LA MODE IN MOSCOW: A POTENTIAL BONANZA, BUT PLENTY OF PITFALLS
Byline: Katherine Weisman
MOSCOW — Russia got its first taste of a Western fashion trade show last week and a number of brands, from Escada to the Wonderbra, came to build business in a huge market that’s hungry for the goods, but fraught with potential problems.
Moda Moscow, the first trade exhibit here dedicated to Western fashion, closed last Friday with mostly good reviews from exhibitors. A number of them have already started testing the waters here, and their main warning is that
Russia’s no place for novices. The problems range from cash-short retailers anxious to buy to a large and unpredictable bureaucracy.
The five-day event at the Krasnaya Presnya fairgrounds was organized through a joint venture of Comtek International, a trade fair organizer based in Wilton, Conn., and Crocus International, Moscow, a retailer and importer of consumer goods. While exhibitors said there was much lacking in the organization of the show — like the fact that the doors were open to the public at large — companies were pleased with the contacts they made and, in a few cases, the orders they took.
One topic exhibitors didn’t want to address was the reported infiltration of crime and hoodlums into many facets of Russian life. The vendors were at the trade show, they said, to talk business.
Roughly 75 apparel, lingerie and accessories brands participated in the show, the majority of them European firms, many receiving financial support from the European Commission to attend. The sprinkling of American firms included Oshkosh B’Gosh, Levi Strauss & Co., The Justin Boot Co., Botany 500 and innerwear from Sara Lee, including the Playtex foundations made for Europe and the Wonderbra, both represented by Paris-based Luxicom.
Among the top European names were the Escada Margaretha Ley collection, which boasts its own space in the GUM department store here, and the Schneberger dress collection, which has two of its La Mode stores in Russia. Both are units of Escada Group, Munich. Others included Oilily of Alkmaar, the Netherlands; Lyle & Scott, Roxburghshire, Scotland; the Steilmann Group, Berlin; Munich’s Triumph International, showing lingerie, and Creation Stummer of Linz, Austria, offering children’s wear.
There were also delegations from such groups as the German Fashion Export Council, the European Fashion Export Council and Promas, a promotional arm of the French Men’s Wear Federation.
Western companies that came to Moda were eager to tap into a market that appears poised for explosive growth. Perestroika and the opening up of the economies in Russia and the neighboring republics of the Commonwealth of Independent States (CIS) have led to privatized companies, startups and large trading conglomerates, creating new wealth and upping the buying power of a select few. But in Russia, boasting a population of roughly 150 million, even a small percentage with buying power represents a lot of consumers.
“This country is huge,” said Escada Group chairman Wolfgang Ley, “Moreover, the bulk of the business is outside of Moscow.”
Escada started selling its Escada collection to GUM three years ago and last year signed a distribution deal for Russia with Vienna-based businesswoman Valentina Hummelbrunner. Schneberger started in this market in mid-1993 and sold about 200,000 pieces in Russia for the fiscal year ended Oct. 31.
Escada and Schneberger had big stands at Moda, but — like other exhibitors — Ley said it was hard to tell who were buyers and who were just sightseers. Escada also staged a fashion show of its spring-summer 1995 collection at Moda Moscow’s kickoff gala at the Kremlin.
“I am very happy we came. We attracted a lot of interest from trading companies and retailers,” said Alison Larson, the international marketing manager for Oshkosh, which has just started to sell in GUM here.
Larson and her colleague, Juan Fernandez, Oshkosh’s director for the Americas, said that if a company has had no experience in exporting to international or tough markets, they should avoid Russia and the CIS.
The rule of thumb here is 100 percent prepaid orders, many pointed out, citing the lack of financial soundness among many companies hoping to import Western products. Also, price is an issue. Many companies say that an item wholesaling for $100 in the West will retail in Russia for $300 to $400, based on duties, taxes and transportation costs. No company interviewed came up with the same percentages for their exporting costs, indicating a lot of nontraditional forms of payment take place.
“Everything can happen here, and it’s very unpredictable,” said Ley, “There is enormous bureaucracy. We don’t want to be political, and I won’t comment on the system. The most important thing is to find the right business partner.”
But some companies said that Russia is not necessarily a more difficult market than others.
“It can be as severe as Mexico,” said Fernandez, who noted Oshkosh’s deliveries to that market often get held up for “no reason at all” at customs. “The good part here is that now, there is no competition.”
Levi’s has an accredited representative’s office here, “which acts more like an embassy,” according to manager Andrei Saveliev, responsible for Russia and CIS markets. The Moscow office manages the brand and assists importers of Levi’s, but all commercial transactions are handled through Levi’s office in Geneva and a distribution center in Hungary.
Saveliev said that even though “90 percent of the people passing by” at Moda Moscow were nonprofessionals, it was a good public relations exercise. Levi’s is one of the few brand names in jeans that is well known in Russia.
“The competition is not that tough. VF Corp., with Lee and Wrangler, is not here yet,” Saveliev noted.
David Napoli, account executive for Botany 500, which opened a freestanding store here two years, said of Moda Moscow, “It has been a pretty good show, and we’ve met a few people.” He warned, however, that it was not the kind of show to sell at.
“We give the buyers a financial background sheet, and later we run a credit check. One out of 10 could be good partners for a store.”
Russian buyers were generally enthusiastic about the offerings at Moda Moscow.
“With the new wealth, now is not the time to buy cheap products from China and Turkey,” said an executive of Ruslan, a Moscow-based wholesaler. “The market here is definitely ready for a trade show like this. But we need more companies willing to be partners with us.”
Retailer Natasha Sobolkova, owner of the Polus Engineering store of consumer goods, was in search of more middle-market brands than those at the show.
“There are lots of very expensive stores in Moscow now, but there are very few things for the middle class,” said Sobolkova. She noted she was also frustrated by the fact that some non-paying Russian retailers have made it very difficult for stores like hers to get Western goods, with vendors demanding prepaid orders. Sobolkova said she can’t pay up front, but has the capital to pay once the goods are sold. She is hoping more Western firms will relax terms and also provide input on store design and merchandising.
The next Moda Moscow is scheduled for four days beginning March 27, 1995, according to Michael Driscoll, vice president of sales for Comtek. Driscoll acknowledged exhibitors’ complaints about the nonprofessional visitors and said that the spring show could see restricted entry, possibly with an admission fee. His other goal is to get more U.S. exhibitors.
New next spring will be an apparel textiles show, Textissina, which will coincide with Moda Moscow and which is also organized by the Comtek-Crocus joint venture.