Seeking Russian Gold: Despite Turmoil, Brands Rush to Booming Market

Fashion and retail firms are heading to Russia in droves, attracted by a vibrant economy, a free-spending elite and a demand for style and status.

Benetton, which has 115 stores in 39 Russian cities, said the typical Benetton customer in Russia is a middle-class woman aged 20 to 35 with a monthly income of $300 to $750. She buys clothes in shops about once every four months. Benetton said its marketing research shows the Russian woman is most concerned with quality, product assortment, brand name and where it is made.

“You must have a brand. The Russian consumer needs and wants brand awareness,” agreed Michael Rosenblat, ceo of Germany’s Tom Tailor, which currently boasts more than 40 points-of-sale in Russia. “Especially in women’s, clothes have to be sexy. They want a tighter fit, shorter skirts, low rise. If it’s not sexy enough, they won’t buy it.”

Most foreign players play down the risk of economic or political turmoil.

“We expect the economy in Russia will grow continuously,” the Metro spokesman said. “Our investments in these markets are long-term oriented.”

“Russia has a very good chance to be among the top seven European markets in three to five years,” said Martin Shankland, managing director of Adidas Russia.

“We believe that the Russian market has a voracious appetite for anything American, even more than in the markets where the Mary-Kate and Ashley brand is present,” said Robert Thorne, president of Dualstar Entertainment Group, the licensing and production firm of the Mary-Kate and Ashley apparel line co-owned by the Olsen twins. The Mary-Kate and Ashley television series is already a hit among young Russian teens and the twins recently graced the cover of Russian Elle Girl there. “We are seriously considering Russia for 2006. Every day that goes by becomes more viable due to the Westernization of the market, but we think it is between a year and a half to two years short of where it should be for our needs.”

Others take a slightly more cautious view.

“Growth in Russia has been big, double-digits, but there will be a ceiling one day,” said Chopard’s Scheufele. “It will be like it was in the Middle East, which grew and grew and then suddenly hit the top. I think Russia still has a lot of potential and it should continue to grow very fast over the next five years.”
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