Consumers who favor Western brand-name clothing could find themselves out of luck soon when looking around Kyiv for their latest Esprit shirt or Lee Cooper jeans.
Even though Ukraine’s retail market is Europe’s 10th largest at $92 billion, more big-name brands are pulling out of the nation’s market or scaling back their offerings.
Besides Esprit, the American clothing designer that is no longer shipping goods to Ukraine, French fashion house Cacharel, Turkey’s casual wear producer Collezione, British jeans supplier Lee Cooper, its American cousin Wrangler and Steve Madden shoes have also exited. Reducing their presence are America’s casual apparel brand Gap and Britain’s largest outfitter Marks & Spenser.
The reason is simple: companies told the Kyiv Post that the retail market contracted by 15 percent in the first six months of the year, compared to the same period the previous year.
Tetyana Buratska, business development director at Arricano real estate company, said Ukraine’s economic and social crisis has pushed some players out of the market. Buratska said the global players struggled with extremely high rents at the prime location amid relatively low demand.
If there is a silver lining, it is that experts say this is not a long-term seismic shift and that the retailers will return when business does.
When Gap and Marks & Spencer closed their flagship shops on Khreshchatyk Street this summer, the departures were noticed.
Despite the high volume of pedestrian traffic on Kyiv’s main artery, the news is especially surprising, given Gap’s meticulous three-year preparation for entering the market in 2011, which included comprehensive marketing research.
“We have no plans to leave the Ukrainian market. We have closed our Khreshchatyk Street store as it was continuously impacted by unrest and protests. This was a real estate decision for this specific store,” Stefan Laban, a senior vice president at Gap, told the Kyiv Post. More eyebrows were raised since the western side of Khreshchatyk, where Gap’s three-story shop was located, is twice cheaper to rent than the eastern part.
Clothing dealers usually pay $15-$30 monthly per square meter of commercial space in the country, whose sizable population of 45 million is a key attraction for foreign businesses. Meanwhile, electronics retailers pay slightly less – $15-$25, according to the Ukrainian Trade Guild, a real estate consultancy that helped Gap enter Ukraine.
Darya Perekosova, an analyst for market researcher GfK Ukraine, said in a written statement that Russia’s war in eastern Ukraine harms consumer willingness to make large purchases. Its index shows a 28 percentage points drop in willingness to make large purchases. Meanwhile, consumer confidence in the nation, GfK’s broadest model of tracking the retail market, hit a 5-year low in April.
In terms of preferences, Ukrainian shoppers are not huge fans of minimalist, calm-colored clothing, which is exactly what the brands that are leaving had been offering, noted Andre Tan, major local fashion designer with a degree from St. Martins College of Art in London.
“It’s not a secret that those who are leaving represent the Western mass market that has little in common with fashionable clothing,” Tan said. “I don’t think Ukrainian consumers will suffer much from what has happened … Cacharel is the exception as they keep a monopoly in supplying high-quality bright shirts.”
Moreover, almost all the Ukrainian shopping malls currently under construction have been frozen, with deadlines moving up to no earlier than 2015, while Kyiv alone, the nation’s capital city, hosts 30 of those projects that will bring as much as 1.6 million square meters of new commercial space offering products to local consumers.
Consumers seem unfazed over the exit of Western retail brands.
Nataliya Voynarovska, 32, a mother of two, says she buys Gap products online anyway. She says the inflated prices at Ukrainian shopping malls have compelled her to look on e-commerce websites like Amazon.
Kateryna Galytska, a Kyiv-based video producer in her 30s, confirms what seems to be the trend among Ukrainians: “I go to the local shops for clothing or perfumes very rarely and buy everything online or during my trips (abroad).”
Still newcomers like America’s popular Abercrombie & Fitch is among those planning to enter the market. Abercrombie is testing the Russian market through the popularization of its Hollister brand, said UTG’s partner Vitaliy Boyko.
Kyiv Post associate business editor Ivan Verstyuk can be reached at [email protected]. Kyiv Post contributor Tetyana Kalambet can be reached at [email protected].
