We all know that the footwear market in Russia is going through hard times, but some are doing better than others, including some local manufacturers. Overall imports of finished shoes fell by about 20 percent during the first half of 2015 as compared to the same period in 2014, due mainly to the collapse of the ruble and a general drop in consumption, yet sales are apparently growing on the small-batch wholesale market, which is mostly occupied by Chinese companies trading in the low-price segment, and the weakness of the ruble has led to an increase in domestic shoe production of several million pairs per year.
There are no reliable statistics on production or imports, as many transactions are not officially declared in order to pay less taxes or import duties. Russia imported about 300 million pairs in 2014, with China accounting for 61 percent of the total volume, followed by Italy with 8 percent. Russian companies made 110.6 million pairs, including 20.3 million pairs of leather shoes, but most of the production consisted of assembly operations.
According to well-informed sources, large wholesalers have shifted orders from Southeast Asia to Russia, with basic women's styles produced through direct injection in the country and men's shoes made in the shoe production cluster around Rostov and at factories in the republic of Dagestan. Russian manufacturers such as Unichel, Obuv Rossii, Ralph Ringer, Francesco Donni and Medisa are said to be running now at full capacity.
The rush for local production has been particularly strong in the last few months. As many importers and wholesalers had made minimal orders of winter shoes in August and September, they were caught with minimal inventories. They made new at-once orders from Chinese and Russian producers, but the latter had an advantage because they could deliver the merchandise in less than 30 days. All their production was sold immediately. The products made in China arrived later, and since the month of November was unseasonably warm, they had to be sold at distressed prices.
Another recent new trend has been a shift from leather shoes to synthetics in the medium-priced segment, benefiting major vendors in this segment such as Analpa, Avenir and Marco Tozzi. Leather shoes have practically ceased to be imported from China, and all the major wholesalers and retailers in this segment have moved their production of leather shoes to Russia and Belarus. Big operators have signed exclusive contracts with factories in the two countries.
Some have even opened new factories on Russian soil. For example, Analpa has opened a factory 20 km from Moscow to produce leather children's shoes under its Keddo brand. Increases of between 10 and 25 percent have been reported for some leading vendors in the children's shoe market like Keddo, Flamingo, Kapika, Kotofei and Skazka.
Some of the major Russian shoe retail chains have been suffering a lot from the market situation. Reports indicate that only some online retailers like LaModa, the Russian sister company of Zalando controlled by Rocket Internet, and retailers operating in the medium segment of the market are doing relatively well. Sales at Obuv.com and mass market retailers like Center-Obuv, Matino, Monro and Payless fell strongly in the first part of the year, with Center-Obuv recording a drop of nearly 40 percent.
Center-Obuv's main rival in the discount segment of the Russian shoe market, Kari, raised its sales and its market share slightly. Also a retail chain, Zenden, whose stores are mainly located in the southern regions of Russia, have been doing a little better, with sales declining by about 30 percent.
According to a well-informed source, sales of footwear by hypermarkets and supermarkets such as those of Auchan, Lenta, and Hiperglobus have been on the rise. Among the apparel retailers, foreign operators like Zara, H&M and Bershka have continued to gain momentum in the shoe market, whereas domestic operators such as Incity, TVOJO, Gloria Jeans and Oodji have sharply reduced their footwear sales.
To avoid non-payment or delayed payments by the retailers, wholesalers are trying to impose pre-payment for new orders, as is already requested by foreign vendors, instead of keeping open accounts with their clients.
The tough market situation has also led to sharply reduced activity at all the major shoe fairs in Moscow including Euroshoes, Mosshoes and Obuv Mir Kozhi. The Italian shoe industry association, Assocalzaturifici, admitted that there was an inevitable overall drop in orders for the 132 Italian companies participating in the last edition of Obuv, which ended on Oct. 2, but said that it intends to continue investing in the Russian market and throughout the CIS, in coordination of the Italian Foreign Trade Agency. This will include new and innovative formulas to intercept more and new buyers from the area.
In the first six months of this year, Italian shoe exports dropped in volume by 35.6 percent in Russia, by 52 percent in Ukraine and by 22.6 percent in Kazakhstan. One factor has been the renewal of economic sanctions by the European Union against Russia up to next month.
Adding to the problems caused by the EU sanctions, some Russian retailers and wholesalers have been forced to cancel orders from Turkey in the last days because of strict controls enforced by the Russian government at customs on products imported from that country following the downing of a Russian warplane headed for Syria by a Turkish jet on Nov. 24.