Most Recent Tendencies in the Russian Lingerie Market: Decline, Stagnation or Continuation of Growth?

Most Recent Tendencies in the Russian Lingerie Market: Decline, Stagnation or Continuation of Growth?

Over the past four years, the Russian retail market value of lingerie, including day-underwear for men, women and children, nightwear, homewear, swimwear and brassieres, rose by an average annual rate of 42%, reaching a nominal value of US $ 2,963 bn. in 2006. This figure results from a market research study, executed by ITMM, the Stuttgart based German consultancy, specialising in mid-to-long term monitoring of the development of world clothing markets with a focus set on Russia.

According to the managing partner of ITMM, Reinhard E. Döpfer, the Russian lingerie market is expected to continue to expand by an average annual increase of 7% over the next four years until 2011, possibly arriving at a retail value of US $ 4,197 bn., based on the exchange rate of US $ against the Russian Rouble, valid for 2006. “Although the general outlook appears positive, we are observing heavy structural changes in the supply chain of lingerie in Russia”, said Döpfer. As he explained in this context, the changes result from a shift of origin of imported intimate apparel. Whereas, in 2002, the majority of lingerie products retailing in Russia, stemmed from Italy, Germany, France and other member states of the European Union, the Peoples Republic of China gained an overwhelming importance as key supplier nation of lingerie to Russia within a short period of four years. As a consequence, the market share of the Europeans, ranging in the area of 56% against the total retail market value in 2002 has dropped to 34% in 2006. At the same time, supplies of lingerie from China reached a market share of 51%, compared to only 28% in 2006.

As Döpfer says, the main reason behind surging lingerie imports from China is seen in the strong rising purchasing power of Russian consumers belonging to the lower-medium-tomedium income classes. No wonder that average ex-works prices valid for Chinese products range in the area from US $ 4,35 for a set of bras and slip to US $ 1,42 for a man’s underpant, meaning that such typical Chinese items retail in Russia at under US $ 10,-- for a set of bras and slip and at around US $ 3,50 for a man’s underpant.

As far as the European offer of lingerie is concerned, which is generally supplying the Russian upper-medium-to-high priced market segment, the most recent studies on export development of lingerie (including panty-hose) from the traditional European member states (EU-15) to Russia show a continuing strong rise of men’s underwear over the period of the first six months of this current year, compared to the relative period of 2006. According to EUROSTAT figures, shipments of men’s underwear to Russia rose by 38%, representing a value of 20,5 mn Euro. The performance of European lingerie exports for female consumption was less successful.

Although total shipments of lingerie from the EU-15 to Russia reached an increase of 12 % over the first semester of this year, representing a value of 149 mn. Euro at ex-works purchasing prices, several product categories suffered from a decline. The most affected product category were brassieres and shape wear, where exports from France to Russia registered a decrease of 14 % against the first six months of last year as well as from Italy, declining by 6%. As the research made by ITMM further reveals, Germany is the only country among the three dominant European lingerie suppliers to Russia, which performed better than its Italian and French competitors. Exports of lingerie from this country to Russia increased at a rate of 34% in general, and at 3,5% for brassieres.

As a response to the questions arising from the headline of this editorial, Döpfer concludes that quite obviously, the Russian lingerie market keeps expanding in the lower-to-medium priced market segment. On the contrary, the market shows signs of stagnation or much lower growth in the upper-to-high priced lingerie segments and it further shows a beginning of decline in the luxury market segment which is still dominated by Italian and French suppliers of brassieres.

Key Drivers for Surging Demand of Intimate Apparel in Russia

- strong rising increase of GDP in terms of Purchasing Power Parity creating an average per capita amount of US $ 12.200 (against US $ 31.900 in Germany),

- high gains from capital investments averaging 10-12 % real and net,

- increasing salaries and wages at average annual rates above 12% real, if not more,

- surging private bank loans offering consumers more flexibility in spending,

- heavy investments in traffic, infrastructure, energy sector, production, construction and services over the next 5 years, worth US $ 800 bn, creating better paid jobs,

- mushrooming shopping malls and trade centers in Moscow and provincial cities (20 malls covering 1 mn sq. m additional retail space in Moscow alone in 2007),

- bringing 600.000 sq. m additional gross leased areas for retailing of clothing,

- widening and deepening of the retail offer of clothing for more individual fashion,

- increasing development of private label order donor ships by Russian retail chains .

New Ventures of Key Retailers in the Russian Intimate Apparel Market, 2007

- The real value of the Russian market for medium-to-luxury priced intimate apparel is estimated to account for US $ 2,964 bn, less “grey market” mass-supplies of US $ 632 mn = US $ 2,332 bn in 2006,

- Targets are set by key retail players on further strong expansion of the intimate apparel retail trade, running in parallel to the expansion of shopping malls,

- WILD ORCHID announcing this August to invest in a new retail chain of “democratychnaya belyo” and to open 100 shops over the next 3-5 years all across Russia and the CIS,

- MARATEX (master franchiser of ESPRIT) decided to develop a chain of mono-brand lingerie shops on behalf of PALMERS, the Austrian lingerie group, and on behalf of HUNKEMOELLER for its label BODIQUE. 50-60 mono-brand stores are planned to open over the next 3 years,

- MILAVITSA (Belarus), in co-operation with LAUMA (Latvia), has started last year to open up to 300 lingerie shops all across Russia under the name of OBLICIE,

- EURO-TRIUMPH succeeded in operating a NOS-stock facility for its wide range of lingerie products in Moscow since spring 2007, after two years of negotiations with the Russian customs authorities.

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