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Competitive question for SELA. |
Russia's largest garment retail chain, SELA, is reportedly to relocate some production facilities from China to Russia. The company is understood to be making the move to save on logistics and become more responsive to market demand back home under a "fast fashion" production concept.
Competitors are claiming that the firm has been encouraged to support national manufacturing, since Russia is not a low cost production destination, with an expensive manpower base, relatively expensive natural resources and production facilities.
SELA has reportedly reached in principal agreements with a number of Russian factories and placed some small trial orders.
The company has factories in central Russia, and intends to relocate some 15% to 20% of its production there. The advantages are said to be a shorter turnaround time for production and the ability to meet smaller orders.
Some clothes, such as formal wear, could benefit from lower logistical costs when manufactured in Russia and avoid costly and complex customs clearance procedures and import duties required for imports.
However, labour costs in Russia are seldom competitive when compared to those in Asia, local operators say. An average seamstress is paid between US$400 and US$500 per month, far higher than for a similar function in most of Asia.
Small quantities of knitwear or formal wear are traditionally manufactured in Russia by other market leaders like Finn Flare and Vassa, though enlarging the SELA production base makes the whole process far less competitive compared to the company's erstwhile Asian operation.
Vassa also operates its own factories in Italy and Portugal, where larger-scale orders are expected to be higher. Wages in those countries and in Russia are expected to cause production costs to balloon, according to some analysts.
SELA was established in 1991 and it has developed into a vertically-integrated corporation specialising in production and distribution of casualwear and moderately-priced formal wear.
It operates businesses in Russia, Ukraine, Estonia, Kazakhstan and on the Chinese mainland, as well as through retail chains and outlets in 14 other countries.
There are some 440 retail stores operated by SELA in Russia, where the company intends to increase the number of outlets to 500 by late 2010, adding to the 560 SELA stores operating abroad.
from Leonid Orlov, Moscow Consultant
