First there was disbelief that a war was breaking out in the middle of Europe, then deep sympathy for the plight of the Ukrainian people. Now the first fashion companies like H&M have reacted and paused their sales in Russia. What are the effects of Russia’s attack on Ukraine so far? We summarize the situation and asked Adidas, Hugo Boss and Gerry Weber.
The role of fashion in times of war?
Fashion designer Giorgio Armani was among the first in the clothing industry to make a mark. He skipped music at his fashion show on Sunday “as a sign of respect to the people involved in the tragedy unfolding in Ukraine.”
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For some it is bizarre to watch fashion shows in Milan and Paris while war rages in Europe. And this ambivalent feeling compared to the “usual” fashion circus, to pursue things as usual – may accompany many. This was also said by the co-managing director of the online retailer Zalando David Schneider.
“Honestly, this year it’s hard for us to pretend everything is normal while watching the war in Ukraine,” he said at the presentation of the annual figures on Tuesday. “Our hearts and thoughts are with the Ukrainian people. And of course with all our employees, their families and friends who are directly and indirectly affected.”
Zalando supports affected employees
Zalando supports the affected employees and their families with advice, visa and travel assistance. Zalando does not have direct business in Ukraine or Russia, but there is a supplier for the private label business in western Ukraine. “We are in close coordination with the suppliers there, as far as this is possible,” said Schröder. “We need to monitor the situation and the impact very closely.”
Zalando supports partner NGOs with its logistics network in Poland to provide refugees with what they need most. With a donation of 1 million euros, the group is supporting humanitarian aid for those affected by the war, in addition to donations in kind, the voluntary commitment of employees and refugee aid, according to reports from Berlin on Wednesday.
The e-commerce group is already noticing that the situation is affecting the mood of consumers (reflected in its Eastern European markets. The countries Croatia, Estonia, Latvia, Lithuania, Slovakia and Slovenia were added last year.
First fashion brands pause business with Russia
For many people, something completely different than shopping for clothes is now in the foreground. It remains to be seen how the mood in Western Europe and Germany will develop in view of the uncertainty. As late as mid-February, the falling number of infections and the relaxation of quarantine regulations in many countries gave hope for normality.
Now the voices calling on the fashion industry to make a mark are getting louder. 1Granary magazine called on “fashion companies and their executives to stand with Ukraine and strongly condemn the Russian invasion.”
The Swedish fashion group H&M is the first of the big fast fashion groups to temporarily pause all sales in Russia. The shops in Ukraine have already been temporarily closed, announced H&M on Wednesday. The Hungarian fashion label Nanuschka has also paused its business relations with Russia.
“This is an essential step for us in the current situation. The decision is not aimed at our Russian customers, or friends, but is a sign against the invasion of Ukraine,” Nanushka explained in an Instagram post on Wednesday. The founder and creative director Sandar Sandor was born in Hungary under a socialist system and therefore has a close emotional connection to the current crisis, it says.
Setting an example, but at what cost?
Armani showed how powerful fashion can make a statement, but it’s not always easy to strike the right note. In Russia itself, the mention of the words “war” or “invasion” in connection with Ukraine is not permitted, instead the word “special operation” is used. According to media reports, anyone who opposes this could face penalties.
So far, most companies have often expressed support for Ukraine without mentioning the Russian invasion. Above all, companies with their own locations and employees in Russia have so far been reluctant to make statements against the actions of the Russian state.
An example is Adidas. The sporting goods manufacturer is a global corporation and thus also has a number of stores in Russia and Ukraine, as a search using the store finder on the website shows. In the most recently published annual report for 2020, sales for the Russia and CIS region were EUR 584 million, or 3 percent of total revenues. According to its own published list, the group has three supplier companies in Ukraine and one in Russia.
Delivery stops to Russia
So far, Adidas suspended its partnership with the Russian Football Union. When asked how Adidas is currently dealing with its business in Russia and Ukraine, the group gave the following answer on Wednesday: “We are closely monitoring the situation and the protection and safety of our employees is our top priority.”
US competitor Nike announced on Tuesday that shopping in the online store and via the app from Russia is no longer possible – because deliveries cannot be guaranteed.
Indeed, the shipping companies UPS and FedEx have stopped deliveries to Russia and Ukraine. Until further notice, Deutsche Post DHL will no longer send any express shipments or freight to Russia. Also shipping companies like Maersk stop their transports. Despite mounting pressure to take a stand, delivering is now becoming more difficult.
Hugo Boss continues to conduct business in Russia – out of responsibility for the employees
Hugo Boss is continuing its business in Russia, “particularly with regard to the responsibility we have towards our 200 employees and their families on site,” said the Metzingen fashion group on Wednesday. Here, too, it says: “Of course, we are constantly monitoring and checking the situation.” In total, Russia operates 13 of its own stores in Russia, which is only a small part of the approximately 440 stores worldwide.
According to its own statements, the group has so far been “only slightly affected” by the economic sanctions against Russia. Deliveries of goods to Russia are currently still possible.
“The share of the Group’s sales that is attributable to Russia is very limited. Together with Ukraine, the market represents about 3 percent of total sales,” the company breaks down. Business partners operate eleven franchise stores in the Ukraine. A long-standing partnership exists with three suppliers, where production has now largely been discontinued. With less than 1 percent, Ukraine’s share of the total procurement volume is small. Hugo Boss is in contact with its partners in order to provide them with the best possible support, but the overall business is not affected.
Gerry Weber is still delivering
The economic sanctions against Russia have also sent the national currency ruble into freefall. In Russian shops, employees are said to be almost unable to keep up with posting the new prices. Currency risk also complicates business with Russia. The exclusion of seven Russian banks from the Swift international payment system also entails the risk for companies of no longer receiving payments from Russian business partners. German fashion companies with business connections to Russia now have to ask themselves whether ordered goods can be produced, delivered and paid for.
The clothing company Gerry Weber does not have its own shops in Russia and Ukraine, but does have business relationships in both countries. Together with franchise and wholesale partners, 18 points of sale are operated in Ukraine and 205 in Russia, Gerry Weber said on Wednesday. In the 2020 annual report, the region of Russia and the CIS countries still accounted for 5.8 percent of sales.
“We are currently no longer delivering to Ukraine due to the partly interrupted logistics and the uncertain situation. We are still delivering our goods to Russia,” said a spokeswoman by email. The effects for the company – as for the entire industry – are not yet foreseeable. Gerry Weber also constantly checks current developments and takes appropriate measures.
Much still unclear
Many consequences of the Russian army’s invasion of Ukraine are unclear. The European textile association Euratex warned of rising energy prices on Wednesday. The association pointed out that some companies are considering shutting down production in the face of high prices for natural gas, oil and other energy sources.
For fashion companies, there are a number of other uncertainties. What disruptions can canceled flights, halted rail transport and destroyed road connections have on supply chains? In addition, there are likely to be rising transport prices given the exploding energy costs. It is not yet possible to foresee how the previous sanctions against Russia will work and which ones may be added. The German Vice Chancellor Robert Habeck resigned Help for affected companies here.
These are some of the business uncertainties that every company must contend with. But at the top of the list of questions remains how things will continue for the people of Ukraine. And the question of what effects this war will have on the security situation and everyday life in Europe.