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44 I Southeast Europe bne October 2018
Comparison of GDP and number of H&M and Inditex stores, 2017
openings reads like a roll call of frontier destinations, including Kazakhstani oil towns and cities in Bosnia, Kosovo and Ukraine, alongside destinations in the Middle East and Africa. Nor has it shied away from politically sensitive locations: one recent opening was in Simferopol in Crimea, which was illegally annexed by Russia four years ago.
The 30-year revolution
The arrival of the fast fashion chains
in the 2000s was just one part of three decades of upheaval in the retail sec- tors of the former communist space, which started back in the 80s with the loosening of trade restrictions in some countries. Retail in Eastern Europe and Eurasia has gone through an era of intense change since the tightly con- trolled systems selling goods produced locally and in other socialist states.
Immediately after the fall of commu- nism, there was an explosion of imports of cheap clothes from China and Turkey,
600 450
150
0
400000
1200000
1600000
Inditex
H&M
300
Source: H&M and Inditex 2017 annual reports.
Asked for an update, a spokesperson for the group told bne IntelliNews that Teddy has opened 12 new shops in Eastern Europe so far this year, and 12 more are expected to be opened before the year is out. “Shops have been and will be opened mostly in Russia but also Slovakia, Poland and Estonia are involved,” the spokesperson said, which “will account for more than 20% of the total of Teddy brands’ new openings
of the year”. This is a significant share
of international openings, taking into account that around 50% of new open- ings will be in the group’s home market Italy. Most of the new openings are Terranova stores, but Teddy also plans to open some new Calliope shops, dubbed the group’s “glamour light” brand.
Expanding to the south and east, these retailers face direct competition from Turkish fast fashion retailers like Koton and LC Waikiki, who were early movers into many of the Emerging Europe mar- kets, especially those in Turkey’s near neighbourhood or those with historical or cultural links to Turkey. According
to Euromonitor’s Kaluina, while global retailers like Zara and H&M are expand- ing around the world, “Turkish chains’ expansion is focused mainly just to Europe and Asia which means they can expand faster”.
Commenting on the strategies of the Turkish chains, Kaluina adds: “Expan- sion to established Western and some Eastern European markets is more difficult due to strong competition and way higher costs than in most of Asia.
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That is also one of the reasons why they expand more quickly to emerging coun- tries. Also being early in new markets before H&M and Inditex puts them in a better competitive position now and in the future. Additionally Turkish chains geographically are closer to Central Asia, the Caucasus and accumulated know- how working in this region.”
800000
GDP ($1,000)
“Despite more rapid growth in emerging markets most sales revenue and profit are still generated by developed Western markets”
Another cultural factor is that LC Waikiki in particular has clothes that are modest enough for practising Muslims – for example using thicker fabrics and high necklines – while its bold colours and quirky styles appeal to secular shoppers, as outlined by Bloomberg’s Business of Fashion newswire. This gives the brand an extra edge in the majority Muslim countries of Eurasia and the Balkans.
While Russia and Romania are prime markets for both Koton and LC Waikiki, unlike the Western chains they have
a higher concentration of stores in Southeast Europe and Eurasia than in Central Europe. For example, Koton isn’t at all present in CEE’s largest market Poland, and LC Waikiki has only four stores there. On the other hand, Serbia is among the top five East European markets for both Turkish chains in terms of the number of stores opened. Indeed, LC Waikiki’s newsfeed of recent store
first brought across borders by small- scale “suitcase traders” and later chan- nelled through the networks of huge wholesale bazaars that sprang up across the post-communist space.
Before the arrival of mass market chains and modern malls, the new ultra-rich class would fly abroad to shop in West- ern capitals, but for most people putting together a fashionable and stylish ward- robe was a challenge. Romanian vlogger Georgiana Marin of Chicinquest recalls that as late as the 2000s, “I was buy-
ing clothes from the shops in my town: they weren’t selling fashion brands, but nevertheless good, quality clothes. I also went to the dressmaker because I couldn’t easily find what was in fashion back in the early 2000s.”
Another Romanian blogger, Constanta- based Maria of Urbn Style, remembers growing up in the Black Sea town of
Number of stores