Finnish clothing chain Seppälä plans major expansion in Russia

Growing Russian middle class attracting retailers into larger cities

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Since the collapse of the Soviet Union, Russia has been seen until recently as a country divided between the very rich and the very poor, but now an increasingly large middle is forcing its way into the ground between these extremes.
      The swelling ranks of middle class shoppers with money to spend are attracting Finnish retailers, who see the huge Russian market as a golden opportunity.
     
The latest to announce expansion eastwards is the clothing chain Seppälä, which already has two stores in St. Petersburg and four in Moscow. When launching operations in Russia in 2003, Seppälä used the shop-in-shop format under the wing of its parent company Stockmann, but the newer stores have been independent units.
      A new Seppälä opens in March in Kazan, and now the company has reported ambitious plans for around fifty additional outlets abroad in the next year, most of them in Russian cities. Russia, with a population of over 140 million, can boast at least twelve cities with a population in excess of one million.
      Seppälä's sales targets for stores in Russia are around 20 to 30 percent higher than in Finland, which can be explained in part by the larger floor-area involved there. On the other hand, customs duties tend to reduce the sales margin from that achieved in the Finnish market. According to the company's CEO Terhi Okkonen, each and every Seppälä outlet in Russia has turned a profit already in its first year of operation.
      The major competitors for the mid-price clothing stores are the French Promod chain and the Danish Vero Moda. Swedish Hennes & Mauritz (H&M) has not yet made landfall in Russia, while the Spanish firm Zara sells appreciably more expensive goods in the Russian market. Stockmann is well placed, as it controls the Russian operations of both Vero Moda and Zara.


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