Changes in the Russian Fashion Retail Sector Since 2022

Fragments from the industry report which is released at the end of May

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Changes in the Russian Fashion Retail Sector Since 2022

Quotes from the annual industry report by Fashion Consulting Group «Apparel and Footwear Market in Russia 2014-2025F», annual report since 2006

Indicators of the fashion market are dependent on GDP indicators and the dynamics of the retail market, so the dynamics always share a common vector. However, the amplitude of fluctuations in the fashion market is higher because clothing purchases are highly sensitive not only to economic factors but also to the emotional state of consumers. Often, buying clothes is perceived by people as a step towards stability or as an opportunity to «treat themselves». Therefore, any positive signal in the economic, political, or social spheres is instantly reflected in clothing purchases.

On one hand, in 2023, GDP indicators showed positive growth (+3.5%); on the other hand, people perceived 2023 as much more stable and less worrisome than 2022. This was also reflected in the indicators of the retail clothing market; the Russian fashion market grew by 10.5% in value in local currency. The final figures for 2023 almost reached the consumption level before the 2019 pandemic.

Benefits for Russian Retailers Resulting from the Departure of Western Brands

Before 2022 the fashion market was under the sway of international conglomerates, their pervasive influence eclipsing the native contenders. Among the illustrious top 10, the contribution of Russian enterprises amounted to a volume share, not surpassing 50% of the 10 leader’s turnover.

Within the bustling corridors of shopping centers, international chains held dominion, commanding a staggering near 60-70% of the coveted rental spaces allocated for clothing and footwear. However, the exodus of these international juggernauts acted as a clarion call for local fashion companies to hastily initiate expansive developmental initiatives.

Over the past 2 years since 2022, the landscape of the market has undergone a profound metamorphosis. Today, a striking reversal of fortunes is witnessed – the zenith Top 10 is now occupied solely by Russian entities, asserting their ascendancy over the market’s helm.

The winds of change blow visibly through the avenues of shopping centers. Once forlorn and desolate in 2022, these edifices stood as somber reminders of bygone glory, with many storefronts lying vacant and bereft. However, the dawn of 2023 heralded a seismic shift; the dismal vacancy rates were supplanted by an auspicious resurgence, reminiscent of the pre-pandemic era of 2019. The composition of tenants of 2024 has also changed. Now, up to 70-80% of the commercial space is commandeered by indigenous retail brands, breathing new life into the moribund shopping precincts of 2022.

As the calendar turned to the threshold of 2024, an «overheated market» phenomenon began to take root — the deluge of new inquiries and the influx of fresh names far outstripped the available vacancies and the tally of departed brands.

The shopping centers are now in dire need of robust and traffic-drawing anchor tenants. The vacated anchor spaces have been ingeniously repurposed into the bastions of the new era – «the new wave» flagship stores. These are not regular department stores known in USA and Europe. Rather, they are expansive multi-brands, functioning as leased departments, where collections are not procured outright from manufacturers but instead showcased on consignment terms. For example, sells staff in these departments are most often employees of the brand-supplier themselves. This symbiotic relationship is advantageous to both the department stores and the local brand proprietors, affording them the opportunity to cultivate offline sales channels sans the burdensome overhead of establishing standalone outlets. These grandiose multi-brand department stores, spanning from 3 to 7,000 square meters, have assumed the mantle of the principal stakeholders in shopping centers, drawing throngs of eager clientele.

The Challenges Faced by Retailers Today:

Marketplaces’ price war challenge:

In 2023, prominent marketplaces have engaged in a harsh battle of prices and this strategy has negative repercussions for retailers and suppliers. Offering exclusive discounts, marketplaces aim to entice customers away from rival marketplaces. The special discounts provided by marketplaces result in lower prices for their collections compared to the same collections in their brick-and-mortar stores and customers, having tried on items in physical stores, opt to purchase them through the marketplace. Consequently, while marketplaces may appear to boost retailers’ turnovers, they do so partly by diverting customers from their own storefronts.

Consumer’s multichannel shopping challenge:

Retailers continue to adapt to the accelerated growth of online sales. The boundary between channels in the perception of shoppers is blurring, with channels converging with each other. Today, up to a third of the turnover of traditional retail networks is accounted for by virtual sales. On the other hand, virtual sellers are venturing into online sales. For example, marketplaces are diversifying their businesses by opening their own specialized offline networks. This trend is supported by numerous companies that initially started on social platforms. Since 2022, they have been actively entering traditional retail. Thus, the modern consumer is a multi-channel shopper. In 2023, already 59% of purchases were made through multiple channels, and this figure is expected to grow to 80-85% in the next three years.

Multi-channel sales management presents a significant technological challenge as companies must synchronize information, prices, and discounts across all channels, including marketplaces. In 2023, the task of effectively segmenting collections by channels came to the forefront. Multi-channel sales require technologies for cross-channel pricing, discount management, and loyalty programs.Market’s expenses and costs growth challenge

Retailers are exerting maximum effort to contain price growth. The increase in retail prices is an unpleasant consequence of rising overhead costs for raw materials, production, logistics, banking, amidst the weakening of the ruble exchange rate in 2023. Overhead cost growth has reached 50% and higher.

In 2022 and 2023, additional expenses for companies included investments in expansion strategies aimed at quickly occupying the «warm spots» left by international players who exited the market. Leading fashion retailers also focused on investments in rebranding, including introducing new lines and expanding retail space, redesigning stores, and enhancing quality of service.

The escalation of company expenses inevitably manifested in the forced increase in prices for new collections. Since 2021 price in local currency (rubles) increases for major mass-market segment leaders have been within the median range of 10-20%.

Biggest Differences In Terms Of Consumer Trends As Of Today

Trend «Smart Saving»

  • Price is king. Customers meticulously compare and check prices across various sales channels, refraining from making purchases hastily and awaiting significant discounts. Discounted price tags become almost a prerequisite for making a purchase.
  • Resale boom – The popularity of second-hand /pre-owned clothing is increasing. The proportion of people who have experience purchasing through resale increased by 30% in 2023, up to 47%. The departure of foreign brands significantly stimulated the demand for pre-owned clothing.

Trend «Fashion Shopping Escapism»

  • The process of buying clothing becomes a form of escapism, often replacing leisure and entertainment. Therefore, fashion retail becomes atmospheric and eventful.
    • offline stores: undergoing rebranding — adding emotional VM, atmospheric design, attentive service, event marketing (collaborations).
    • online stores: creating emotional catalog photoshoots, building communities on social networks, creating online lifestyle magazines.
  • Fashion is a realm of beauty and harmony. The separation of fashion marketing from social agendas focuses exclusively on beauty, harmony, aesthetics, ecological consciousness, universal values, and caring for loved ones.

Trend “Patriotic consumption«

  • The significance of national identity and unity is growing in response to international sanctions pressure. This is evident in the increasing popularity of Russian brands and loyalty to trademarks labeled «Made in Russia.» Brands are emphasizing cultural codes in their collections: historical themes, folk traditions, regional nature, and references to national art and folk culture.
  • There is rapid growth in creative communities: fashion design becomes a form of mass leisure, part of urban culture, and a popular form of activity for young people. Numerous fashion projects, festivals, competitions, and fashion weeks are actively supported by local government programs and numerous of grants.

Trend «Modest Fashion»

  • “Functionality as a fashion trend»: durable, versatile, functional clothing, as well as calm classic styles, are becoming increasingly popular.
  • «Modest fashion»: rising popularity of modern fashion brands that delicately incorporate religious traditions into their designs, encompassing both Muslim and Christian denominations.

Current Results of the «New Fashion» Holding (successor of INDITEX) for 2023 and its Prospects on the Russian Market

In 2022, the Spanish group Inditex, which owns the clothing store chains Zara, Bershka, Stradivarius, and Pull&Bear, decided to sell its Russian division to the large Lebanese holding Daher Group. Daher Group has been a long-term partner of Spanish Inditex in developing it’s brands in the Arab region.

In 2022, the company «Novaya Moda» was registered in Moscow, taking over the baton from the Inditex holding. Lebanese alternative brands MAAG (formerly ZARA), Ecru (formerly Bershka), Dub (formerly Pull&Bear), Vilet (formerly Stradivarius), and Dub (formerly Pull&Bear) replaced the Spanish brands Zara, Bershka, Pull&Bear, and Stradivarius in the market.

During the transition period, Inditex provided maximum support and assistance to its successor » Novaya Moda «, including transferring the best locations in shopping centers, all stores’ fixtures, retaining and transferring experienced qualified teams, as well as disclosing all its internal sales analytics in Russia. Despite the support of such a powerful partner as Inditex, entering a new market in an emergency mode was a very challenging task and a very bold step for a foreign retailer.

Brief overview: From the financial statements of AO «Novaya Moda» (brands MAAG, Vilet, Dab, Ecru):

By the end of 2023, «Novaya Moda» had 243 stores in Russia. Revenue from clothing sales for 2023 increased from 5.4 billion rubles in 2022 to 19.8 billion rubles, footwear sales increased from 585.2 million to 1 billion rubles. Expenses increased from 13.8 billion rubles in the previous year to 25.6 billion rubles. As a result, for the year 2023, «Novaya Moda» incurred a net loss of 5.4 billion rubles compared to a net profit of 3.9 billion rubles in the previous year.

The Lebanese holding’s entry into the Russian market began with the MAAG brand, and in 2022, only MAAG stores were in operation, occupying the spaces previously held by ZARA. The ambitious replacement of the well-known and beloved ZARA was a notable event, sparking both interest and skepticism, and undoubtedly attracting the attention of numerous ZARA customers disappointed by the departure of the Spanish brand from the Russian market. Attention to the ambitious MAAG was inevitable, even without special marketing campaigns.

However, in 2023, three more brands joined MAAG, and the introduction of Vilet, Dub, Ecru went completely unnoticed by the mass consumer.

  • Their launch was not accompanied by any marketing campaign, meaning that very few Russian consumers understood what each of the three newcomer brands represented. The launch of Vilet, Dub, Ecru essentially dissolved into the stream of numerous newcomers from Russia, Turkey, China, Kazakhstan, and Belarus. The brands became equal participants in the list of all new startups, lacking history, recognizability, and clear positioning.
  • The idea of ​​passing the baton to Lebanese brands from the departed INDITEX brands was not fully utilized, this advantage was essentially not played out. There was no well-thought-out marketing impulse that would allow these three brands to gain a competitive bonus in the eyes of customers right from the start.
  • Additionally, it’s worth noting that the branding of these products is not particularly user-friendly for Russian-speaking mass-market consumers. Names like Maag, Dub, Ecru sound unfamiliar and, consequently, present challenges for reproduction and memorization, requiring additional efforts in their promotion

And their performance perfectly reflects the characteristics of a highly competitive market. In today’s highly competitive market, stores typically reach their target metrics after 4-5 seasons of operation, marking the point when sustainable customer traffic begins to develop. Achieving breakeven for any new retail fashion project typically takes 5 to 8 seasons of operation, provided there is sound commercial management and effective loyalty programs.

It is worth noting that the fashion market in 2023 turned out to be overheated, driven by the extensive growth of major players and numerous new brands against the backdrop of declining consumer purchasing power. Instead of easing, the departure of brands intensified competition in the market. This competition is exacerbated by aggressively growing marketplaces that engage in price wars and serve as platforms where any brand can be found, entering through the system of parallel imports legitimized in 2022.

The biggest challenges for Novaya Moda in the Russian market

It is important to underline that the conditions under which the 4 startups entered the new market were extreme. In order to retain the best locations inherited from INDITEX, the newly formed holding had to simultaneously open 252 stores in the new country. And they managed to do this thanks to their determination to act quickly and intuitively.

The biggest challenges for the company are the extreme conditions of fast growth

  • Despite receiving extensive business support from INDITEX in creating assortments, including understanding seasonality, demand characteristics, and bestsellers, the brands did not inherit any marketing legacy. As a result, the brands were created in haste, without thoughtful branding and clear positioning in the highly competitive Russian market. «Novaya Moda» has to build its customer bases and loyalty programs from scratch.
  • «Novaya Moda» stores were opened without marketing campaigns; there was no preliminary «warm-up», support on social networks, advertising, special events, or influencer support. Meanwhile, all their Russian competitors are highly active in promotion through all available media resources.
  • «Novaya Moda» operates exclusively as offline stores, without its online platforms. Meanwhile, all major competitors are multichannel sellers, and today, and online platform is necessary part of this

Chances for Novaya Moda to Become Profitable within the Next Year and Reach Inditex’s Performance Figures in Russia

Expecting «Novaya Moda» to match ZARA’s performance levels is unrealistic. ZARA’s success is based on:

  • Years of international authority in the fashion industry, with storefronts gracing the most beautiful streets of global capitals.
  • A uniquely efficient «hardly centralized vertical» structure, which remains unmatched by competitors.
  • Colossal scale, providing special conditions in every aspect, from sourcing to rent.

Success is entirely feasible, given the market’s turbulent changes and reconstructions. Consumers are altering their habits and are receptive to new offerings.

«Novaya Moda» is a local startup company tailored exclusively for the local market, joining the ranks of other local brands catering to local shoppers. MAAG, Dub, Ecru, and Vilet should benchmark against the metrics of local networks and compete successfully with them. This requires:

  • Creating clear positioning and a unique brand platform to engage with Russian customers.
  • Fully immersing themselves in the Russian-speaking online space, including social media,
  • Launching active operational marketing: communication and promotion on all fronts including advertising, special events, and community building.

 Difference in Performance Between International Retailers (like Novaya Moda) and Leading Local Retailers in the Russian Market

Russian companies offer highly competitive products. Mass segment customers in Russia are accustomed to quality standards that often exceed international offerings at similar prices. This makes our market extremely challenging for new international players to enter. Brands from Lebanon, China, and Turkey, which entered the market in 2022-23, face stiff competition. Achieving brand recognition requires a systematic marketing approach for the same target audience, for at least 6 seasons (3 years).

An additional barrier for international companies is the current trend of Russian «Patriotic consumption,» which supports domestic manufacturers and retailers. Therefore, the marketing budgets of international companies need to be larger than those of local ones. However, the situation is currently the opposite.

And undoubtedly, these two local leaders such as Melon Fashion Group and Gloria Jeans are exemplars in terms of business acumen and their organic understanding of local specifics. They serve as experts in initiating new strategies, witty marketing, deep understanding their customers, and building highly qualified teams. Most importantly, they are masters for adapting to the constantly changing conditions in Russia. These companies are unquestionably ‘stellar’ benchmarks for any newcomer in the Russian market.


This material, published on May 22, 2024, reflects the expert assessment of Fashion Consulting Group, based on open government and industry sources of information, as well as Fashion Consulting Group’s own marketing research. Partial or full use of the materials is permitted only with a reference and/or direct hyperlink open to search engines to the specific address of the material on the website.

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