25 June 2018
Imaginary Brands and Phantom Imports Dominate Russian Shoe Sales
Country's authorities look to root out phony footwear with high-tech factory to sales-point product IDs.
At first glance, Russia's footwear market – the largest in Central and Eastern Europe – appears hugely lucrative, if a little saturated, with a wide variety of brands and outlets offering an impressive number of options at a range of different price points. Dig a little deeper, though, and it soon becomes apparent that the sector is not quite what it seems. Indeed, the glitzy ads and stylish displays that are its public face actually conceal an industry dogged by black market imports and one where the local players resort to a branding sleight-of-hand to mask the true origins of their output. Now, though, the former problem, at least, may at last be being brought to heel.
One thing that immediately strikes any overseas visitor as they peruse one of Russia's many retail hubs is that nearly every item boasts distinctly non-Russian branding, with the footwear sector representing something of a high-water mark for this particular conceit. It's a marketing convention that has its roots in the Perestroika years (1985-1991), a time when the country began to tentatively embrace market-led economics and when realisation duly set in that Soviet-era footwear – as with many other USSR-manufactured items – was produced to a standard well below the international norm.
Today, much of the domestically-produced footwear is at least on a par with the imported equivalents, but many manufacturers still opt to play it safe and conceal their outputs' origins behind a distinctly foreign-sounding name. The Carlo Pazolini brand, for instance, one of the most well-known footwear lines in Russia, was actually dreamt up by a Moscow-based advertising agency back in 1990. While the general public has swallowed its apparent designer Italian affectations, the range has been exclusively manufactured in Russia and China for nearly 30 years. Similarly, while Ralf Ringer has a reassuringly Germanic lilt to it, this comfortable, easy-care footwear range originates from three Central Russian factories, with the German border some 2,300km distant.
It is a casual deception that is similarly common among footwear retailers. While the highly un-Russian sounding Respect, Zenden, Tervolina, Camelot and Calipso are the country's leading shoe chains, they are all Russian-owned and sell largely Russia-manufactured items. Curiously, the one exception seems to be children's footwear, where the distinctly Russian-sounding Kotofei, Lel and Top-Top ("Step-step" in the local parlance) not only predominate, but – thanks to their recognised high quality – have also carved out a successful export niche for themselves, particularly with regard to the former USSR satellite nations.
Regardless of the possible impropriety of posing as foreign footwear makers, the efficacy of the tactic seems hard to deny. Last year, some 104 million pairs of domestically-manufactured shoes were sold in Russia, compared to 66 million in 2010 and 33 million pairs in 2000. These are produced be some 200 footwear factories across the country which are, in turn supported by 32 leather-processing factories.
Overall, locally-produced genuine leather footwear is composed of 80% Russia-sourced materials, although most accessories and the chemicals used in sole production are almost wholly-imported. By contrast, footwear with synthetic uppers is only 60% locally-sourced due the lack of suitable locally-produced artificial materials.
Despite the rise of the domestic shoe sector, however, it still only accounts for 20% of all official sales in the Russian market, including those made in certain closed segments, notably footwear supplies for the army and state-employed utility workers. Overall, footwear of China origin still accounts for 65% of the market, followed by the EU with 10% and then Belarus / India with almost 2.5% apiece.
Aside from this, black market imports account for a figure equivalent to 33% of the official market total. Again, this more illicit sector is dominated by China-origin footwear, predominantly low-quality items smuggled in via Kazakhstan, a consequence of its open border with Russia as mandated by their shared membership of the Eurasian Economic Union.
This, however, may all be about to change. As of 1 July, this year, Russia's Ministry of Industry and Trade is trialling a new product identification system in the footwear sector. This will oblige manufacturers / importers to add two additional bar codes to all packaging, ensuring that every individual consignment can be tracked from its factory of origin, across any border and to the final point of sale. The initial phase has seen 10 of the leading shoe suppliers to the Russian market already sign-up.
Leonid Orlov, Moscow Consultant