Opportunities For Chinese Garment Enterprises: The Russian Market Needs To Be Explored

The Russian market is like an undeveloped virgin land. However, in most of our apparel listed companies, no one has considered taking root in Russia.

Russian President Putin signed a federal bill to ratification of Russia's accession to the World Trade Organization in July 21st.

This means that Russia has completed the relevant legal procedures for joining the WTO, and will officially become the 156th member of WTO in August.

Earlier, due to low profits, China's clothing products exported to Russia less, including Chinese clothing, YOUNGOR (600177) and Shanshan stock (600884) and other garment enterprises have indicated that they have no trade with Russia, but after Russia's accession to the WTO, they brought good opportunities to domestic garment enterprises.

Some experts believe that after Russia's accession to the WTO, tariff reductions will bring benefits to China's shoes and hats and clothing industries.

The Russian market needs to be explored.

As of 2011, WTO approved Russia's accession to the WTO, and Russia's application for accession to the WTO lasted 18 years.

In July 10th and 18th this year, the Russian State Duma (the lower house of parliament) and the Federal Council (upper house of parliament) successively passed the agreement of Russia's accession to the WTO.

On July 21st, Russian President Putin signed a federal bill to ratification of Russia's accession to WTO.

On July 23rd, Maxim Medvedkov, director of the Department of trade negotiations of the Russian Ministry of economic development, said publicly that Russia will become a member of the WTO in August 23rd.

From the above-mentioned series of Russia's accession to the WTO schedule, Russia's accession to the WTO has entered the countdown.

And how does China next to Russia look at the WTO accession?

Bai Ming, deputy director of the international market research department of the Ministry of Commerce of China, believes that tariff concessions and other measures will bring positive benefits to China's shoes and hats and clothing industries.

Earlier, Russia's manufacturing of light industry is relatively scarce, and these industries have maintained high tariffs, such as 12% of wool textile tariffs and 30% of leather clothing tariffs.

According to the Ministry of commerce website's public information, Russia's trade threshold will gradually decrease after joining the WTO, which will contribute to the commodity circulation between China and Russia.

After accession to the WTO, the average level of Russian tariff protection will drop by 3.5 percentage points. The weighted average tax rate will fall to 7.6% in 2013, 6.9% in 2014, and 6% in 2015.

For Chinese enterprises, such changes can reduce their export costs and increase the export of superior products, such as clothing, textiles, footwear and household appliances.

In the eyes of professionals, the Russian market is like an undeveloped "virgin land". However, in most of our apparel listed companies, no one has considered taking root in Russia.

"Our company has no export products in Russia". This is our correspondent's interview with Chinese clothing, YOUNGOR and Shanshan stock company.

Opportunities for Chinese brand clothing

In fact, there are also reasons why the above listed clothing companies do not export to Russia.

In the past, most of China's exports to Russia were low-end clothing, and the price of such clothing was low, so the profits they could get were very few.

Apportioned to each export garment is even more meager, usually selling 10 thousand "big cargo" to earn $50 thousand.

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Zhu Nanping, a research fellow who has worked in Russia for many years and graduated from the Northeast Asian Research Institute of the Heilongjiang Academy of Social Sciences, graduated from Moscow State University, believes that China's exports to Russia have not created the image of "made in China" with cheap goods, and have not produced a well-known brand and famous brand in the Russian clothing market.

Chinese clothing products are only a cheap "big road" for sale in the Russian arena. They are a helpless choice when people earn very low incomes during economic difficulties.

However, with the increasing income of Russian residents, their demand for high-end clothing has increased rapidly.

According to the survey, 10% to 15% of Russians have the ability to buy brand-name high-end clothing.

Zhejiang businessmen, who have visited the market in Russia, think that Russia is a very fashionable place, whether rich or poor, who are very particular about the pursuit of fashion.

Nowadays, Russian residents are less and less in demand for cheap and low-grade clothing. The only way out is to upgrade the quality and brand of Chinese clothing. This time, Russia's accession to the WTO will be a good opportunity for China's famous brands to penetrate into the Russian market.

However, after consulting with a number of clothing listed companies, there was no clear indication of the development of the Russian market, and due to the weak international economic market, the export business of these companies also shrank correspondingly.

In this regard, Liu Xinyu, director general of YOUNGOR, briefed reporters: "at present, the company's exports are relatively few, and its main business is in the domestic market."

Zhu Nanping suggested that Chinese enterprises should seize the opportunity to continuously improve the brand effect by improving the quality of products, and developing scientific marketing strategies, integrating the advantages of industrial resources, and speeding up the pace of opening up the Russian apparel market.

If we take Hangzhou as an example, we can find that not only the export volume of clothing has increased, but also the price of clothing exports has been rising.

According to statistics, from January to June this year, the number of garments exported to Russia by the Hangzhou inspection and Quarantine Bureau was 1 million 700 thousand and 400, an increase of 32% over the previous year, and the export amount was $11 million 664 thousand and 600, an increase of 74% over the same period last year. The average export price increased from 5.2 US dollars per year to 6.9 US dollars per year.

It is reported that Hangzhou's export of Russian clothing is dominated by women's fashion, and its price positioning is relatively high.

With the rising price of energy products in recent years, the overall income level of Russian residents has been rising, the corresponding structure of clothing consumption market is also changing quietly, and the development of middle and high grade clothing consumer market is accelerating. Hangzhou clothing has won the trust and favor of Russian consumers at a high cost performance ratio.

At present, China's brand clothing has not yet established its own brand effect in Russia.

As a result, garment companies, which are mainly garment export or shrinking in export business, may consider setting up their own brand effect in Russia to seize the new Russian market.