Regions Report by PROfashion

RegionS Report RUSSIA:

Voronezh Yekaterinburg Kazan Nizhny Novgorod Novosibirsk Rostov-on-Don Saint-Petersburg SOCHI Surgut Tyumen

Regions Report

PROfashion to comply with the marketâ&#x20AC;&#x2122;s needs

ROfashion Regions Report is a unique guide to the Russian apparel market for foreign companies that realize it is much bigger than just Moscow.

Communicating with foreign apparel we came across the big need for information about the Russian market outside Moscow. We realized that it takes a lot of human and financial efforts to explore it independently. Being a professional trade publishing house we aim at studying the market and giving its players the most complete and useful information. In 2010 we published several analytical articles about Russian local markets and then realized the urge for systematizing and translating this information for our foreign readers. That is how the idea of PROfashion Regions Report was born. We just comply with the marketâ&#x20AC;&#x2122;s needs. Twice a year PROfashion will publish an issue describing local markets of ten big Russian cities: from general statistics to commercial real estate and brand portfolios coverage. Our leading trade journalists will analyze current situation on local markets and we will translate their articles into English. PROfashion Regions Report will help foreign apparel producers find new distribution channels throughout Russia and receive direct feedback from the strongest retailers and multipliers in Russian metropolises. We are sure that PROfashion Regions Report will become a kind of Russian trade encyclopedia and contribute to the international apparel market development. Olesya Orlova Editor-in-chief

Regions Report

contents The Field of Dreams Voronezh Yekaterinburg Kazan Nizhny Novgorod Novosibirsk Rostov-on-Don Saint-Petersburg SOCHI Surgut Tyumen

4 12 16 20 23 26 29 32 36 40 43

Moscow trade shows calendar Regional trade shows calendar

46 47

fa s h i o n m a g a z i n e f o r p r o f e s s i o n a l s Regions Report is published by PROfashion Publishing House Other projects: PROfashion magazine – the B2B magazine for fashion professionals PROfashion Business Guide – the most complete directory of Russian showrooms and fashion related companies. PROfashion Kids – kids’ wear, shoes and accessories producers catalogue PROfashion Hats – headwear and accessories producers catalogue PROfashion Weekly Newletter – fresh fashion business news and special offers for the B2B audience PROfashion Awards – annual fashion business prize More at www.profashion.ru/eng

Target group The whole range of fashion business specialists. • Distributors, wholesalers, retailers • Apparel, shoes and accessories producers • Commercial real estate companies Positions: owners, buyers, designers, merchandisers, shop window designer, business trainers, marketing, advertising and PR managers and directors.

Regions Report By Roman Sidorov

The Field of Dreams

The Russian market can be compared to the virgin unplowed wildland. According to experts’ estimates, the country is among the TOP-10 most promising regions for the development of international retail. It was until fairly recently that the Russian market saw its extensive development which had taken two different directions: there was a considerable recovery in the operations of domestic companies, who, seemingly, could have it all in their hands, yet, on the other hand, major foreign players started a massive expansion of Russia’s market. Notably, the latter are now doing much better, their unsteady steps on Russia’s shaky terra incognita getting firmer and firmer year after year.

t is sometimes astonishing how fast the «invaders» tap the Russian market. Moreover, these are not only millionplus-cities like Novosibirsk or Yekaterinburg that they target; they are also interested in less populated areas. Exempli gratia, representatives of Mango, the Spanish retailer, have travelled all over Russia from Kaliningrad to the Far East in search of the places to open their new mono-brand stores. The lion’s 65% share of the new stores is represented by regional market. With 65 POS operating in the country as of 2010, the company makes it clear that it is going to further entrench its positions and names the Northern parts of the country such as the cities of Surgut and Novy Urengoy promising for opening their new stores. “MEGA-Omsk” interior Having 64 stores in various Russian cities raging from Abakan to Uzhno-Sakhalinks Benetton is no less ubiquitous. The newcomers, those who have just recently entered the Russian market, also show a rather aggressive behavior. E.g. since 2008 the American Creative Recreation has expanded its presence in Russia to 14 cities and continues growing extensively. One can 4

Regions Report draw numerous other examples illustrating the unprecedented interest of foreign retailers of all size in the Russian market which, as compared to Europe, shows the growth desired by many. The 2008-2009 downturn did nothing but added fuel to the fire: when local companies of all kinds were suffering loss and nebbish regional private entrepreneurs were going bankrupt, global mass market brands were there to immediately take their place.

The lion’s share «For eight years before the crisis the Russian market enjoyed rather rapid growth of retail sales – about 21 %, and then witnessed a gradual decrease from 40 to 22 %. It was then that many international companies entered the Russian market. Unaware of the Russian mentality and unable to maneuver with its legislation they preferred to develop through distributors,» says Olga Zapolskaya, the BBCG company, producer of the forum Fashion Retail Russia. «When the crisis struck, they had to review their development strategies. The crisis had swept the market making inefficient companies quit providing free sales space and market niches. It was a propitious moment for their independent development in the Russian market since global suppliers, unlike local retailers, have fine-tuned business processes, are experienced in launching new stores, aren’t burdened with the remains of old collections and debt liability. Besides they have idle money, a chance to quickly occupy a free market niche and, looking forward, a margin that they won’t have to share with the middleman and a manageable business. They benefited from all these advantages. Major international players open dozens of shops in Russia’s regions, leaving less familiar brands just a little behind. They stake on both the independent growth and franchising. Virtually all major international companies have placed their counters on Russia’s map: Mango, Inditex, Adidas, H & M, C & A, GAP, a recent newcomer UNIQLO and many more. How large will be the market share that each company wins? It depends on how aggressive their attack is and how effectively they communicate with the audience.» More cautious companies enter the Russian market along with those who are more familiar with its national realities. MEGA, which introduces a considerable pool of mass-market clothing brands to the regional market, can be considered a key partner for many foreign retailers.

“MEGA-Omsk” facade

«Currently there are 12 MEGA malls operating in nine major regions of Russia with two more about to open in Ufa and Samara. In the short term, we are not planning to launch any new projects, yet we will continue investing into the development of the already operating centers to strengthen their positions in the market,» explains Irina Johansson, PR Manager at IKEA Russia & CIS. «The idea of our concept is based on a pool of lessees made up of major national and international brands as well as such labels as New Yorker, Ann Christine, Marks & Spencer, Accessorize, the labels of the

Regions Report Inditex Group and Russian retailers. In all MEGA malls there are, on average, about 70% of lessees doing their business with us. In the course of time, the pool of our regional partners can change. It is a natural course of things as the concept of a mall is tuned to match up the buyer’s expectations and has to, as it were, stand the test of time. This year has seen the advent of Review, McNeal, Berliner, Parfois, Six and Bench. The American retailer Converse was the first mono-brand to escape the boundaries of the USA to open its store in MEGA Khimki this September. The German New Yorker operating in most our malls is planning to open three more stores. Petit Patapon, the first Russian shop selling children’s wear, and the first mono-brand of American Eagle is to open in MEGA Khimki soon. Besides we soon expect the opening of Apart (a Polish chain store) and Scandinavian Pandora.»

Model types Extensive construction of shopping areas, which is still underway in most regions, entailed certain recovery of the product market. In major cities, seen as having primary importance for the retail segment, the construction of new areas started as early as in the late 90s and early 2000s. E.g. between 1999 and 2010, 859, 65 thousand sq. m. of shopping areas were put into operation in Yekaterinburg, 398, 44 thousand sq. m. – in Novosibirsk and currently there are 732,77 thousand sq. m. of shopping and entertainment centers under construction. «Secondary» cities saw massive construction later in 2003-2009. This trend held more or less true for the large majority of Russia’s cities from Arkhangelsk to the Far East. Before mid-2008 the constructed areas were mostly taken up by local entrepreneurs and regional companies. However their activities were affected by the recession and the economic panic. In general, regional markets of mass-market, masstige and premium ready-made clothing are unevenly developed which is, to a great extent, determined by socio-economic conditions of this or that area. «Between 2008 and 2010 the consumption level decreased. Naturally, the stock could not be sold out which reduced the purchase,» says Natalia Kuznetsova, the owner of three brand clothing stores in Nizhny Novgorod. «This had negative consequences on the business and required constant assessment of the city’s demand and supply. I tend to think that the city’s fashion market is a developing market with youth fashion being the most promising niche. The city still has very few serious companies which work directly with European brands. Those few do their business with premium Italian labels. The middle-up segment is largely represented by German labels such as Apriori, Gardeur, Betty Barclay, Strenesse and others. » «Between 2008 and 2010, at an attempt of being more sustainable we had to work with more affordable clothing labels, thoroughly study the customer demand and increase the advertising budget,» adds Ekaterina Milashenko from the Maria Korzun company which has been operating in Perm market for 17 years and has over 15 labels in its brandbook. «Generally one can hardly regard our market as a developing one – it remains being undeveloped. The deficit of quality men’s and women’s brand clothing is obvious, we are extremely hungry for the personnel. Despite it, I see that local entrepreneurs aim at cooperation with foreign companies.» «We’ve been present in the regional market since 1996. At present we have three mono-brand stores and three multi-brand outlets,» says Roza Bedretdinova, the Rosta company, Kazan. «The local 8

Regions Report market is quite mature if we consider the mass-market. Besides numerous local companies, the labels present here include Zara, Mexx and British House. H & M and Marks & Spencer are to open soon. In my view, luxury and premium labels still have most potential for growth. Most entrepreneurs are focused on cooperation with foreign companies as the domestic market still lacks enough manufactures of modern fashionable clothing. »

BRAX boutique in Perm

The market situation in Nizhny Novgorod, Perm and Kazan can be rightfully considered a model which describes general conditions of the domestic market of ready-made mass-market clothing. I.e. most local players are not able to make proper use of the available market space and have to lose their ground in the competition with new retailers. Ralf Ringer and Visshaya Liga are the two exceptions to this negative trend.

In Summa Accordingly, it is unrealistic to hope that regional companies and entrepreneurs will be able to eat into the share of the Russian clothing market, its lion’s share given away to foreign cosmopolitan brands. The rivalry between them will increase to the consumer’s satisfaction. «Apparently, the market is going to become more consolidated over the next five years. This will lead to a more fierce competition for the consumer,» expects Olga Zapolskaya. «The means of developing the customer’s loyalty are now various. The Internet technologies – virtual services, applications, e-shops, etc. – are bound to become the retailers’ most effective choice. Social networks remain to be a little-studied but rather efficient tool which has not yet found its deserved popularity with retailers. Another positive consequence of the crisis is a transition from «mega prices» to «mega ideas». In the last few years manufactures decided to take things easy and play on the price and the brand name and didn’t attempt to present any interesting commercial collections. Though the situation has changed, the trend seems here to stay. We should also expect the development of the eco-trend which, being popular all over the world, is not yet that powerful in Russia. These are clothes made of eco-friendly fabrics, eco-friendly packaging materials, energy-saving production, etc.» Strenesse FW 2010/11

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Regions Report

Voronezh General information Founded in: 1585 Area, km2: 590.5 Distance from Moscow, km.: 515 Population, thousand people: 961.82 Annual increase in population, thousand people: 7.01 Unemployed, thousand people: 13.75 Average salary, €/month: 290 – 350 Subsistence level, €/month: 140 Climate: moderate Average annual temperature, °С: +6.5 Average temperature in January, °С: -7.4 Average temperature in June, °С: +18.5

Overview

Shopping area: Between 2004 and 2010, twelve shopping malls and shopping and entertainment centers with a total area of 653.4 thousand sq. m. were built in the “center of the Black Earth Region”. The years 2007 and 2010 turned out to be the most successful ones in this regard (see the chart). 12

shopping areas, thousand sq. m.

In terms of its population, the city of Voronezh ranks 15th in the country. Meanwhile, the earnings gain rate is low here and equals to 5-6% per year, which is much lower than the personal inflation rate. Voronezh has a highly developed industry, with machine engineering, metalworking, electronic, chemical and food industries prevailing and making the city one of the major economic centers of the country. However, the industrial output per capita is lower in Voronezh than the average industrial output in the region and in Russia on the whole. The industry of Voronezh has been stagnant for a few years, and the equipment deterioration has reached staggering 48 percent. The current situation is to be blamed for the city budget deficit (€19.77 million as of the last year) as well as for the low personal income of those who are employed in the industrial sector. However pessimistic the circumstances may be, the city is undergoing a construction boom. Last year alone, 34 hectares of land plots were allocated for construction, of which 5.5 hectares were allocated for the individual housing construction. Much of this land Figure 1. Dynamics of the construction of shopping areas in Voronezh in 2004 – 2010, thousand sq. m/year is within the city boundaries, mostly in central districts.

built over the year, total number by the next year

Annual fashion industry award

Regions Report

Since 2005, the developers have been staking on shopping and entertainment centers of local, regional and super-regional importance. The most ambitious players in this area are Gallery Chizhov, VDK and OOO Taly. Their contribution to the total shopping area during the last 6 years has reached almost 65%. Expectations of those who have “Gallery Chizhov” shopping center decided to invest in the development of retail property are based on not only the purchasing power of the city residents but also on other factors. It is well-known that today Voronezh forms an urban agglomeration together with the town of Novovoronezh and Semiluksly, Novousmansky, Kashirsky, Ramonsky and Khokholsky municipal districts, due to which the total number of potential buyers exceeds one million. However, the estimates of the developing companies are much higher than “Voronezh urban agglomeration”. For example, the owners of the Grad shopping and entertainment center, which is located on the Voronezh – Moscow motorway near the town of Yamnoye, also target the dwellers of residential areas that are within a 30-120 minute driving distance from Voronezh. This area includes such cities as Lipetsk, Tambov, Belgorod, Kursk, Borisoglebsk and more than 10 relatively large municipal districts, small towns and villages.

“Moskovsky prospekt” shopping mall

Retail: Now that the Cherkizovsky market – the major distribution center for poor-quality clothing – is closed, local businessmen have to look for new means of subsistence and come up with new business ideas. The ration between local retail outlets and various mono brand stores opened under a franchise agreement is different for each shopping mall and ranges between 68% and 16%. Apparently, the number of shops opened on the own initiative of local busi-

Regions Report

nessmen depends on the policy perused by the management of each shopping and entertainment center. For example, the Mezhdunarodny super-regional shopping mall has the lowest number of “nameless” retail outlets. The shopping mall represents such mass-market, masstige and middle-up brands as C’N’C Costume National, Just Cavalli, Guess, Mariella Burani and Mandarina Duck, Mango, Benet“MaksiMir” shopping center ton, Sisley. In the outcoming year, the major achievement for the ready-made clothing market in Voronezh is the opening of the Inditex Fashion Group that represents the family of brands from Bershka to Zara. Their mono-brand stores are housed in the Grad shopping and entertainment center. The attractive market with a large potential target group has not been overlooked by simpler players of the mass-market segment like SELA, TVOE, Terranova, Zolla, O’stin, People and others. We must also mention the initiative of some local businessmen who try to promote high-quality European clothes from Germany and Poland. For example, the Collections of German clothes has been in the market in Voronezh since 2004. The company runs three multi-brand stores with the same name and an official boutique of Escada Sport. The brand portfolio of the company includes Apart, Laurel, Roeckl and many others. A mono-brand store for the Polish brand House has recently opened.

Prospects for development: At this stage, it is impossible to talk about the market segmentation – for example, specialized mono-brand stores are not represented at all (e.g. clothing for men). Conceptual multibrand stores are not present in the market either.

Steinberg boutique

Regions Report

Yekaterinburg General information Founded in: 1723 Area, sq. km: 1151 Distance from Moscow, km: 1670 Population, thousand people: 1343.84 Annual population growth, thousand people: 8.38 Number of unemployed, thousand people: 14.69 Average salary, €/month: 455 – 580 Subsistence level, €/month: 140 Climate: temperate continental Average temperature, °С: +2.7 Average temperature in January, °С: -13.7 Average temperature in July, °С: +16.9 “Pokrovsky Passazh” shopping center

Overview: Owing to highly developed heavy, mining, light, transport and logistics industries, intense cultural and academic life of the city and a sufficient number of customers, the ready-made clothing market has been growing rapidly. For example, in 2002-2005 the market doubled; the average annual growth rate fluctuated between 15% and 50%, many times exceeding the average European indicators. According to various estimates, the present market size varies from 896.97 to 1121.83 million Euros. Moreover, the experts believe that the share of the fashion industry products in the city’s sales volume will be growing. Yekaterinburg is one of the few Russian cities, where the local designers and textile manufacturers make quite a considerable contribution to the industry. At present there are over 30 companies and brands, offering products for the most diverse range of customers – from youth clothing lines, children’s and even baby clothing lines to exclusive up-market products. According to various estimates, the share of the Vajnera street 16

Regions Report

“Greenwich“ shopping mall

local designers in the ready-made clothing market of Yekaterinburg accounts for 1-5%, the annual increase in production amounts to 10-15%, and 80% of the production is distributed outside the city’s market.

Shopping Areas: Between 2005 and 2009 the overall shopping area was growing considerably – about 623.61thousand sq. m. were built during this period. Four other large shopping malls with the total area of about 245 thousand sq. m. “Park House” shopping mall will have been built by 2012. At present there are over 40 shopping malls in Yekaterinburg. The most popular with local buyers are the Tikhvin gallery, Evropa-Yekaterinburg, Limerance, Pokrovsky Passazh and Corteo fashion Mall, representing premium brands, and mass-market Uspensky, Greenwich and Park House shopping malls. Retail: For the last 8 years the market niche of the products designed for middle class and lower middle class, the lion’s share of which are young people, has been actively filled. While the city’s brand portfolio has been enlarging, the boutique chain of the national and foreign retailers has been growing. Since 2008 the brands of Inditex Group have been represented in the MEGA shopping 17

Regions Report mall, while the brands Mango and Benetton already have three or four monobrand boutiques each, not only in the city centre, but also in the peripheral areas – such as Verkh-Isetsky and Zheleznodorozhny districts. In the context of the ready-made clothing market development the market segment of masstige and luxury goods is very illustrative. At present this «sweet spot» is occupied by 5 companies. The largest market share is held by the local market players Weda Trade Holding and Domino Fashion Group, the companies Limerance fashion center and Luxury Gallery are focused on the cooperation with the Moscow luxury groups Jamilko and Richmond Group. Recently the Bosco company has appeared in the local market and opened Etro, Armani Collezioni, Hugo Boss, Bosco Sport boutiques in the Evropa shopping mall. The monobrands Louis Vuitton, Chanel and Dior, set up directly by the brand owners, started operating in the market a year ago. Among the local clothing producers it is worth to note Larisa Selyanina’s Knitwear Studio and Lyudmila Pashevich’s Fashion House. Such designers as Lora Dembitskaya, Masha Varlamova, Tatyana Bochkareva, Konstantin Tomilov and Nikita Baranov have their own production and sales outlets. The companies Anton Ilyenkov Design and Shishkin produce men’s designer clothing. Besides, new local brands appear every year. One can judge about the scale of the local fashion industry by the fact that Yekaterinburg hosts its own fashion week that was earlier called Ural Fashion Week and is now known as Yekaterinburg Fashion Week. The event lasts six days and showcases 1000 coordinated outfits created solely by local designers. Among the other fashion projects with an international scope it is worth to note Russian-British Fashion Forum and many private visits of the British designers, of which the visit of Dame Vivienne Westwood attracted the most attention.

Promising niches: According to many participants of Yekaterinburg market, despite fierce competition and general maturity of the market, there are still opportunities for sustainable work and further development. For example, the niche of fashion multibrands seems very promising. Practice proved that it is the multibrand format that turned out to be the most effective in the crisis period of 2008-2009. In this regard, the production with the largest commercial potential is the collections of the modern American, Belgian and Japanese designers, as their collections are light, fresh and are rather favored in the Russian market. “Limerance” shopping center 18

Regions Report

Corteo Fashion Mall

Emporio Armani boutique in Corteo Fashion Mall

Regions Report

Kazan General information Founded in: 1005 Area, km2: 613.3 Distance from Moscow, km: 818 Population, thousand people: 1139 Annual increase in population, thousand people: 3.91 Unemployed, thousand people: 19.36 Average salary, €/month: 385 – 492 Subsistence level, €/month: 126.02 Climate: moderate continental Average annual temperature, °С: +4.1 Average temperature in January, °С: -11.6 Average temperature in June, °С: +18.0

Overview: Experts believe that the volume of the ready-made clothing market is about €143.32 – 185.33 million per year. The growth in this sector of retail trade can be attributed to the highly developed industry, transport infrastructure, rich cultural heritage, traditions, and full-fledged entertainment industry as well as to the influx of tourists, which makes Kazan one of the most famous tourist attractions in Russia. Nevertheless, the development of the ready-made clothing market – from the flea market to the boutique – began only ten years ago, when large shopping and entertainment centers began to emerge within the city boundaries. The construction of shopping malls is still underway. The more square meters of shopping areas are built, the more the clothing market expands in terms of its quality and quantity. This growth is connected not only with the mass-market, but also with the masstige and luxury brands. The participants of the local market claim that the number of players in the luxury sector is very small, and these are solely and exclusively local businessmen.

“Tandem“ shopping mall

Regions Report Shopping areas: At present, there are eight major shopping and entertainment centers with the area of 25 thousand sq. m. in Kazan. Seven of them are local centers, and Park House Kazan, which was designed by Giovanni Bartoli, is of regional importance. “Suvar Plaza” shopping center Their total area is 207 thousand sq. m. The shopping and entertainment centers have virtually become centers for the development of national and international retail trade, sales centers for various clothes. There is no information about the construction of new shopping areas. Still, according to various data, there are eighteen shopping centers in Kazan that, apart from all other things, also sell clothes. Their total area is 508.5 thousand sq. m. They were built in 20032009. In 2006, when about 230 thousand sq. m. of shopping areas were put into operation, the construction was at its peak. The major developer is Odak – a Turkish company. The rental payments range between 113.7 and 340.3 €/m2 per year in remote areas and between 450 and 1050 €/m2 in the city center. The record high figure of €2270 per sq. m. has been registered in the MEGA-Kazan shopping mall.

Retail: The set of brands is not very much different from brands in stock of any Moscow shopping mall; you can find everything in Kazan shopping and entertainment centers: from Adidas to Zara. However, such brands as SELA, Terranova, Oggi, S.Oliver and so on are dominant in the structure of the supply. Such major European retailers as Zara and Bershka have entered the market and each of them has opened one store; The Mango has ventured to open two stores. The Suvar Plaza shopping mall is the most interesting one in terms of its brands; here you can find clothes and accessories of such brands as Frey Wille, Furla, Bal“Koltso” shopping center 21

Regions Report dinini and others. Russian retailers turn out to be the most daring ones in the Kazan market. Each of such companies as Zarina, Glance, 5 Karmanov and TVOE has opened four stores. The Finn Flare, which is more cautious, has opened three mono-brand stores. Of Russian designers, clothes by Kira Plastinina are most widely represented in the market; there are also boutiques that sell clothes by Sultanna Frantsuzova and Evgenia Ostrovskaya. The luxury brands are hardly represented on the market. There are only three official franchise stores in Kazan – Escada, Escada Sport and Corneliani boutiques; all of them were opened in 2008. Such mono-brands as Balmain and Donna Karan are expected to come onto the market in 2011-2012. There are also a few multi-brand stores, for example Milano-Butik and Milano Sport, which sell clothes of such brands as Oscar de la Renta, Lanvin, Givenchy, Celine, Fendi and luxury shoes of the Walter Steiger brand. Speaking about conceptual projects, we can mention only one multi-brand store – F-People, which sells clothes and accessories of 30 brands, related to one another by the idea of intellectual style. The company portfolio also includes such names as Dries Norten, Kris van Assche, John Varvatos, Neil Barrett, Martin Margiela and Rick Owens.

Prospects for development The weakest but not unpopular segment of the readymade clothing in Kazan is that of luxury clothing. Only some local businessmen are trying to tap this market. Three are no multi-brand stores for men’s luxury clothing, which have already proved to be effective both in Europe and in many regions of Russia. It would be interesting to mention that, according to the Premier 2010 survey, 65% of super consumers in Kazan are quite allegiant to products manufactured in Russia. The low-level trading format (corners and shop-in-shop) is not developed, and this can become an important factor in the growth and expansion of external retailers. A large number of “no-format” and ineffective stores are run by local businessmen and occupy attractive shopping areas. This is also a positive factor and resource for the growth and development of Russian and foreign companies whose interest in Kazan is increasing due to the growing prestige of the city and the upcoming World Student Games and the 2018 World Cup.

“Park House” shopping center

Regions Report

Nizhny Novgorod General information Founded in: 1221 Area, sq. km: 460 Distance from Moscow, km: 450 Population, thousand people: 1278.8 Annual population growth, thousand people: –6.4 Number of unemployed, thousand people: 9.2 Average salary, €/month: 494–618 Subsistence level, €/month: 132.74 Climate: temperate continental Average temperature, °С: +4.4 Average temperature in January, °С: -10 Average temperature in June, °С: +17.2

Overview: Nizhny Novgorod today is the fifth largest city in Russia by population. It is an important economic, cultural and transportation center. Nizhny Novgorod agglomeration (2.02 mln people), including Dzerzhinsk and six large districts, is the largest in the Middle Volga Region and is the fifth largest on a national scale. Proximity to the capital — 450 km in an eastern direction, as well as a well-developed transportation system and an existing transport corridor make it possible to identify Moscow — Nizhny Novgorod conurbation. The city is located upon the conflux of two big rivers — the Oka and the Volga. The Oka divides the city in two parts: the upper area (on Dyatlovy Hills) and the lower area (on the lower bank of the river). Since 2000 Nizhny Novgorod has been the center of Volga Federal District. Commercial and business center of the city is being formed in its historic center, often by means of infill development. In 2010 the city masterplan was adopted, making provisions for transfer“Muravei” department store 23

Regions Report ring business activity to the other side of the river, together with the development of metro, express tramway and overall extension of the city area.

Shopping Areas: Development of commercial and retail property market in Nizhny “Etazhi” shopping center Novgorod was marked in the period between 2000 and 2008, when 12 shopping malls and shopping and entertainment centers were built with a total area of about 240 thousand sq. m. – a fairly modest figure for a million-plus city. The appearance of the MEGA shopping mall in the local market in 2006 increased total area of retail property by 398 thousand sq. m. Several projects were started in 2008, but due to the economic crisis their construction has not been finished yet. For the third quarter of 2010 the total area of suspended construction amounted to 232.9 thousand sq. m. The shopping malls most popular with retailers are Zolotaya Milya (Golden Mile), Respublica (Republic) and Etazhi (The Floors), constructed in 2002-2005. Rental rate varies from 245 to 1123.6 € sq. m./year. Maximum quote of €2956 sq. m./year was marked in Muravei shopping mall, located in Sormovsky district, in the north-western part of the city.

Retail: Ready-made

“Lobachevski Plaza” shopping mall

clothing market can easily concede to Moscow and St. Petersburg, for almost all companies and brands operating in Russia are represented here. Three mono-brand stores were opened by Woolstreet, Finn Flare, Zarina, Mexx, Colin’s and Steilmann, two stores are kept by Savage, Zolla, TVOYE, Gianni Mor-

Regions Report cello, Esprit, BGN, MoDaMo and Gloria Jeans. All in all, mass-market and masstige clothing is represented by 90 brands, including those rarely found in other regions of Russia, like Isabel de Pedro, Marina Rinaldi, Yves Delorme, Cop Copine and others. A slightly different situation can be observed in luxury segment, though serious chang“Respublica” shopping center es were noted here over the last year. In the Lobachevsky-PLAZA shopping mall the leading world brands like Sonia Rykiel, Salvatore Ferragamo, Burberry, Сostume national, Missoni, Ermenegildo Zegna, Emporio Armani opened their corners and boutiques, not mentioning the jewelry and watch making companies. Interestingly, the credit for that, except for the Bosco Sport boutique, is due to local companies, chiefly Milo and Jolie. However, according to the experts, the prices in Nizhny Novgorod are 10% lower than in Moscow, at the same time being 25–40% higher than in Europe, which is caused by specific features of Russian customs legislation and transportation costs. Luxury sector in Nizhny Novgorod is considered mature, formed up to 95%. However its growth and development rates are considerably lower compared to Moscow. The reason is that local demand is mostly covered by shopping which local customers do in Moscow and abroad. This habit, formed in the times of supply shortage during the Soviet period still exists, especially as Moscow is within less than five-hour drive. It is also assumed that boutiques in Nizhny Novgorod offer a limited range of goods, as the key format for premium brands here is a corner or a multibrand store, which does not allow for all the brand lines to be fully represented.

Promising niches: Despite the fact that almost all segments of ready-made clothing market have been tapped, there is still a possibility for further growth, mainly through creating currently popular conceptual boutiques. In the premium segment in particular the city is lacking “new wave” luxury brands, such as a number of brands by Belgium and Japanese designers, contemporary British and American companies. Still popular are multi-brand stores for men’s clothes, offering a possibility to form full stock of clothes — from business and dress suits with suitable accessories to casual clothing or cruise wear.

Regions Report

Novosibirsk General information Founded in: 1903 Area, sq.km.: 506.7 Distance from Moscow, km.: 3486 Population, thousand people: 1409.14 Annual increase in population, thousand people: 5.67 Unemployed, thousand people: 14.2 Average salary, €/month: 385 – 495 Subsistence level, €/month: 145.02 Climate: continental Annual average temperature: °С: +0.2 Average temperature in January: °С: -19 Average temperature in June: °С: +19.2

Overview: In terms of its population the city of Novosibirsk ranks third in Russia and it is the largest municipal district (also in terms of the population) in the Russian Federation. The number of young people with university education prevailing (due to the significant amount of the education institutions within Novosibirsk`s Academic Town), the city looks attractive to foreign manufactures of medium/high-priced clothing. The city is one of the three most promising cities with regard to opening new commercial premises in Russia as of 2009. In terms of retail turnover Novosibirsk is also among the leading three cities following in the footsteps of Yekaterinburg. Shopping area: According to NAI Becar, the construction of several shopping facilities with a total area of 730 thousand sq. m. had been frozen by the end of 2009, giving it a 53% share of the initial project scope. Several shopping centers have been put up for sale, among them are Bolshaya Medvedit“Moskva” shopping center 26

Regions Report sa –62.1 thousand sq. m., Moskva – 20.6 thousand sq. m., Domocentr- 17.5 thousand sq. m., Kalinacenter – 10.3 thousand sq. m., Zelenye Kupola – 6 thousand sq.m., Flagman – 4.4 thousand sq.m., Bonansa – 3.5 thousand sq. m. Having paid $ 30 million to the RID Group, SUN “Grand City” shopping center Investments Partners acquired the Omega Plaza shopping center (90 thousand sq. m. on Karl Marx Square, Novosibirsk), which is still under construction. The construction is to have been completed by 2013 with extra $100 million being invested in the project. There are several «frozen» construction projects owned by Moscow developers and foreign investors: Aura – 145 thousand sq. m., Planeta – 120 thousand sq. m., Kompleks na Kamenskoy – 180 thousand sq. m., Kamenka – 130 thousand sq. m. European Bank for Reconstruction and Development together with UniCredit have opened the long-term Amstar Global Partners credit line worth € 60 million, the fund being channeled into the completion of the Aura shopping and entertainment center. The project will help eliminate the gap in the development of commercial property segment between Novosibirsk and other RF municipal district centers. The four-level complex of the shopping and entertainment center with a total area of 145 thousand sq. m. will house a food supermarket, a DIY-supermarket, a multiplex and a two-level underground car parking for 1500 parking places. The project cost is estimated at about € 154 million. By the end of February 2010, comparing to other commercial property, an increase in rental costs concerned sales premises only. Today`s rental rate is 350 – 1350 c.u. per year. Despite Novosibirsk is very promising in terms of its economic growth, the experts point at the surplus of the sales premises on offer. As a result the «frozen» projects are hardly to reach the completion point. “Sibirsky Mall” 27

Regions Report Retail: The vast majority of boutiques, clothes, shoe, and accessories stores sprawl along the four Novosibirsk streets – in Krasny Prospect, Vokzalnaya Magistral, Vatutin Street and Karl Marx Street. There you can find some shopping centers and mono-brand stores like Hugo Boss, Calzedonia, Kira Plastinina, Incity, MoDaMo, Motivi and many others. The collection of the brands like these in the city`s main streets is a good indicator of the development of ready-made clothing market which is suffocating in the megalopolis affected by a modest income of its population. Some foreign retailers and clothing manufactures have entered Novosibirsk market through the MEGA – Novosibirsk company which houses such brand stores as Inditex – Bershka, Pull&Bear, Zara, Mango, Benetton, Vero Moda, Jack Jones, BGN, Camaieu and other members of MEGA`s brandbook whose role in advancing the European mass-market brands within the RF boundaries is highly appreciated. Meanwhile, such major Russian companies as Finn Flare, Zarina and Econica have entrenched their market positions in the severe region of Siberia. Novosibirsk features six internet–shops offering men, women and children`s clothing as well as accessories which is not common for other regions of Russia. Many of the internet-shops operate as a studio – i.e. there is a small saloon in the city center where you can buy any item of clothes or you can order its delivery via the Internet. Such companies use video broadcasting: e.g. a potential customer can ask to show an item he/she would like to buy via Skype to make a final decision on the purchase. Prospects for development: In spite of Novosibirsk`s mass-market being well occupied mostly by the European companies, the city can still provide opportunities for further growth and introduce new projects to serve specific purposes. Novosibirsk`s market virtually lacks brand men`s wear, especially underwear. Novosibirsk offers great opportunities for various multi-brand stores as well, e.g. today there are several saloons retailing high-quality brand clothing by Italian, Finnish, German, Estonian, Latvian and Korean producers still unknown to the Russian audience.

“Kalina-Center” shopping mall

Regions Report

Rostov-on-Don General information Founded in: 1749 Area, km2: 354 Distance from Moscow, km: 1101 Population, thousand people: 1048.1 Annual increase in population, thousand people: 3.3 Unemployed, thousand people: 13.63 Average salary, €/month: 375 – 475 Subsistence level, €/month: 136.95 Climate: humid continental Average temperature, °С: +9.7 Average temperature in January, °С: –4.4 Average temperature in June, °С: +21.2

Overview: The participants of the Fashion Retail Russia-2010 business summit admit that the South of Russia is one of the most attractive regions for the development of business in the segment of ready-made clothing for mass consumption. These territories are of special interest for those who build franchising chains. It’s obvious that Rostov-on-Don being one more Russian million-plus city is bound to become the center where the key forces meet. Shopping area: The «Southern Center of Russia» has been undergoing considerable changes since 2005. Last year alone, two shopping and entertainment centers with a total area of 69 thousand sq.m. were built. In general, between 2006 and 2009 the market area, according to different estimates, expanded by 155-200 thousand sq.m. of shopping area, which looks impressive for the city with the population of 1.7 million people (1.3 million people considering agglomeration or 3.57 million considering all the population of Ros“Megamag” shopping center 29

Regions Report tovskaya and Shakhtinskaya conurbation). What is more, the investors, including the foreign ones, and the developers are not going to stop: currently the construction of a colossal (by regional standards) Vsplesk shopping mall in the Aksaisky district is in full swing. The announced area is 212 thousand sq.m., 58 of which are allocated for a shopping center and six for a grocery hypermarket. The shopping mall is expected “tsum” to open its doors in 2012. Among the existing projects, the MEGA Rostov-on-Don and the Gorizont shopping and entertainment center fall within the category of super regional complexes. The current rent rates vary greatly between 3 up to 92.7 thousand rubles/sq.m. per year. The opening of the A’ Stor Plaza shopping mall with a total area of 22 thousand sq.m. in 2006, which houses such mono-brands as Salvatore Ferragamo, Frey Wille, Burberry, Sonya Rykiel and others, is of no less importance for the local market. The experts tend to connect such enviable revival to the fact that the Ministry of Regional Development has begun on working out the Big Rostov program. It implies that very soon Rostov will develop into an agglomeration which will include satellite towns within a radius of 12 km.

Retail: In terms of the quality of ready-made clothing, the Rostov-on-Don market can boast of almost 170 international and Russian brands. Official mono- brand stores of J.M. Weston, Salvatore Ferragamo, Yves Delorme, Lacoste are successfully operating in the city. Baldinini, Guess by Marciano, Wolford and Karen Millen have opened two boutiques each. Moreover, local malls often represent brands 30

“Astor Plaza” shopping mall

Regions Report which are not familiar to Russian buyers, e.g. Italian Lea Foscati and Flavio Costellani, Furla and Betty Blue are difficult to find even in Moscow. Cop Copine and the ParisHilton mono-brand are among masstige Europeans that risked entering this market. The mass-market segment also provides enviable variety. For example, the brands from the pleiad of the Inditex Fashion Group are presented here in full. Their colleagues from Mango, who have opened their two stores, are also trying their luck under the Rostov sun. The Rostov fashion map also features Marks&Spencer, Tommy Hilfiger, Benetton and some other European and American brands. Russian players are more cautious and the number of the federal franchisee retailers and manufactures is, en masse, considerably smaller than that of their foreign partners. By now only such designers as Kira Plastinina and Sultanna Frantsuzova have introduced themselves. Zarina, Donatto, Glance have opened their boutiques, Snezhnaya Koroleva and Finn Flare chains have two shops each. Among all the «invaders» only Sela, operating its four mono-brands stores, maintains the leading position. Econika with its four corners and casekits, Centrobuv and Carlo Pazolini have established a firm foothold in the subsegment of shoes and accessories. Prospects for development: The ready-made clothing market in Rostov-on-Don is a controversial, eclectic and original, in its own way, phenomenon. Nevertheless, it is a promising spot for investments. The analysts estimate that its volume may reach up to 32 bln rubles in 2010. The current dynamic development is on mostly due to the construction of large shopping and entertainment centers which are quickly taken over by foreign and Russian retailers and manufactures. The contribution of the local companies, the major being the Gorizont holding company, makes up 60%, the rest of the market is shared between external players. The important resource factor for growth and development of brands that enter this market is a significant number of shops and low-effective trading enterprises occupying attractive areas.

“Taler” shopping center

Regions Report

Saint-Petersburg General information Founded in: 1703 Area, sq.km: 1439 Distance from Moscow, km.: 696 Population, thousand people: 4613.8 Annual increase in population, thousand people: +22.88 Unemployed, thousand people: 29.7 Average salary, €/month: 519 – 668 Subsistence level, €/month: 135 Climate: continental, moderately continental Average annual temperature, °С: +5.4 Average temperature in January, °С: – 8.8 Average temperature in June, °С: +11.8

Overview: Since mid-2008 Saint-Petersburg has ranked second after Moscow in terms of its attractiveness for investors. It particularly concerns the construction of retail outlets which, in their turn, determine numerous indicators which describe ready-made brand clothing market. Shopping area: In terms of opening new shopping areas 2009 was the most disappointing for the city for the last five years. Only eight shopping centers with a total area of 150 thousand sq. m. were put into operation, which is half as much as it was planned. The main reason is deferring the opening to a later date and freezing the construction already under way. Currently the construction is still going on at the sites which were launched before 2008 and have been sufficiently invested ever since. The major of them are shopping and entertainment centers Leto, Galeria, Cruise and AURA. Four centers with a total area of 158.5 thousand sq.m. are scheduled to be opened in 2011. On average the shopping area-population ratio is 537 Gostinny Dvor on Nevsky prospekt 32

Regions Report sq. m. per one thousand people. Moskovsky and Primorsky districts are leading with more than 1.2 sq. m. per one thousand residents, then follow Vyborgsky (more than one thousand sq. m.) and Nevsky (about 750 sq.m.) districts. At present over 90% of the shopping space offered by malls is taken. Vacant space is usually inconveniently-located or has other disadvantages. Most successful shopMEGA Dybenko ping centers, such as MEGA Dybenko, Raduga or Grand-Canyon, still keep their waiting lists. Retail: One of the major brand portfolios is held by family shopping and entertainment centre Galeria, which is the city’s biggest (193 thousand sq. m.) operating shopping facility some of its part still being under construction. The five floors of the shopping arcade will house more than 250 international and Russian brand stores, such as Topshop, Topman, Miss Selfridges, Mango, InCity, Colin’s, Nice Connection, Karen Millen, CK Jeans, Oasis, Manoukian, Zimaletto, O’Stin, Springfield, Meucci, Swarovski, Henderson, Accessorize, Woolstreet, Monton, Motivi, Fiorella Rubino, Intimissimi, Calzedonia, Tezenis, Tatuum, Nike, Monsoon, Alessandro Frenza and many others. The BNS company rented 800 sq.m. in the Leto shopping mall. It opened such stores as Topshop, Topman and Miss Selfridges. According to the experts, the rent could have been agreed upon 1,000-1,200 rubles per sq. m. H & M and the Payless shoe shop chain have already announced their plans to enter the city market, the Naisten Pukutendas Oy (NP) clothing store has opened, Stockmann is expanding its Lindex and Seppala chains. Galeria is planning to open Habitat and Mamas & Papas outlets. “Frantsuzsky Bulvar” shopping center 33

Regions Report A downturn in the buying activity increased the amount of vacant shopping premises in the street-retail segment. Major international companies relocate their stores to shopping centres, thus cutting down on rental costs. This also allowed renting premises in Nevsky Prospekt, Bolshoi Prospekt and other prestigious shopping areas of the city. The street-retail in the centre of St. Petersburg is characterized by active rotation of lessees (expensive stores and restaurants giving way to more democratic places), for example, the Swarovski boutique was replaced with the café Yabloko, the Escada store moved out giving way to the restaurant Dve palochki, the Khlebnikov’s jewellery store was replaced with the café Kofeinaya Gamma, Women’s Secret with the restaurant Dubai, and so on. There is not too much race for the premises given for rent – since the beginning of the year only two major rental deals for shopping premises were made. Thus, Sportmaster rented 4.160 sq. m. for seven years in Grand Canyon. Inditex rented around 3.100 sq.m. in Leto for 20 years. The monthly rental rate per sq.m in Grand Canyon on average amounts to $60-80 ($1=31 rubles). There is one special thing about the Russian lessors: they set their rental rate considering the requirements of prospective lessees disregarding possible efficiency or return. Thus, in unpopular shopping centres located far from metro stations the rental rate decreased by 60% against the pre-crisis level. In the street-retail segment, including Nevsky Prospekt, the decrease amounted to 40%. According to the market experts, it will now cost $2,400-3,000 (including VAT but excluding operational expenses) per year to rent one sq.m. in Nevsky Prospekt and $1,200-1,800 in Bolshoy Prospekt. Rental rates for street-retail premises in St.Petersburg in comparison with other European cities have suffered a significant decrease. In 2009 it amounted to about 32%, compared with 16% in Moscow, 13% in London, 10% in Barcelona. Such decrease makes it possible to conclude that before 2008 the rates were pitched too high. Growth factors Starting from 2011, the offer of vacant shopping premises will be gradually sloping down. In this light it is reasonable to open shopping centers in the districts which lack them (e.g. Petrogradsky district) or where huge condominiums are under construction (Kudrovo, Baltic Pearl, etc.); It may be expected that major conservative investment funds, which are not represented in Russia yet, will enter the market. Besides, the world economic crisis and decrease in profitability of foreign real estate may be regarded as added incentives for new investors to enter the market of St.Petersburg. Shopping complex on Ligovsky prospekt

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Regions Report

SOCHI General information Founded in: 1838 Area, sq. km.: 3502 Distance from Moscow, km.: 1647 Population, thousand people: 341.9 Annual increase in population, thousand people: + 3.1 Unemployed rate, thousand people: 13.63 Average salary, €/month: 470 – 544 Subsistence level, €/month: 151.58 Climate: humid continental Annual average temperature: °С: +14.2 Average temperature in January: °С: +5.7 Average temperature in June: °С: +20.0

Overview: Situated on the same latitude as Nice, Sochi is a key sea resort in Russia that attracts a myriad of tourists from April till October every year. It is no secret that the lion`s share of the city local economy belongs to domestic tourism. The tourism, leisure and catering services market amounted to 25 bn. RUB last year. This trend gathering momentum, these sectors of economy are at present experiencing steady growth and can boast a sound return on investment for their projects – for hotels it does not exceed 5-7 years, according to the European Center Marketing & Real Estate. The current boom in the tourism and leisure market encouraged by the upcoming 2014 Winter Olympics annually provides up to 200 employment opportunities and facilitates raising the welfare level of the population. For example, the average salary increased by 17 % between 2008 and 2009. Last year the number of Sochi permanent residents increased to 411 thousand people with 283 thousand of labor force and 130 thousand involved in small business. Each year this indicator witnesses an aver“Alexandria” shopping center 36

Regions Report age 3.2% increase. The demographic and social-economic characteristics gradually lead to a shift in consumer motivation and, consequently, in demand. For example, for the last three –four years the experts have seen a decrease in demand for the current consumption goods in an average family expenditure while the demand for the durables has been increasing. All economic activities in “Alexandria” shopping center Sochi are aiming at achieving a considerable rise in tourist inflow (mainly from Russia) in high season. The incredibly large database of the resort premises comprises nearly 147 objects among which 100 account for recreation and retreat centers, rest homes and sanatoriums, while the rest stands for hotels, one of which has been assigned the 5-star hotel rating with the nine being assigned the 4-star hotel rating. In this connection the satellite leisure industry is a perfect match to the tourism market. It is common knowledge that the more various services the leisure industry can provide, the higher the demand for the fashion goods is. Today Sochi can boast more that 215 cafes, bars, restaurants, night clubs and other entertainment venues with international companies and the state owning only a surprising 3.3% share in this sector. The thriving entertainment and leisure industry implies a considerable demand for clothes and accessories. The number of the registered trade companies offering clothes at a wide range of price and quality to the visitors and the locals can argue in favor of this statement. Sales premises: There are nine major shopping malls in Russia`s resort capital. This year has witnessed the opening of a new shopping and entertainment “La Scala” boutique 37

Regions Report center Olymp with a total area of 34 400 sq. m. As a whole, four new state-of-the-art centers with the overall area of 69 thousand sq. m. have appeared between 2007 and 2010. Another four construction projects are to be completed by the beginning of the Olympics, three such projects being carried out in the Centre District (Na Vorovskogo, Sochi-City, Sputnik), one project – in Adler District (Ocean). Moreover the city`s new shopping and entertainment center Sochi Mall , a 177 thousand sq. m. complex, is to open in October, 2011. The cost of renting one sq. m. will amount to €300 – 750 per year with a 15 – 20% cost reduction for the low winter season. The cost of renting commercial premises varies more considerably – one sq. m. of a store or a boutique ranges from €1360 to 6200 per year.

Retail:The shopping malls mentioned above are currently housing nearly 220 of various boutiques, saloons and brand stores. Today Sochi market map has been marked by several major shopping networks of national importance such as Econica, FinnFlare, Glance, Centrobuv, Trevolina, Vyschaya League and others. Here you can also find such European brand stores like Pal Zilery, InWear/Matinique and Mango. The fashion lines by Dior and YSL are presented in the grand boutique with an ambitious name LaScala. Still the foreign players` market share is relatively modest: no more than 25 saloons and mono-brand stores versus 240 commercial projects developed by local businessmen. Sochi Institute of Fashion, Business and Law supports local readymade clothing market as well, there are some design-studios such as a large holding company Ludmila Ivanova`s Fashion House or Svetlana Gubskaya`s studio Lanaline&O with a modest production line providing an opportunity to produce small collections and to meet the demand for custom tailoring. Prospects for development: A trace amount of the players of national and international importance in Sochi`s market is a bonus they personally can benefit from. Firstly, the current ration between the market players makes it impossible to talk about competition between the network projects. Secondly, there are excellent opportunities for their further development through competition with local business representatives and an attempt at driving them out of their niche. Ludmila Ivanova’s Fashion House

Regions Report

Surgut General information Founded in: 1594 Area, sq.km: 213 Distance from Moscow, km.: 2,958 Population, thousand people: 341.9 Annual increase in population, thousand people: +4.73 Unemployed, thousand people: 5.11 Average salary, €/month: 1,112 – 1,705 Subsistence level, €/month: 225 Climate: continental Average annual temperature, °С: -1.9 Average temperature in January, °С: -20.9 Average temperature in June, °С: +14.3

At Fashion Retail Russia 2010 business summit Aniko Kostyal, Expansion Director for Northern, Central and Eastern Europe at Mango, told the guests and the participants that Surgut is a most attractive Russian city for the company, which is planning to open its mono-brand stores there. Apparently the interest of European market researchers is drawn by the fact that Surgut population is among the most affluent in the country.

Shopping area: At present there are not more than ten noteworthy shopping centers which can make the slightest difference to the market. The most popular with the locals are Imperial, Rebous, Mir, Tsentrcity and Rosich. A special mention should be made about Sibir as a shopping mall of regional significance, which houses the lion’s share of mono-brands and local initiatives. The remaining share of the market of clothing and accessories, apart from these more or less significant shopping agglomerations, mostly belongs to local companies which occupying the re“Gera“ shopping center 40

Regions Report maining shopping space in the city centre. The so-called «boutiques» are quire numerous in Surgut, as well as in many other cities and towns of Russia; these are usually opened on ground floors of nice-looking houses, in place of flats. The situation may change for the better if SKU, a major developing company, fulfills its construction plans. In this case the shopping area of the “Rosich” supermarket Northern city will expand by as much as 32.5 thousand sq. m.: it is scheduled to launch another shopping and entertainment centre called Vershina in the fourth quarter of 2010; the project is designed by Erick Van Egeraat, a well-known architect. The new and commercially attractive shopping areas are sure to be occupied not only by local companies in the market of ready-made clothing, but also foreign companies and major Russian retailers. However, considering that key market sectors are already well-developed, one should not expect any kind of a major shopping breakthrough from a city which population barely reaches 304 000 people.

Retail: If market growth is possible, it is likely to be a quality growth. Such scenario is rooted in a huge number of trade formats of local businesses. Various retail outlets usually grow at their expense. These account for up to 70% of Surgut market. Usually these are stores with modest names like Charm, Fason (Design), Stilnaya Odezhda (Stylish Wear) or simply For Men. Their range is certainly almost unpredictable, and the owners are reluctant to communicate. In particular, it is known that in such points of sale one may find such labels as FinnFlare. Customers are apparently mostly interested in practi“Mir na Yugorskoi“ shopping center 41

Regions Report cal and warm casual wear and active sports wear. Men’s wear accounts for a significant market share, which is clear taking into consideration sex composition of the population, in which women have a smaller share. The key part in demand for Luxe wear and accessories is not played by Italian and French premium brands, but by furs: apart from the two Russian retailers Surgut has three local fur shops and one tailor shop. The major is Vito Ponti, which 2008 received local Business-Leader award. While Mango is planning to open its mono-brand store, their Italian colleagues form Benetton are probing the market, as opposed to their strategy not to open a store in cities with the population less than 500 000 people. Besides, Surgut shopping market features such mass-market companies as Befree, Sela, Mexx; Italian men’s wear company Baurotti holds a separate shop. Active wear is represented by such majors as Columbia, the sports trio Adidas-Puma-Reebok and Sportmaster. Most of the abovementioned companies have their POS in the Sibir shopping mall. Other companies and retailers, especially Russian ones, are much more cautious as regards starting their business in the Northern city of Surgut. The advent of the Ketroy brand which opened its boutique here seems quite logical; no less justified is the appearance of the Donatto monobrand store. However, the company’s official website does not confirm the opening of its outlet in the «oil capital of Russia». Not less intriguing is opening of the SoFrench store by famous designer Sultana Frantsuzova. Snezhnaya Koroleva and Mir Kozhi I Meha are major Russian retailers holding key shares of the market. It is also worth mentioning TrentrObuv, Gloria Jeans and SweetMama. The appearance of the latter is apparently connected with sustainable population growth, 2.5 thousand newlyborns every year. It should also be noted that there are three stores operated by the RalfRinger company.

Prospects for development: Surgut market has typical Northern features. The opening of new shopping areas, such as the shopping and entertainment centre Vershina, will lead to a minor extension of the city’s brandbook; however, not at the expense of luxe or masstige brands. Taking into consideration climatic and social features of Surgut, the luxury segment is likely to be represented by such brands as SoFrench or Mango. Their production, however, considering its weighted average price, does not correspond to the current requirements, its purchase having no practical purpose either. This need is satisfied by numerous casual and active wear stores. “Sibir“ trading complex

Regions Report

Tyumen General information Founded in: 1586 Area, sq. km: 235 Distance from Moscow, km: 2144 Population, thousand people: 609.1 Annual population growth, thousand people: 9.9 Number of unemployed, thousand people: 2.52 Average salary, €/month: 656 Subsistence level, €/month: 131.9 Climate: temperate continental Average temperature, °С: 1.9 Average temperature in January, °С: -15.4 Average temperature in June, °С: +17.0

Overview: Tyumen, the first Russian city in Siberia, is currently an unofficial oil-and-gas capital of Russia, an administrative center of the Tyumen District and Region. The city is located on the West Syberian Plain, on the Tura river, a tributary of the Irtysh. City economy is based on oil and gas industry. Headquaters and representative offices of leading production and transportation companies, oilfield services and machine-building companies are located here, as well as Antiponsky Oil Processing Plant. About 48% of active age population work in large and medium-scale enterprises, while 5.4% are employed in numerous research and applied science centers. In January 2010 industrial production index of Tyumen enterprises (without small businesses) amounted to 100.5% (the general figure in Russia against the same period amounted to 110.2%). The biggest production growth indexes for the first half-year period of 2010 against the same period of 2009 are noted in petrochemicals production (+72%), pulp and paper industry, printing industry (+40.3%) and electrical ma“Kontinent” shopping center 43

Regions Report chinery production (+32.1%). Nevertheless most segments of economy have not reached the pre-crisis level of 2008. Overall retail volume in January-June 2010 came up to €1392.15 mln., or €2.29 mln. per capita. Shopping Areas: According to Regional Real Estate, total area of shopping malls in Tyumen amounts to 400 000 sq. m. (680 sq.m per one thousand people). The major part of shopping malls in the city are of regional class, with the share of 50% of the total sales area, shopping malls of district class (24 % of the total sales area) rank second. Rental rate varies from 475 – 1170 € per sq. m/year, annual average value increase - 6 — 7.3%. At present a number of shopping malls are being constructed, with a total area of 291 000 sq. m., including malls of super-regional scale, e.g. HyperCityMall with an area of 110 thousand sq. m. Most of them will be located in Leninsky District. By 2010 market capacity in Tyumen amounts to 691 000 sq. m. The 400 thousand sq.m currently offered on the market demonstrate a high demand for sales premises.

Retail: In a qualitative sense, the ready-made clothing market in Tyumen is by 60% focused on female clients, and 74% of existing shops are projects of local businesses. The share of monobrand franchise shops is small. O’Stin is the only brand that opened its three mono-brand stores; Cop.Copine, Axara, InCity, Olsen, BGN and Zolla currently own two stores. Among the brands found in Tyumen and not common for other Russian cities are Jus D’Orange (France), Popolare and Bizzarro (Italy), Balizza (Turkey), Jendo (Finland), Van Cliff (Netherlands). In the structure of European brands represented in Tyumen market, Italian brands are most prevalent. An interesting fact is that despite a high income level in the city, its market doesn’t have big European players – Savage, Sela and Oggi demonstrate the level of the brands present. Among those who ventured to have a try in this Siberian city, Mango and Benetton can be mentioned. According to local businessmen, many well-known companies do not even try to discuss opening a store in a city with a population of 600 thousand people. Promising niches: The multi-

“Gudvin” shopping mall

brand format is practically not developed at all, especially multi-brands of the middle-up brand segment. Despite the fact that there is a sufficient number of managers working in oil and gas sector, premium and luxury brands are almost non-existent.

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АММА

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Regions Report Moscow trade shows calendar 10.01 - 13.01 Mosshoes 17.01 - 20.01 Consumexpo’2011

15.02 - 18.02 Textillegprom 21.02 - 24.02 СРМ – Collection Premiere Moscow 21.02 - 24.02 CJF’2011. Spring 23.02 - 26.02 EURO SHOES PREMIERE COLLECTION 24.02 - 26.02 Stock-Show: Fashion OUTLET 26.02 - 09.03 YUVELIR - VESNA 04.03 - 06.03 Wedding World and Graduation Ball 10.03-11.03 Premiere Vision Moscow 11.03-13.03 Wedding Fashion, Eveningwear & Accessories 16.03 - 19.03 Trade Season CHAPEAU-2011 21.03 - 24.03 Mosshoes Dates are Volvo Fashion Week specified Moscow 17.05-19.05 OBUV. MIR KOZHI’2011. Spring Dates are Russian Fashion Week specified 27.04 - 29.04 MALL 14.05-23.05 17.05-19.05 18.05-20.05 25.05 - 29.05

YUVELIR - 2 LeShow SHOES FROM ITALY New Russian Style 2011

02.06 - 03.06 Fashion Retail Russia 46

January Footwear, Bags and Accessories International Exhibition of Consumer Goods February Women’s–, Menes–, Kidswear, Lingerie, Accessories and Young Fashion Women’s–, Men’s–, Kidswear, Lingerie, Accessories and Young Fashion Salon of Child and Junior Fashion, Maternity Wear Footwear, Accessories

www.mosshoes.com www.consum-expo.ru

www.textilexpo.ru www.cpm-moscow.ru www.cjf-expo.ru

www.euroshoes-moscow.com Clothing stocks from the producers, www.stockshow.ru clothing from brand-shops and chains Exhibition of Jewellery and Gifts www.rosyuvelirexpo.ru March Wedding fashion www.rosinex.ru The Best of Textile Creativity

www.premierevision.ru

Bridal Fashion, Eveningwear & Accessories

www.wedding-fashion. ru

Headwear, raw material

www.kordon.ru

Footwear, Bags and Accessories Fashion Week

www.mosshoes.com www.fashionweek.ru

Exibition of soes and leather products

www.obuv-expo.ru

Fashion Week

www.rfw.ru

April Exhibition of Retail Real Estate May Exhibition of Jewellery Exhibition of leather and fur fashion Exibition of soes and leather products Exhibition of Jewellery June Business - forum

www.mall-expo.ru www.rosyuvelirexpo.ru www.leshow.ru www.obuv-expo.ru www.rjexpert.ru

www.b2bpg.com

Regions Report Regional trade shows calendar February 10.02 - 14.02 Man and Woman

Chelyabinsk

16.02 - 20.02 World of Childhood’ 2011 24.02-27.02 Textiles and Fashion (Spring) 24.02 - 27.02 Tovary XXI veka (21st century goods)

St. Petersburg Novosibirsk Volgograd

Clothes, footwear, headdresses, accessories Children’s goods Clothes, footwear, accessories Clothes, footwear

www.pvo74.ru www.planet.lenexpo. ru www.sibconsumo. sibfair.ru www.volgogradexpo. ru

March 02.03 - 06.03 Fashion and style week (Spring) 03.03 - 06.03 Textiles and Fashion’ 2011

Kazan

04.03 - 06.03 Petersburg Wedding Salon’ 2011 16.03 - 19.03 Fashion Industry

St. Petersburg

24.03 - 27.03 Modny salon (Spring - summer) 24.03 - 28.03 All–Russia fair in Udmurtia

Saratov

Habarovsk

St.Petersburg

Izhevsk

Textile industry goods Clothes, footwear, headdresses, accessories Wedding fashion Clothes, textiles, accessories Clothes, footwear, accessories Consumer goods

www.expotextil.ru www.khabexpo.ru www.wedding. lenexpo.ru www.farexpo.ru www.expo.sofit.ru www.vcudmurtia.ru

April 06.04 - 09.04 Fashion Week’ 2011 13.04 - 16.04 Lazorevyi tsvetik (“Azure flower”) 20.04 - 22.04 Fashion Industry. Textiles. Jersey. Furs. Leather 20.04 - 23.04 Fashion Industry

Belgorod

Clothes, textiles

www.belexpocentr.ru

Volgograd

Clothes, textiles, accessories Clothes, textiles, accessories

www.vzr.ru

21.04 - 24.04 Fashion territory (Spring - summer) Dates are Defile na neve specified Dates are KarapuzExpo specified 28.04 - 30.04 Wedding waltz

Krasnoyarsk

Yekaterinburg Ufa

St. Petersburg Rostov na Dony Kirov

www.uralex.ru

Clothes, accessories, www.bvkexpo.ru furs Clothes, textiles, acwww.krasfair.ru cessories Fashion Week www.defilenaneve.ru Children’s goods

www.karapuzexpo.ru

Wedding fashion

www.vcci.ru

Regions Report Regional trade shows calendar May 12.05 - 14.05 Mayodan

Krasnodar

18.05 - 21.05 Urallegprom – XXI vek

Chelyabinsk

Dates are Mit detstva Chelyabinsk specified 17.05 - 20.05 Urallegprom (Spring) Ufa 17.05 - 19.05 Fashion. Style. Beauty Penza 18.05 - 21.05 BabyTime - Sibir 18.05 - 21.05 Mit detstva’ 2011 (“children’s world”) 26.05 - 28.05 World of miraclе/ Tovary XXI veka (21st century goods) 29.05 - 01.06 Fashion and style Industry/ Modny rebenok (“trendy kid”) 31.05 - 03.06 Children’s world

Novosibirsk Kazan

www.expo74.ru www.expoural.ru

Clothes, footwear, acwww.bashexpo.ru cessories Clothes, textiles, acces- – sories Kidswear www.children.sibfair.ru Kidswear www.mdexpo.ru Kidswear, сlothes, footwear

www.volgogradexpo.ru

Nizhniy Novgorod

Clothes, footwear, headdresses, accessories / Children’s goods Children’s goods

www.yarmarka.ru

Children’s goods

www.veta.ru

Voronez

Contacts Address: B.Ordynsky per., 4, bld.4 Moscow 115184 Russia Phone/fax: +7 495 626 30 20 E-mail: info@profashion.ru

www.profashion.ru

www.krasnodarexpo.ru

Volgograd

Chelyabinsk June

01.06 - 02.06 Children’s territory

Clothes, footwear, headdresses, accessories Clothes, footwear, headdresses, accessories Kidswear

www.pvo74.ru

Olesya Orlova Editor-in-chief orlova@profashion.ru

Yuna Zavelskaya Deputy editor-in-chief editor@profashion.ru

Tatyana Belkevich Commercial director director@profashion.ru

Maria Kapustina Online editor adv3@profashion.ru

Olga Davydkina PR director pr@profashion.ru

Anna Zadorozhnaya Fashion news editor moda@profashion.ru

www.profashion.ru

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