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FROM RUSSIA WITH LACE

WILD ORCHID IS EXPANDING ITS LINGERIE EMPIRE FROM RUSSIA TO WESTERN EUROPE

By Nicky Godding

Hey, undies make a valuable and reliable barometer of economic development. Who knew?

The global underwear market is forecast to grow by about 9 percent by 2012, with the likes of China, India and Southeast Asia driving the expansion. In Russia some $1.8 billion worth of lingerie and swimwear was sold last year, and industry observers say this will rise roughly 15 percent annually over the next five years. In Britain alone yearly sales of corsets, lingerie and hosiery total about £2.5 billion ($5.2 billion), according to Just Style, a U.K.-based market research firm.

This is cheery news indeed for Wild Orchid, Russia’s leading lingerie retailer. In August, 14 years after opening its first boutique in Moscow, the retailer moved into Western Europe with a store in the U.K. it calls Vendetta. This Vendetta concept is named after the retailer’s own brand label. The 175-square-meter (1,880 square feet) British store is in the Bluewater shopping center, in Kent.

The company also opened a 3,000-square-foot flagship in London’s Kensington High Street in October, then another in The Glades shopping center, just outside London. At press time yet another was slated to open on Oxford Street, London’s busiest shopping thoroughfare, sometime early this month. Early in the new year, the company also plans to open a store in the seaside resort of Forte Dei Marmi, Tuscany.

Melanie Vance, the director who is leading the West European expansion, says the company’s ambitions do not stop there, though. “We’re launching in China in 2008, and our ultimate goal is to move into the U.S. market to rival Victoria’s Secret,” she said.

At press time Wild Orchid had 216 stores across Russia and Ukraine under a variety of brand names. Fifty-three luxury stores are branded Wild Orchid, where the chain sells its Vendetta line of goods alongside other upmarket international brands. An additional 156 stores called Bustier sell to the middle market, and seven men’s stores opened under the VI Legion name.

Wild Orchid has cornered 50 percent of the high-end market in Russia (in Moscow, its 70 percent), while Bustier holds up 15 percent of the Russian midmarket. Last year the company posted nearly $100 million in sales, up from $60 million in 2005 and $45 million in 2004.

Vance says the company has chosen to enter Western Europe by way of London because lots of Russians are settling in Britain. Some 400,000 expatriate Russians live in the U.K., many of them not only wealthy but also familiar with the Wild Orchid name, of course.

And yet, even with all those Russians, the company has its work cut out, says retail analyst Richard Hyman, managing director at U.K.-based Verdict Consulting. “Virtually all Western retail markets are physically very mature,” he said. “They already have too many players, particularly in fashion-related markets. … The failures outweigh the successes. Take the U.K. and U.S.A. — same language, similar culture, both affluent, and yet very few cross-border incursions in either direction have worked, and most end in tears.”

But Wild Orchid is forging ahead with its Vendetta plans. Why such confidence? Vendetta is dedicated to underwear, selling the “best international brands, such as Roberto Cavalli and Christian Lacroix, alongside our own brand,” said Vance. And the company is big on store design, customer service and merchandising, she says.

Vance says sales at the Bluewater store have been good, especially considering that the company has yet to launch a national marketing campaign, but has relied instead on word of mouth. Western Europe will pose challenges, she says. “Leases, stamp duty, land tax and rates are all more expensive than in Russia,” Vance said. “But as our research shows that women in the U.K. buy an average of 7.3 briefs and 2.8 bras per year and are the highest-spending per head in Europe, we think the investment is more than worthwhile.” In time for Christmas, the company plans a promotional campaign for its U.K. stores, consisting of in-store events.

The retailer has a fan in Fiona Campbell-Riley, head of marketing at Bluewater. “At Bluewater we are always looking for new and exciting retailers to join our retailer mix, and Vendetta fit the bill perfectly,” she said. “It has been well received by our guests and is attracting a high proportion of visitors.”

Fiona also has some advice for other East European retailers seeking a foothold in the West: Work with shopping center executives. “Relationship building is key when looking to open in U.K. centers. Research into the center, its surrounding area and infrastructure will help inform the decision. Many international retailers moving over to the U.K. are looking to open a flagship store which can then be built on, so it is vital that the center management ‘teamworks’ with the retailers to understand their offer and ensure their aspirations are achieved.”

Alexander Fedorov, founder and president of Wild Orchid, opened the company’s very first unit in Moscow in 1993 to sell upscale lingerie. The company opened more shops in Moscow and then in other Russian cities. In 2004 it launched the Vendetta label, followed by the creation of the Decollete in 2006, which does not have its own stores. The first Wild Orchid store in Ukraine opened in 2005. Currently, the retailer’s most successful shop is in the Atrium shopping center, in Moscow.

Wild Orchid manufactures most of its own products. About 70 percent of the merchandise is made in its own factories in Russia, and 30 percent is made in China. Ultimately, Vance says, the company wants to manufacture all its products to maintain control, quality and lead times.

Fedorov says he is convinced that Wild Orchid and Vendetta will be a success in the U.K. “Lots of Russian companies raise funds in Britain, but we want to do business here,” he told SCT. “We feel we are bringing something different to the U.K. market and could easily have up to 200 stores if the concept proves successful.”