Abstract
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- Get insight into trends in market performance
- Pinpoint growth sectors and identify factors driving change
- Identify market and brand leaders and understand the competitive
environment
Executive summary
Negative impact of economic crisis on the market performance
The main factor exerting a negative influence on the market' s performance in
2008 was the economic crisis. The first negative trend appeared in
August--September 2008. In the Russian national statistics, clothing and
footwear are classified as non-essential goods, and 42% of Russians reported
spending less money on clothing and footwear products. This product category
was the first to be affected when Russian consumers reduced their expenses in
response to the economic crisis.
Market structure changes as a result of economic crisis
The market structure is changing in response to the developing economic
crisis. In 2007, the mid-price segment accounted for 55% of the market, the
mass market for 30% and the premium segment for 15%. In 2008, however, the
market started to change and premium-segment consumers moved towards the
middle market, and the so the consumer demand for luxury clothing and footwear
decreased. Sales of the new collection for 2009 will be lower by some 30--40%.
These market changes represent the effects of Russian consumers' reallocation
of their household budgets in response to the difficult economic situation.
Sports and kids' products are fast-growing product categories
Sports products are the fastest-growing product category. The pattern of
consumer demand is changing, as more Russians are attending sports clubs, and
changing their lifestyles. About 10% of the Russian population actively
participates in sports.
Kids' products are another fast-growing category, on account of the rise in
the birth rate. The government provides incentives to the Russian people to
have second and third children by providing them with additional financial
support.
Russian market highly fragmented
The Russian market is not at all consolidated, and even some major producers
and retailers hold market shares of about 1% of the whole market. The market
shares of the Russian producers are very low, and some have their own
production in China.
Until the current financial crisis, the Russian market was very attractive to
foreign retailers. Companies such as Japanese Fast Retailing Co. and The Gap,
for example, were planning to launch in Russia, although some of the foreign
companies have now refrained from doing so.
Temporary stagnation because of consumers' and retailers' financial difficulties
According to various studies, the market' s performance will decrease because
of the current financial difficulties faced by both consumers and retailers.
Consumers' incomes will decrease, which will automatically lead to declines in
consumer demand for some products. The clothing market is the first sector in
which Russians are cutting back on consumer spending money. Prices increases
will also have a negative influence on consumer behaviour.
Retailers will find it difficult to attract investment, and their difficulties
in gaining credits for future business development will have a negative
influence on the business sector, which will lead in turn to a narrowing of
their assortments and increases in their prices. In addition, the number of
shops may also decline, and this will mainly affect small retailers and
premium shops.
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