The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
KIEV, Ukraine — One way to gauge the window of opportunity in any market is by keeping one eye on the speedometer to see how fast the market is moving toward maturation and the other eye on the signposts indicating how far there the road extends before reaching saturation. For the fashion sector, this means surveying the landscape not only for increasingly affluent and discerning consumers, but also for the emergence of a native fashion scene rooted in more than provincial heroes creating derivative designs.
Fortunately for Ukraine, signs of both could be observed at the latest Mercedes-Benz Kiev Fashion Days which concluded on Sunday in the nation's capital. At least half of the dozen or so young Ukrainian labels using this platform — including Sasha Kanevski, Omelya Atelier, Anton Belinskiy, Paskal and Anna October — could boast creative integrity and international distribution. And the audience they attracted was largely made up of young industry professionals and youthful private clients, clad in distinctive hi-low combos of hip international brands, rare vintage finds and the intermittent insider luxury label or two.
But just how representative is this of even the most eager and urban, Ukrainian fashion consumers, when rival event Ukrainian Fashion Week has been catering largely to high society, oligarch's wives and celebrities since 1997?
"I see a lot of young and rich girls here who know the names of very fashion-forward designers and who are ready to buy these specialty items. But I'm not sure they are all spending their money in Ukraine as the majority of them do travel a lot," says Daria Shapovalova, the ambitious serial entrepreneur behind Kiev Fashion Days, who is known both locally and internationally as the 26-year-old go-to-girl for cool fashion in Ukraine — and increasingly for her connections throughout Eastern Europe and the CIS (Commonwealth of Independent States) countries.
"Maybe I sound too optimistic, but I've definitely seen a huge shift in the Ukrainian fashion industry here over these last five years. Sure, I would attribute part of this success to the active position of our own event. For three years already, we've been working under a philosophy of being globally minded where we bring a few fashion-forward designers here from abroad while promoting the same sort of Ukrainian designers year-round through our many initiatives and now through Fashion Scout Kiev which we also operate," continues Shapovalova, who began her career at the age of 19, as a fashion broadcaster with her own Ukrainian TV show before creating the popular fashion portal Fashionweek.kiev.ua and then moving into content creation for international media like Style.com.
In terms of retail, one place in Kiev where they have succeeded in placing a substantial selection of such niche local design talent alongside international designer labels since 2005 is at the post-industrial concept store Atelier1, which sells accessible designerwear from Japan and several other countries. On the other side of town, multibrand store Pure focuses on mixing local designers with mainly British brands. On Chervonoarmiyska Street, The Icon is more swanky, featuring a few Ukrainians alongside an eclectic global selection spanning Gareth Pugh, Rochas, Alexander Wang, Gaultier, Christopher Kane and Balmain.
"For niche, I believe that if you believe in the brands you represent, nowadays you don't have to follow the typical luxury rules here," says Helen Khilkova, co-founder and managing director of Atelier1. "We're pretty successful, selling top fashion brands like Comme des Garçons and Junya Watanabe, as well as a new wave luxury niche brands in our new location, created in an underground bunker kept to resemble Soviet times. We still need more art and design events here to raise the general awareness of creativity, because this has a direct impact on fashion. But there is now an interesting tendency in Ukrainian society, where people have also started looking towards self-perfection — investing more in their education, attending master-classes and so on."
This broader trend toward self-improvement, well-being, spirituality and knowledge-building is happening at different age and socio-economic groups, Khilkova suggests, and is profoundly changing the way people consume fashion at the moment.
"Now, they spend money on things we've always promoted in Atelier1 since the very beginning — understated luxury and a very sophisticated approach to developing individual style. However, this latest craze is starting to become almost annoying in a way because it's like a reaction to the exaggerated 'bling bling' style we had during the logo-driven 1990s. It seems like almost everyone's starting to look 'moody,' wrapped up in dark asymmetric clothes, or wearing expensive avant-garde designers."
Another outspoken and iconoclastic leader of the 'new guard' of Ukrainian fashion is Masha Tsukanova, who at age 29 launched Vogue Ukraine, becoming its first editor-in-chief this March. Through a license between Condé Nast and Kiev-based media giant UMH, Vogue entered a rather crowded market dominated by Sanoma Media, which publishes local editions of Harper's Bazaar, Esquire and Cosmopolitan, and Hearst Shkulev which publishes Ukrainian Elle and Marie Claire.
"It's very important to understand the peculiarities of the Ukrainian way of doing business, like knowing the right people in customs and the tax inspectorates or knowing how to protect your business in a highly corrupt country. A lot of business is grey and the Ukrainian economy is 100 percent dependent upon Ukrainian policy, [so] the people in the government are the same people who own the majority of businesses in the country," says Tsukanova, who formerly worked at leading Ukrainian business newspaper Kommersant and launched its lifestyle supplement. "So if I were a big brand entering the market today, I'd actually do so directly without any local retailer, but through a local consultant or maybe with a local partner instead."
But Tsukanova says that, "on the other hand, there is a very strong and self-motivated young generation that has access to new media, travels a lot and is very broad-minded. They're trying to build small- and medium-sized businesses in a new way — separately from the authorities. Maybe there's no big money in these businesses yet, but they are good examples showing that, in time, the whole situation in the country could eventually change. Either way, no matter which part of the fashion market you're in, it's still important to have a clear vision and knowledge of how fashion business is done in the West, where PR, advertising and customer relationship management are of the highest priority, because these are the points which are still weak here."
A report published in January by Euromonitor International confirmed this, stating that since last year, more fashion retailers — especially those in the luxury segment — have started using newer methods of promotion like outdoor advertising, their own fashion magazines, loyalty programmes and social mass media campaigns, which have helped stimulate the market.
Vogue Ukraine's advertising director, Julia Kostetskaya, says that besides being somewhere between a post-Soviet business environment and Western codes of conduct, the market is also going through a major transition from the multibrand and franchising model of the old guard, who paved the way for fashion to first enter the country, towards a new wave of directly-owned retail networks launched by international megabrands. Prada, for instance, launched its first flagship in Ukraine, last year, under the operational jurisdiction of the brand's Moscow subsidiary, which executives have been expanding to deploy the same directly-owned business model for other stores in CIS countries.
"In the end of 1990s, the Ukrainian fashion market was represented by two strong players who opened the first monobrand stores for major international fashion brands: Helen Marlen Group and Sanahunt. But most of the branded stores in the centre of Kiev only came here in the mid-2000s. Helen Marlen Group opened Yves Saint Laurent monobrand boutique in Kiev, in 2005, for example, which was the same year they created The Passage, a new shopping area that was done according to European standards," says Kostetskaya.
"The next year, Gucci, Burberry and Roberto Cavalli opened their doors in The Passage and at the same time top international brands started direct intervention into the market. The most important openings were Louis Vuitton (on the main retail thoroughfare of Khreshatyk Street), Dior, Prada and Chanel (in Mandarin Plaza) which also opened up offices here."
Their arrival ushered in a new chapter in the history of the Ukrainian fashion market, which has seen new players entering the fold, including Katia Verber, president and owner of OLO Fashion, who has signed deals with Dolce & Gabbana and Ralph Lauren, and Asya Mkhitaryan, who is working with the likes of Valentino. This, and the economic crisis between 2008 and 2011, pushed the old guard to re-evaluate their business architecture and bring in new blood.
"Not many in the fashion market here were able to keep up with the pressure of the unfavourable economic environment, on one side, and the tempo and dynamics of the competition, on the other," says Ievgen Mamai, who was brought in by Sanahunt Group's legendary founder Oksana Moroz-Hunt, in 2010, as a specialist in accounting, planning and budgeting. "But during the crisis period, we opened eight shop-in-shops, including Stella Mccartney, Berluti, Alexander McQueen, Zilli, Lanvin, Balenciaga, Giuseppe Zanotti, Celine and Brunello Cucinelli."
"For 15 years, Sanahunt has managed to attract the world's best brands. More than two hundred of them are located in 7,000 square metres. In 2013, we opened a number of new shop-in-shops including Tom Ford, Charlotte Olympia, Azzedine Alaia and in December, we also plan to open a Giorgio Armani corner."
While the majority of middle and mass-market fashion chains in Ukraine were traditionally Russian and Turkish brands, that has been changing fast with both international and local competition heating up. Topshop has two stores, while Zara has four outposts, in Kiev alone (including the Dreamtown Mall and Karavan Megastore locations). Notably, H&M has been absent from the Ukrainian market, but Mango counts seven stores in the capital and several in each of the major cities around the country, namely Kharkiv, Odessa, Dnipropetrovsk and Donetsk. But, unlike in many emerging markets where second- and third-tier cities cater almost exclusively to the high street, luxury retail has long had a foothold in these areas through multibrand stores like Cult in Donetsk, for example.
Katia Verber, who cut her teeth under the tenure of her Russian mother, Alla Verber (vice-president of Mercury Group and TsUM), also saw opportunities during the economic crisis and duly opened up her own enterprise in Ukraine.
"Kiev really started booming for serious fashion brands around 2008 to 2009, in fact, which is right when I moved here from Moscow," she says. "Since then there has been a great jump in the industry, with malls such as Sky Mall, Ocean Plaza and Gulliver opening up. In two years, Kiev TsUM (a giant space unconnected to the Russian business being developed by ESTA Holding, a part of SKM Group), looks like a promising middle class and high street project. Right now, all other brands are looking to enter Ukraine. I believe that Kiev will grow tremendously in the next few years, and of course people will have more choice, which will change the market too. But I would advise serious brands to move slowly and know that the most important thing in Kiev is location, location, location."
Shapovalova agrees. "I think that TsUM will change the landscape a lot here. Also, I see a big potential in some of the smaller retailers, who now own one or two monobrands, but who have big ambitions for future. I hope that Ukraine will sign an agreement with the European Union so that it will simplify the trade system and that Ukrainian designers will be able to ship their clothes to international stockists with fewer problems. For some of our designers, it costs more to deliver the clothes to their global retailers than it does to produce them."
"Also, I believe that changes in the law for Internet shopping will also have a massive impact. Now, if the parcel costs more than 300 euros, we pay more than 30 percent of the imported value to tax, which is insane. So the importance of big international online retailers will also increase in the future if the taxes will indeed be reduced. I know Net-a-Porter is already doing special events for their Ukrainian clients — and this is only the beginning."
The lifestyle led by customers of Net-a-Porter in the enchanted historical city centre is of course a far cry from that of those eking out an existence in the grim and menacing tenements that line Kiev's main motorway from the airport, where shady characters, illicit goods and serious danger lurk in some of the more dodgy rynok (street markets) selling clothes to the impoverished millions, who make up a quarter of Ukraine's population.
But according to an August 2013 report by Euromonitor International, "[although] apparel continued to be restrained by the ongoing economic recession, with many people still economising on new clothes and footwear [in 2012], it was another year of positive growth in both volume and value terms. The end of the year was marked by additional tension prior to the parliamentary elections in October 2012 and Ukrainians speculating about another possible dip of the crisis and expecting devaluation of the local Hryvnia currency...However, overall economic indicators remained positive and in 2012, real GDP growth was nearly 2 percent."
Vogue's Kostetskaya suggests that Ukrainians of virtually all incomes and backgrounds are particularly willing to make sacrifices to look good. "Political instability and uncertainty in the economy cannot influence Ukrainians' willingness to buy clothes and be on trend," she says. "And one of the most powerful engines of growth in the retail segment right now is the fast-fashion being launched in new shopping centres being constantly built. That's how we can physically feel that, despite a few signs that might make you otherwise doubt it, that the fashion market here in Ukraine is actually booming."