MOSCOW: Brand owners in the apparel category stand to achieve substantial growth if they are able to navigate the complexities of the Russian market, research by McKinsey has suggested.
The consultancy argued in a new report that sales in this sector would bounce back to the pre-downturn levels of $50bn by the close of 2011, and should grow by 8% a year to 2015.
It revealed that Russians spend a higher share of their income, 3.1%, on apparel purchases than was recorded in nations like China, Germany, Hungary, Poland and the US.
Other encouraging trends outlined by the company included the fact that income levels are due to expand by 7% a year to 2015, while there is also a "strong sense of aspiration" among shoppers.
"Almost half of consumers say that they want to see premium brands when they shop, even if they can't buy them," McKinsey's study said.
Less favourably, apparel takes up just 3,500 square metres of retail space per 100,000 people in Russia, half the figure logged by Brazil and 10% of the equivalent total for the US.
More positively, this means considerable room for growth remains, prompting Uniqlo to enter the market in 2010, following Gap's arrival in 2009.
In 2010, the largest Russian apparel chain had 560 stores, up by 133 year on year, and the biggest foreign operator boasted 153 outlets, an improvement of 14.
Moreover, the top ten retailers in the country take a modest 7% of category sales, rising to 15% in the modern retail sector, and only three of the 20 top retailers cut their investment in 2009/10.
"In sum, Russia's apparel market is a wide open race, with a large number of players jockeying for position," McKinsey said.
At present, traditional open-air markets deliver 45% of category sales, ahead of department stores on 26%. Looking forward, however, single-brand chains are likely to see growth of 15% per year.
On average, Russians spend $6 a year per capita on clothing online, equating to a value of $1bn, but set to reach $9bn or so by 2015. Nearly a quarter of web users have made apparel purchases in this way.
Typically, netizens direct 52% of their category spending to offline sources, 12% to "monobrand" ecommerce sties and 11% to multibrand web platforms, falling to 4% for social networks, the lowest score in all.
Data sourced from McKinsey; additional content by Warc staff