Why are clothes so expensive in Russia?

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Taking Perm as an example–and why not–it says here that while most things in Perm are 1/2 or 1/3 of the price in London, clothes cost the same–I’d say that if you take into account choice and quality things are a lot worse  than that for the Permians.

My guess is that the basis of the fashion trade in the UK is that the big retailers get stuff very cheap (but decent quality–a lot better than the Chinese stuff you get in Russia) from Bangladesh and China and then sell it in rather large shops that provide a decent shopping experience–mirrors, fitting rooms, toilets…

So would this work in Russia?  If you can buy stuff at Bangladeshi or Chinese prices and sell it at London prices while paying Russian rent and wages you should be able to make some money.

I tried to think of what the problems might be specifically for clothing.  For instance: you can’t get your stock from China to Perm the cheapest way (by boat), but that applies to anything else imported from China, so doesn’t really count.

I thought of the following:

1.  Clothes are relatively easy for the staff and customers to steal (but this is soluble)

2.  You wouldn’t get as cheap a wholesale price as the big UK retailers (but still cheap enough)

3.  If there hasn’t been a proper fashion business in Russia then you won’t get a decent buyer.   But if nobody else has one that’s not so serious.

4.  I don’t think the shop units you get in Russia are generally anything like big enough.  I’m sure there are enough disused warehouses and factories in Perm, but you’d have to spend some money on fitting one out.

5.  My best answer is that the special thing about fashion is that you need clothes in a vast range of sizes, patterns, styles, colours [etc].  As a retailer you can’t afford to carry all that stock yourself so you need a network of wholesalers and middlemen to do it for you.  Which may not exist in Russia.  But it I think it will in China or Bangladesh and so on…

6.  I thought that there might be a steep tariff on imported clothes in Russia, but I looked it up and it’s pretty much the same as the UK.

I then found a Russian-produced answer to my question that you can also view through Google Translate here.

Basically it’s the same as my initial thoughts except:

1)  they ignore the fancy stuff about choice, buyers etc

2)  they refer to shortage/high price of shop space generally

3)  they point out the real problem with the tariff is what the Customs officer will actually charge you

4)  they say that [the same as with housing in the UK] people expect to pay stupid prices.

Of these, (2) & (3) are probably true but they would apply to all imported goods in shops and generally they’re not that dear in Russia.  You do need more floorspace to flog clothes than some other things, but wherever you are you need to put some effort in to turning over the stock so that you cover your overheads.

So we might say that unrealistic expectations are more a part of fashion than some other businesses, and that could be ‘the’ answer.

But then I got some expert economic advice:

Can’t say I’m convinced by the expectation argument.  People are not perfectly rational, but they’re not stupid.  With few exceptions (https://en.wikipedia.org/wiki/Giffen_good ) offer people better quality at lower prices and they will buy.  The cost and supply side constraints sound a much more believable explanation.

Thinking about this, if it was a case of expectations there should probably be a differential effect in different market sectors, which would be easy enough to check for.  Offhand I think the answer is No.

Otherwise the explanation has to show why clothes are different from other imported goods.

1)  The UK price of clothes is too low relative to other goods
–some evidence here, for instance M&S cross-subsidy and people seem to come here from abroad to buy clothes more than other things

2)  UK has high tariffs on non-clothes imports compared with Russia
–hard to believe since UK policy is generally non-protectionist and EU tends to play by the WTO/GATT rules

3)  Something about costs of variety
–not too convinced:  there are lots of diverse clothing factories in China

So my current answer would be the combination of a)  weakness in retailing (indolence, incompetence and shortage of suitable premises means they don’t shift enough stuff per square metre) and b)  difficulties in importation (in particular, uncertainty in knowing what the Customs officer is going to demand and how long he’s going to hang on to your container–the official tariff is perfectly reasonable).

Now under a) they manage perfectly reasonable supermarkets and rather nice chain restaurants at the Pizza Express-ish level and with sensible prices in both cases [but enough of the stuff is domestically sourced to make this not so difficult], while under b) the prices for say cars and computers are…tolerable (maybe 2/3 of the price here), but there’s not the same need to shift the stuff quickly I think.

One problem with this explanation is that if you don’t believe in expectation based on UK/’Western’ prices, then a different set of factors is managing to reproduce them with surprising accuracy.

Then you could ask whether all this means that home dressmaking is more popular in Russia.

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