default-output-block.skip-main
BoF Logo

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.

Inside Russia’s Clandestine Showrooms

BoF goes inside the network of clandestine “showrooms” which distribute underpriced luxury fashion products across Russia and the former USSR.
A monument to "shuttle traders" in Manzhouli, on the border between Russia and China | Source: Wikimedia Commons
By
  • Jana Reynolds

MOSCOW, Russia One night during Paris Fashion Week, I was standing in a Marais street chatting to an acquaintance who works in sales for a number of high-end labels and showrooms. A couple of stylish Russian-speaking men walked past and exchanged hellos with her. "Which store are they from?" I asked, assuming them to be her clients. She rolled her eyes: "Good question. They are meant to be stylists. Apparently, they come to Paris showrooms to place personal orders. But these usually amount to about €40,000 per brand, per season, every season. Go figure."

Russia, home to major luxury fashion flagships and department stores, also plays host to an intricate — and unofficial —  distribution network for fashion products. A network of clandestine “showrooms”, as they usually label themselves, selling luxury items at prices that undercut the official retailers, operates from private apartments and through social platforms. Some are small-scale operations that work on a pre-order basis, whereby the individual running the business circulates photographs of fashion items on Facebook or Instagram to gauge interest amongst clients before purchasing and importing the goods. Others occupy 200-square-metre spaces in residential buildings and are run like proper stores, but without the costs of paying retail rents and other overheads. There are also official brick-and-mortar stores that, alongside their legitimate stock, sell collections that they should not, technically, be carrying. But one thing these various ventures have in common is that their business is not knowingly endorsed by the luxury brands they sell. So how do they obtain their merchandise?

For the wholesale teams at luxury brands, a lack of local knowledge of Russia and the geographically vast ex-USSR territories makes controlling distribution in these markets almost impossible. “You’ve got to be Russian to think ‘This sounds a bit dodgy’ when an unknown store from Magadan tries to buy €35,000 worth of Margiela menswear,” says Natasha Cochet, senior wholesale manager at Balenciaga and former sales executive at Maison Martin Margiela. “You’ve got to be Russian to tell a Muscovite from their accent and attire, when they are claiming to be from a boutique in Yaroslavl.”

If an order comes in from a store in Magadan (a 17-hour flight from Paris), it is unlikely that the Europe-based brand manager will visit said store to make sure it exists and is genuine. Thus, buyers that claim to be working for stores in remote regions of Russia often turn out to be running clandestine “showrooms” in central Moscow, selling their merchandise at a mark-up of 2.5, as opposed to 3 to 3.5 in official Russian stores. For this reason, official stores are often the first to inform brands about these illicit resellers.

“We once had a meeting with a company that claimed they were opening a store in Minsk,” says Audrey Manes, owner of Place Rouge, a London-based agency that sells brands such as A. F. Vandevorst, Rupert Sanderson and Eleven Paris. “They showed us a presentation: the photos were of very poor quality, but the buyers said the store was under renovation and they’d send us new images once it was open. They placed an order with one of our designers, which was delivered to an address in Belarus, so we suspected nothing… A few months later, one of the Moscow stores we work with informed us that they found our collection in a showroom around the corner from their own shop, retailing at cheaper prices.” The “showroom” was run by the owners of the (non-existent) Minsk boutique, who, when confronted, claimed that it served public relations purposes only. Manes, unconvinced, severed all relations with the boutique.

Clandestine retailers also secure luxury fashion merchandise by claiming to be buying for a real — unsuspecting — store, rather than making one up.

Vitaly Plissov is the owner of CreativEst, a consulting agency that specialises in Eastern European markets and counts Rick Owens, Stone Island and Pierre Hardy among its clients. He recounts numerous encounters with buyers claiming to represent real stores in Saratov, Voronezh or Tomsk, who turned out to have no relationship with these shops at all. "They were mainly Moscow-based parallelschiki [people conducting a "parallel" business] who assumed false identities," he explains.

According to Anna Lebsak-Kleimans, the founder and CEO of Fashion Consulting Group, a business intelligence agency that specialises in ex-USSR markets, the scale of these operations is “insignificant, maybe 2 percent to 7 percent of the market.”

Measuring the scale of these unofficial distribution networks is a murky business, not least because their operations can spread beyond the countries of the former USSR. A few Russian shops recently received an email from an Italian “reseller” offering new season collections from dozens of leading luxury labels. It read: “We are aware that some of these brands are unwilling to open new accounts in the city where your boutique is located, or impose minimums that may be difficult for you to reach. We are here to help you obtain their collections regardless of these obstacles.” It later emerged that the operation was run by the owner of a reputable Italian store, who had set up a warehouse in St. Petersburg and was reselling over half of his merchandise to Russian retailers, thus acting as an unsolicited distributor for his labels.

It would also appear that many brands are aware of these schemes, but pretend not to be. After all, most parallelschiki pay as well as official stores. And with established labels commonly imposing minimum orders of €15,000 to €50,000 and above, losing any customer would be a measurable financial blow. In fact, these minimums contribute to the phenomenon: some stores are unable to sell €50,000 worth of a label per season, but are unwilling to drop the brand for reasons of prestige. Thus, in order to make ends meet, they "share" their orders with other retailers or "showrooms," without informing the brands.

Curiously, the labels targeted by these unofficial distribution networks are not only the best known luxury brands: alongside Celine bags and Lanvin gowns, clandestine showrooms stock leather jackets by Isaac Sellam, complex asymmetric pieces by little-known label Peachoo & Krejberg and avant-garde jewellery by Rene Talmon l’Armee. Why would anyone go to such lengths to obtain merchandise that won’t necessarily be selling like hot cakes? Plissov thinks it’s a question of image and aspiration rather than revenues: “They want to be cool and conceptual, not your run-of-the-mill glamour spots. This is probably what their clients want too — to feel special and sophisticated.”

"[The] underground garment trade in Russia goes back to pre-capitalist times," Lebsak-Kleimans observes. She goes on to quote cult Soviet films that feature fartsovschiki, black marketeers who traded illegitimately from apartments and backstreets as early as the 1950s, offering imported goods that were impossible to buy in official stores. The attitude towards them in the Soviet times was ambivalent. When two pioneers of the trade, Ian Rokotov and Vladislav Faibishenko, were executed under Khruschev in 1961, at the age of 22, thousands of Soviet citizens sent letters endorsing the penalty; yet in more liberal Western-leaning circles, their business was regarded as indispensable, if not heroic.

After the collapse of the USSR, a new generation of clandestine importers emerged: chelnoki, shuttle traders who smuggled clothes and other consumer goods in signature plaid bags. In the economic havoc of the early post-Soviet years such trade became the only way to survive for many people, including those with a university degree. The attitude towards them that still prevails today can be derived from the fact that in 2007 and 2009, two Russian cities, Belgorod and Yekaterinburg, unveiled monuments that glorify chelnoki. Many of the shuttle traders later went on to establish Russia's first luxury boutiques. "The country's entire fashion industry grew out of illegitimate trade," Plissov shrugs. "It would be naïve to expect people to suddenly turn their backs on the black market."

There is one type of fashion player that could, in theory, benefit from the clandestine showrooms: independent fashion labels that seek to enter the Russian market but do not have any connections with established stores yet. “Undercover retailers are free from the financial pressures and anxieties inevitable for official retail businesses,” reflects Philippe Natali, owner of N˚10 Showroom, a Paris-based showroom that represents emerging designers. “They can afford to be more experimental in their selection and, as official retailers are keeping a close eye on them, they could even become great jumpstart platforms for new labels. Moreover, if they buy brands that are not yet stocked by more established retailers, they do not jeopardise the business of the latter as their selections do not overlap: it’s a win-win.”

Moscow’s retail scene has seen a few success stories of this kind: concept-stores SV Moscow and Air, both of which began as secret showrooms, have over the years introduced to the market avant-garde brands that are now stocked by some of the most recognised shops, and went on to become official and reputable retailers themselves. If more clandestine businesses turned their attention to emerging, rather than established, labels, their business model may become legitimised in the eyes of industry insiders and customers, seeing that the latter come to them in search of cool, rather than pure glamour.

© 2022 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions

More from Global Markets
On the ground intelligence and analysis from emerging and frontier markets.



BoF sits down with Zainab Abdulrazzaq, founder of 3oud.com and organiser of the Oud Fashion Talks, to discover the next steps for the event, designed to cement Kuwait’s place on the international fashion map.


view more

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.
CONNECT WITH US ON
How to Build a Profitable DTC Brand
© 2023 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions and Privacy policy.
How to Build a Profitable DTC Brand