Will new sanctions on Russia impact the fashion industry?

Tensions between Russia and the Ukraine may lead to greater international sanctions, if an invasion of Ukrainian territory takes place. The impact of sanctions on the fashion industry may not be fully tangible, but will no doubt reverberate.

High dependence on import

To start, Russia’s fashion sector is strongly dependent on imported goods. Despite local apparel companies trying to meet domestic demand, most clothing and accessories are bought from imported brands.

Ursula von der Leyen, head of the EU’s Executive Commission, said on Monday Russia would be cut off from access to financial markets and high-tech goods limited under Western sanctions. While delivery of fashion goods was minimally disrupted in 2014, when the West first introduced sanctions after Russia’s invasion of Crimea, it is likely Russian households will have less to spend.

The state of the Russian fashion industry is also not a rosy as it may appear. In a 2019 report from the Flanders Investment & Trade Group, it highlighted that Russia has a bad connection between fashion designers, textile producers and weavers, with low investment activity and a shortage of domestic raw materials (flax, cotton, wool) as well as lack of killed personnel (sewing, textile, leather and shoemaking).

Unlike its close neighbour Poland and other EU countries, Russia does not produce high-quality fabrics, shoe soles and shoe accessories. Many fabrics and shoe soles are imported from Italy, Turkey and China. The country also doesn’t grow cotton, which is imported from Uzbekistan, Tajikistan and Turkmenistan. Wool, fur and leather are produced in Russia, but the supply of these materials is insufficient, said the report.

While much of its mid-market and lower-end goods originates from China, Russia is pursuing the policy of import substitution to reduce its dependence and strengthen its own textile and fashion industries.

Like the rest of the world, luxury spending has only increased since the pandemic and Russian sales across all sectors saw a strong fourth quarter in 2021.

While the focus may be shifting towards local brands, the appeal of Western fashion and luxury companies will not wane, even if sanctions are applied. As borders reopen Russians will be able to travel and wealthy spenders will be welcomed back in fashion capitals across the UK, Japan, Italy and France.

While a diplomatic resolution will be the best scenario for both Russian retailers and Western brands, there is no denying sanctions will affect Russian consumer spending, and this will impact those who export to its market.

Article source: Flanders Investment & Trade report: Fashion Market in Russia and Saint Petersburg