style. And the response of European designers and fashion firms has been to start a new march on Moscow. In the vanguard, besides Laura Biagiotti, are:
Gianfranco Ferre, Sonia Rykiel, Karl Lagerfeld, Georges Rech, Jean-Louis Scherrer, Blumarine, Claude Montana, Jil Sander, Emanuel Ungaro and Joop. All have opened sales points in Moscow in the last few years.
Gianni Versace, who last March opened a huge free-standing store in Moscow under a franchise agreement. After only six months, the store started renovation to open up its second floor and sell the Versace home line and expand the men’s wear department.
The Escada Group. The Margaretha Ley collection and its sister line, Schneberger, have been operating in the market for several years, and both have boutiques in the giant GUM department store complex. At the end of 1993, the group signed a franchise agreement with a Russian partner to sell Escada to fashion stores in Russia and the Commonwealth of Independent States (CIS).
German apparel giant Steilmann, which manufactures some 10,000 pieces a year in the CIS. It is also selling its collection to over 100 shops, and boasts a concession at GUM.
Luxury goods firm Trussardi — which opened a franchised shop last year in the Slvjanskaya Hotel — as well as S.T. Dupont and Nina Ricci, which have headed to the newly renovated turn-of-the-century shopping mall, Petrovsky Passage.
Cartier, which had its first Russian client in 1860, and signed a distribution agreement at the end of last year with Société Hermitage SA to market Cartier products throughout the CIS. Cartier already has 51 sales points in the market, and recently opened a shop in the Petrovsky center.
“I think there is a unique process happening right now,” Irina Sumina, marketing director for Moscow designer Slava Zaitsev, said of the Russian rush to style. “It’s like when a man has been walking in a desert for a long time, and now he has water.”
But who is buying the goods?
The customers start at about 20 years old, and both sexes are equally strong consumers, according to resources and consultants. The younger consumer might be the child of a newly wealthy industrialist or entrepreneur. Older ones might be among the bilingual Russian executives working for foreign banks, business consulting or law firms that are paying vastly higher salaries than local firms.
There’s another group of enthusiastic consumers, too. The new Russia is known to be plagued by organized crime, and gangsters and their families are among the newly rich who are splashing out for Western fashion and luxury goods, according to almost everyone who does business here.
“Sure, we have customers who are racketeers and prostitutes. I know them by face,” said the manager of the Choice store in the Tsum department store center, which carries labels like Georges Rech and Olivier Strelli.
“My personal opinion is that it’s strange that these people can spend $3,000 just like that,” says Christina Schroderus, buying manager for fashion, shoes and cosmetics for Stockmann, the Finnish department store that is a strong retail presence in the market. “Can it be honest money coming so quickly? I just don’t know. In Finland, you can’t sell such expensive stuff as in Moscow.” No matter where the money comes from, the customers are spending a lot. They want both high quality and high fashion, and seem to believe high price is proof that their requirements have been met. Bestsellers often are the more flamboyant looks a designer has to offer. Sandrine Fantoni, the sales director responsible for Russia at Karl Lagerfeld, said that a tight jersey dress with marabou trim was the company’s bestseller last fall. She added that Stockmann bought and sold about 100 pieces.
“Everyone said we had to be careful at the beginning — Russia’s a poor country,” said Nicole Berger, the marketing manager for Galeries Lafayette’s store in GUM. “We started out with low-priced merchandise, but we learned we had made a big mistake. After a year, we brought in the Chanel perfumes and cosmetics and it worked.”
A few years ago, Western apparel makers might have tried to dump old merchandise or seconds to the CIS, but that doesn’t work any more.
“Don’t think you can sell your leftovers or seconds in Russia,” said Hans Baruch, the managing director of Baruch International Fashion Group B.V., a Mijdrecht, Holland-based maker of moderate apparel that has been selling to Russia and the CIS for some 20 years. “Russian women have always known what they want — they just haven’t been able to get it,” he added, noting that Baruch does $40 million in wholesale business in the market.
Tapping the Russian and CIS markets is not easy. Shipping, customs duties, taxes, counterfeiting and getting paid for goods pose considerable challenges to Western firms. But companies already there say that it’s no different from doing business in Mexico. Pointers from Escada group chairman Wolfgang Ley include making sure you find the right business partner. “Business here is extremely complicated. Anything can happen, and it’s very unpredictable,” he says. “The key is to find the right partner who understands the actual situations.”
The safest partners are the large trading conglomerates that grew out of the former state monopolies, according to Dr. Natalia Karpova, a Moscow-based economist and marketing consultant. Executives from several resources agree that the former state monopolies are the most stable, and the most dependable for payment in dollars.
Companies currently exporting recommend working on the basis of 100-percent-prepaid orders. “It can be very tough for customers to change their rubles into dollars,” says Richard Doepfer, executive director of the German Fashion Export Council, adding that this helps to weed out risky clients.
Russian fashion design in the strict sense is limited to a handful of designers led by Slava Zaitsev, for whom L’Oréal launched the Maroussia women’s fragrance in 1992. Other upcoming designers include Alexei Grekov, Nataliya Naftalijeva, Misha Pantelejev and Valentin Yudashkin.
But the Russians crave Western designs. “In the beginning, it was terrible,” recounts Schroderus. “The European companies first thought we were a Russian company, and thought that Russian women were either hookers, or tasteless.”
But that was then. Now “it’s a success beyond our wildest dreams, and we have been profitable since the beginning,” Schroderus said.