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Impact Of Russia-Ukraine War On Global Apparel Industry

Mar 21, 2022
Impact Of Russia-Ukraine War On Global Apparel Industry

The impact of the Russia and Ukraine war on global cotton textile industrial chain is gradually expanding.

Among the major import origins of textile and apparel in Russia, the proportion from China takes a high of 43.8%, followed by Italy 8.1%, Bangladesh 6.4%, Republic of Belarus 6.3%, Turkey 6.1% and Vietnam 6.1%.

Viewed from the China and Russia relations and global trade change, the market shares of China in Russian textile and apparel imports may increase further in long run, to fulfill the supply gap caused by the sanctions from Europe and US. For China, the textile and apparel exports to Russia take a very small proportion, easy to meet the new demand from Russia. However, restrained by the large export shares of EU, Japan and US for China, if the war influences the relations between EU, Japan, US and China, China’s textile and apparel exports may face obvious pressure.

The protests in Ukraine and the political instability have had a great impact on the relationship between Russia and the European Union. Recently the sanctions against Russia by the EU have generated discomfort and discussions between many western owned international retail businesses. A sense of panic has struck many apparel retailers and garment brands who have been otherwise witnessing good business from Russia. They fear that the anti-Russian sanctions might take a toll on the sales of garments and have a dramatic effect on their businesses.

For many apparel and luxury clothing retailers of the West, Russia has remained a growing and focus market and have been eyeing on it for international market expansion. But considering the political situation, the progress has been put at hold by many.

Russian shoppers while travelling to the West especially to the UK have decreased by 17 percent according to a research done by a tax-free shopping firm during the political crisis in Russia and Ukraine. The firm also claims that tourists from the Soviet Union spend 669 pounds per transaction, which many retailers fear will continue to decrease if the relationship between Russia and EU remain stressed.

The sales have also dropped in the domestic market of Russia, with the rouble being strained for the past few months and many international brands ignoring any foreign investments at the moment in the country. With the number of rich Russians travellingto places like London, Paris, and Milan for luxury brand shopping decreasing due to the US and EU freezing visas of the high heeled in the country and the West pledging aid to Ukraine. However, many marketers and brand consultants predict it to be a short term impact and are optimistic for the crisis to resolve in the long run.

However, the sales of luxury brand items in the domestic market have remained stable. A department store in Moscow, Tsvetnoy, witnessed a 39 percent increase in the sales volume. With the purchase of luxury products remaining steady given the odds like appreciation of euro, the threatened sanctions, and the Russian economy hit by the crisis retailers are convinced that the shoppers in the country are still purchasing at home, if not, while travelling abroad. It is also a sign that Russian markets in general have a mature premium and luxury market potential since buyers are ready to pay more for the products, which are otherwise available for less at the European stores.

Many international Luxury brand retailers are not concerned about the sales in the country but are worried about the slowdown in the countrys economy and depreciation of the rouble, which as a consequence would affect the travel of luxury shoppers to the West.

The lack of access to the global markets and restriction on buying foreign branded products is believed to have a positive impact on the competitiveness among Russian companies. It also provides a good opportunity to new domestic brands and the existing high-end retailers planning to enter the newer markets within the country. Such a situation will aid re-emphasize the demand towards the domestic brands and market. Shoppers might switch to domestic brands providing more opportunities to Russian retailers, which can help strengthen the economy. Supporting local brands can boost the economy of Russia and help raise the value of the rouble in the international market.

The crisis in Ukraine might have strained relations between Russia and European Union while some luxury retailers and high end brands have put their expansion plans on hold and some seem to be optimistic about the growing domestic demand for international brand until Russian high flyers resume their travel abroad for shopping.

In general, the economic and other sanctions caused by the Russian-Ukrainian war may lead to a decrease in the export of textiles and clothing from several major exporting countries to Russia, and this part of the decrease may be fulfilled by China. However, since Russia’s textile and apparel import demand accounts for a relatively small proportion in the world, the Russian-Ukrainian war may more affect global trade flows, while its impact on total demand may be relatively limited.

Meanwhile, Russia is also a major exporter of fertilizers. In 2021, the export volume of urea is 7 million tons, accounting for 3.56% of global production.

Global cotton planting costs are likely to keep increasing with higher prices of fertilizers. The planting areas in 2022/23 season still have large uncertainties.

In addition, the war has also led to a shortage of seafarers, and the global supply chain may face the risk of disruption. The Seafarer Workforce Report, published in 2021 by BIMCO and ICS, reports that 1.89 million seafarers are currently operating over 74,000 vessels in the global merchant fleet. Of this total workforce, 198,123 (10.5%) of seafarers are Russian and Ukraine accounts for 76,442 (4%) of seafarers. Combined they represent 14.5% of the global workforce. 26,000 seafarers may be lacked in the next four years. International sea freight may keep high for long time.

References

  1. fashionunited.co.uk
  2. luxurydaily.com
  3. just-style.com
  4. textileexcellence.com
Posted by Abiteks

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