California Apparel News

California’s lifestyle apparel, known for its casual and cool looks, thrives in stores across the United States and overseas, but will that look translate into Russian?

Several Los Angeles apparel makers believe it will. A handful of them are signing up for the first time to exhibit at a decades-old trade show in Moscow with an eye on capturing the hearts and wallets of a fashion-obsessed consumer with plenty of rubles to blow.

“It is a hungry market, and that is why a lot of brands are starting to take a look at Russia. There is money to be spent,” said Nate Herman, vice president of international trade at the American Apparel & FootwearAssociation in Arlington, Va.

The United States, in the 12 months ending Nov. 30, shipped only $17.2 million in apparel and $114 million in textiles to Russia.

L.A. companies that will be showing for the first time at Collection Première Moscow,taking place Feb. 28–March 2, include Joe’s Jeans, Robin’s Jean, Guess? and Single, a contemporary line of dresses established in 1994.

Many of these lines already export to Russia,but they hope to lure store buyers from beyond the large cities in this vast country.

Single, designed by Galina Sobolev, ventured into the Russian market about seven years ago because of Sobolev’s Ukrainian roots and Russian-language skills.

Now her contemporary dresses are in high-end Russian department stores such as Tsum and GUM, as well as in fashionable boutiques in St. Petersburg.

Even though 10 percent of her revenues now come from Russia, Sobolev is hoping the Moscow trade show bumps that up a notch by attracting buyers from beyond the urban areas of Moscow and St. Petersburg,the most cosmopolitan cities in the world’s largest country, which spans nine time zones and has a population of 138.8 million.

While the average Russian is not as wealthy as most Americans, fashion is at the top of many men’s and women’s to-buy lists. Moscow is the city with the fourth-largest number of luxury-brand stores in Europe—after Paris, London and Milan—according to Jones Lang LaSalle, which specializes in commercial property.

“The consumer is very hungry,” Sobolev said. “She is very fashion-forward. She is not squeamish about spending money. She would rather not eat but have the latest dresses. All the younger girls dress up all the time. They look like ‘Sex and the City’ 24/7.”

Single dresses that sell for $300 in the United States take on a $500 price tag in Russia because of shipping, duties and other costs.

While the average per capita income in Russia is $16,700, compared with $48,100in the United States, there is a crowd of newly minted rich Russians whose fortunes from oil and gas concerns are putting them in the “Guinness World Records.”

Research shows there are 62 billionaires in Russia today, placing the country third, behind the United States, with 403 billionaires, and China, with 89, according to Forbes magazine.

The largest yacht in the world, the 537-foot Eclipse, is owned by Russian businessman Robin Abramovich. It cost $475 million and has two helipads, two swimming pools and 24 guest cabins.

That’s why Marc Crossman, chief executive of Joe’s Jeans, believes there is a market for his premium-denim label, whose average price in the United States is $170.

For the past two years, he has been represented by a Moscow showroom and has a distributor. “Russia is becoming a more meaningful market for us,” he said. “There are a lot of Russian nationals who want to keep up with the trends, and there is an influx of money there. There is a demand for high-end clothes as a status symbol.”

Exports is one way for Joe’s Jeans to grow its revenues, which totaled $98 million in 2010. Its other export markets include England, France, Italy, Germany, Japan, Hong Kong and Canada.

Getting goods to market

One of the obstacles to Russia is its borders. Because of the amount of endless paperwork needed to import goods and the country’s higher duties, it is not always easy to get goods through customs. But it could get easier.

This summer, Russia is expected to join the World Trade Organization, which means that import duties on apparel will go from 20 percent down to 14.5 percent to 17.5percent. Those duties apply to U.S.-branded apparel no matter where it is manufactured.

Furthermore, Russia has agreed to market reforms as part of its WTO membership,which means it will treat importers fairly and allow 100 percent foreign ownership of retail and other distribution services.

“They have to open their markets,” said the AAFA’s Herman.

Still, logistics can be a nightmare. Joe’s Jeans’ Crossman said his company used to ship its orders to Russia from a warehouse in Belgium. “It is very difficult to move goods into Russia,” Crossman said. “The documentation they make you jump through—it is a little more onerous than it is in other countries. It comes down to the massive amount of paperwork you have to fill out. It means there are more chances for errors, and an error gets it kicked back to you. Then you get put into the back of the line. This is not only for products but for samples, too.”

Crossman decided to hire a distributor to take care of the paperwork nightmare. “We felt it was better to go with a distributor that has an on-the-ground relationship doing business there. We ship from Belgium to Germany, and then the distributor brings it in from there.”

Galina Sobolev avoids dealing with logistics by having the retail buyer take care of the shipping. “We tell them to give us the name of their freight forwarder, and usually they have to wire the full amount [of the order] before we ship. We don’t extend terms to anybody there. That is how it is,” the designer said.

Doing business in Russia is to understand the Russian mentality. It’s all about developing customer trust and good relationships.

“The people who have been successful in Russia think of it as a long-term bet,” said Harry Broadman, a former U.S. trade negotiator and an economist specializing in emerging markets at PricewaterhouseCoopers in Washington, D.C. “It’s not about making money quickly. It is going to take time. It does depend on the relationships you have.”

Sobolev knows firsthand about that. Her first order to Russia was made to a boutique in St. Petersburg after she met the store’s owners several years ago at the Coterie tradeshow in New York. She saw a couple walking by her booth, heard them speaking Russian and asked if they were buyers. After developing a friendship, she now ships $500,000worth of merchandise a year to them.