Made in Syria: Putin Hotspots Spur Shoe Sales for Russian ChainBy
Zenden lures patriots with sandals from Assad ancestral home
Company building $18 million factory in disputed Crimea region
In a Russian twist to the kind of consumer nationalism that Donald Trump is championing, a hard-charging retailer in Moscow has figured out how to turn Vladimir Putin’s boldest geopolitical gambits into shoe sales.
The “Made in Syria” and “Made in Crimea” shelves in most of Andrey Pavlov’s 350 Zenden stores have created a buzz on social media, luring customers and lifting revenue at the tail end of a recession that’s bankrupted two rivals.
“We’re working day and night looking for niches,” Pavlov said over green tea in his office in northern Moscow.
The founder of the country’s fastest-growing chain of footwear shops grinned as he pulled out his smartphone to show a photo of the side-by-side Syria and Crimea displays that a Zenden customer had just posted on Instagram. The caption read: “Can’t decide which would be more patriotic to buy.”
The Kremlin’s propaganda machine kicked into overdrive after Putin’s annexation of Crimea from Ukraine in 2014 and Russia’s surprise entry into Syria’s civil war to prop up Bashar al-Assad’s regime in 2015. Pavlov said resurgent national pride is a powerful commercial force, but capitalizing on the trend is tricky because most Russians prefer foreign-sounding brands like Zenden, which he named after former Dutch soccer star Boudewijn Zenden.
Pavlov, 43, said his own sense of patriotism triggered his determination to find suppliers in Syria after neighboring Turkey shot down a Russian bomber along the border. That was no easy task in a country that’s been ravaged by a conflict that’s displaced half the population and left more than 400,000 dead.
Pavlov, who served in the army in the early 1990s, said he refused to do business any more with his Turkish partners, who’d accounted for about 7 percent of Zenden’s sales. He said associates with contacts in the Middle East put him in touch with manufacturers in Latakia, the Assad family’s political stronghold on the Mediterranean where Russia maintains an air base.
An initial batch of 10,000 women’s sandals of different designs arrived by truck to Zenden’s Russian warehouses via Iran and Azerbaijan in the first quarter. Pavlov declined to detail Zenden’s commercial arrangements in Latakia, fearing his new suppliers will be roped into making boots for Assad’s forces.
The sandals, which retail for the ruble equivalent of about $15, have proven to be a hit with consumers like Irina Ershova, a marketing manager who bought a pair last month at a Zenden outlet in the Russian capital.
“The ‘Made in Syria’ tag caught my attention, but it’s the value for money that won me over,” she said.
Pavlov said he’s trying to figure out ways to buy more footwear from Syria, where quality is high and costs are even lower than in China, which supplies almost 80 percent of his inventory. He said the logistical and political hurdles turned out to be greater than he first anticipated, jeopardizing an original plan to order as many as 350,000 pairs of summer shoes from producers in Latakia.
The entrepreneur is more bullish on Crimea, where the tax breaks Russia is offering to ease the disputed region’s incorporation are giving him an edge.
Zenden produced 80,000 pairs of shoes at a rented facility in Crimea last year, or about 1 percent of the company’s output, but Pavlov said that volume will swell to as much as a million pairs annually once he finishes the 1 billion-ruble ($18 million) factory he’s building in the Black Sea port city of Yevpatoria.
Pavlov expects sales to jump to 12 million pairs this year, boosting revenue by about 30 percent to 28 billion rubles as he opens his 400th store and expands into Siberia. Only Kari, which sells almost exclusively Chinese shoes, and Germany’s higher-priced Adidas AG, which has scaled back since the ruble plunged in 2014, including closing 80 stores so far this year, sold more in 2016, data compiled by Fashion Consulting Group show.
“The low-budget shoppers targeted by Zenden are more inclined toward patriotism,” said Galina Kravchenko, an analyst at the Moscow-based FCG research group. "Still, it’s unlikely they’d buy shoes from Crimea and Syria if the chain sold them at higher prices than other shoes.”
Big Mac Business
Pavlov got his start in business selling hundreds of Big Macs a day to vendors at Luzhniki, Russia’s largest outdoor market, for double what he paid. From carrying burgers in shoeboxes, he moved into the real thing, setting up a footwear wholesaler to supply many of those same vendors. In 1997, he started Zenden.
A lifelong soccer enthusiast -- Zenden sponsors a second-tier professional club -- Pavlov said the stir created by his Syrian and Crimean campaigns is worthless without competitive pricing.
Most of the 4,000 or so varieties his company offers at its various locations sell for less than $50, so the fight for “every decimal point” of margin never ends, he said. Different tastes in different regions -- “men love shiny shoes with ornaments in the Caucasus, basic black in Novgorod” -- makes achieving economies of scale in manufacturing more difficult, he said.
What isn’t hard is convincing Russians to support Putin’s geopolitical actions with their wallets, according to Ivan Fedyakov, who runs INFOline, a company in St. Petersburg that analyzes retail markets. He said the penalties the U.S. and the European Union imposed over Ukraine sharpened the “friend or foe” attitude many Russian have, which is a good thing for retailers like Zenden.
“Consumers are ready to support goods from Russia and its political allies with their rubles,” Fedyakov said.