“There was a light at the end of the tunnel…” Participants in the shoe market on the situation in the industry.

2020 became a crisis year for the real sector of the economy and the footwear industry. Shoes Report spoke with wholesalers, Mikhail Kryuchkov, head of the Paloma distribution company, which represents a number of Spanish shoe brands on the Russian market, and Renat Malikov, co-owner of Tuffoni, which develops the shoe brand of the same name. The conversation was about the specifics of the current crisis, about “is there a light at the end of the tunnel” and when this “tunnel” will end.

Mikhail Kryuchkov - General Director of the distribution company Paloma

Renat Malikov - co-owner of Tuffoni company

Shoes Report: We are now experiencing the second wave of the pandemic and the second wave of the crisis. It would seem that we are already accustomed to crises, and yet this one is special. What is its specificity?

Renat Malikov: The main problem with this crisis is that no one understands what will happen next. It's impossible to predict. Factories are closing, not just shoe manufacturers, but also component and accessory manufacturers. It's difficult to create collections now because travel is impossible, and information is extremely limited. This is the main problem: even when accepting orders for shoes, it turns out that some styles are impossible to produce.

Mikhail Kryuchkov: Factories are open for half a day and downsizing. There are also reduction of collections. Fewer molds are produced than always, everyone understands that demand has fallen.

Shoes Report: Are many factories actually closing in China?

Renat: A lot, and not just in our segment. We're currently moving to a new office and are partially expanding with the prospect of further development. We're planning to open a second production line. I ordered lighting from China for our new office; there's a city where they only produce lighting. About 70% of the stores and factories in that city have closed permanently. When I was there about eight years ago, everything was filled with stores. Now, practically everything is closed. It's not just our industry that's suffering.

Mikhail: We are suffering because the end consumer has now taken a break in order to stay in the money, to see what will happen next, how everything will develop.

Renat: Look, as soon as they announced in October that remote work would be partially reintroduced, trade came to a complete halt. We saw a similar decline in March and April.

Mikhail: In the spring, when we were in quarantine, the internet came to our rescue; many people started developing online. At first, people were optimistic that this would pass quickly. Now investors are counting on a vaccine.

Renat: Once they start vaccinating people in large numbers, then we'll see some movement. I think we'll only get our bearings by the fall. Because people won't be vaccinated that quickly.

Mikhail: It's like a war, when normal life and the economy come to a standstill, when people can plan their expenses, vacations, and New Year's gifts. There's so much turbulence now that nothing surprises you anymore. A large number of factories are going bankrupt…

Tuffoni at the Euro Shoes Premiere Collection in Moscow in August 2020

Renat: What can I say about this season? First, the exhibitions went well, Euroshoes went well, orders were confirmed by clients, and we've moved into production. We'll see what happens next. We performed better in the fall than in the spring, when there was a big cancellation, since the lockdown was announced right at the time when orders for collections were being confirmed and paid for.

Mikhail: I agree that the last Euroshoes exhibition went very well. I think because there were fewer participants, we had little competition…

Renat: But all the main participants were there. Everyone who works regularly was represented at the exhibition. The only thing missing was the usual large number of Turkish brands that aren't regular exhibitors, coming to try their luck, so to speak. Those who have a stable presence in the market were there and did well. The main thing is that all the clients came and didn't reduce their orders.

Michael: And the summer was good, warm. All sandals, open sandals sold well.

Shoes Report: What can you say about the online consumer churn that everyone is talking about now?

Mikhail: Retail is just starting to pick up right now. Moscow itself is overheated, of course, but in the regions, those who are in good locations—on the main street, in the best shopping centers—are doing well. There was demand, and warehouses were thoroughly cleaned out. But this is also because many people didn't confirm orders for the fall, only picking up in the summer. In the summer, stores were mostly closed; St. Petersburg actually opened late, later than Moscow. St. Petersburg and Kazan were the last to open.

Renat: But nevertheless, our summer collection sold out completely in St. Petersburg. St. Petersburg sold well this season.

At the Euro Shoes Premiere Collection exhibition in Moscow in August 2020

Mikhail: I think the next four months will be very difficult – December, January, February, March. There was optimism at the Euroshoes exhibition, but I see things gradually slipping…

Renat: I'll put it another way: I think it's the opposite – everything will be fine. We're optimistic. Because the summer season is starting now. Trade will pick up in the summer anyway.

Michael: In order for customers to buy out the spring-summer collection and send you an advance payment, and the order was sent to production, retailers must sell well for the winter, but now they sell poorly.

Shoes Report: It depends on how much people are willing to spend money in the retail segment now.

Renat: Of course, money is not being spent now. The situation, as Zadornov said, is this: "There was a light at the end of the tunnel, only the tunnel does not end!" It’s hard, of course, but those who do not sit still, work, will survive, will swim out. Unless there is some external force that will drown.

Shoes Report: We're just counting on this pandemic to end soon, what if not? The virus does not disappear. It is not yet clear about the vaccine ...

Renat: People get used to everything. If there is no total horror ... But this is the same as arguing whether there will be a war. If there is a war, what kind of footwear, besides tarpaulin boots? If the pandemic is sluggish, they will get used to it, they will live with it, that's all. We didn't come here in a quilted jacket, right? Right now coronavirus, but people are sitting in a cafe, and no one came barefoot.

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Shoes Report: Well, Moscow in general ...

Renat: No, it's not just Moscow. People in the outskirts tend to dress well. In Moscow, it's been more relaxed for years.

Shoes Report: By the way, I would like to compliment the new Tuffoni collection, I really liked it, it feels like you follow all the trends - unusual heels, square toes ...

Renat: The collection was completely new, with virtually no duplicates in lasts. Of course, to sell successfully, you need to consider trends. If there aren't any trends, then you need price, and to set a price, you need quantity. But if we offer a good price, the shoes will be simpler.

Shoes Report: How are the Germans?

Renat: Yes, they have their niche, and we have ours. Everyone in their place.

Mikhail: We're focused on European fashion and trends. Essentially, we sell fashion.

Renat: Fashion – quality-price – is our segment.

Tuffoni, spring-summer 2021

Shoes Report: What's in Spain now? What's going on with Spanish stamps?

Mikhail: The whole of Europe is struggling with the pandemic, and our brand, Roobin's, for example, has been hit hard, even though it always sold well, including in Europe. The pandemic has hit the factory hard, and it's closed. European brands rely on representatives in each country. A brand representative helps develop the product in their territory. During the pandemic, these representatives couldn't work, no one placed orders with the factories, and production began to close. The Roobin's factory is still closed.

Shoes Report: How many brands are there in Paloma's portfolio?

Mikhail: Four. Rococo, On Foot (Spain), Roobin's and Wonders.

Shoes Report: Now the development of marketplaces is underway - Wildberries, Lamoda, Ozon ... They are growing, expanding the assortment matrix, improving logistics, reducing the speed of delivery. Do you work with marketplaces?

Renat: We sell on Wildberries ourselves and through partners. But recently, we've been declining sales on that marketplace due to difficulties with financial control. I won't even mention dumping; we took that into account from the start and supplied completely different collections there, ones that don't overlap with our core collection, which our wholesalers regularly order. Another problem is that Wildberries provides virtually no sales information. We requested some of the goods back, but a year later, we still haven't received them all. We've filed complaints, but no one has responded. This is no way to work! We've reduced our volumes. We work with Lamoda. At least everything there is clear and predictable, and we'll continue to develop this partnership. We don't work with Ozon.

Shoes Report: And the fact that virtual exhibitions are being organized now, how do you feel about these projects?

Renat: We didn't even consider what MosShoes is doing now. The MosShoes exhibition has moved into the low-end segment. They've gone in a completely different direction from their original offerings, and now they're offering really cheap shoes and bags.

Shoes Report: Does your production work in Turkey?

Renat: Yes, everything works, nothing has been jammed. We order components from all over, from China to Italy – soles, lasts, leather.

Shoes Report: As for your experience with MICAM, you have successfully attended the exhibition. After that, do you regularly participate in it?

Renat: Yes. We also have a representative office in Poland, and this area is developing very well.

Shoes Report: How do you envision the future, what actions will you take to stay afloat?

Mikhail: Right now, the challenge is simply to persevere. We need to do everything we can to protect ourselves from risks. The most important thing is to minimize expenses, take a comprehensive look at the entire business, communicate with our customers, partners, and exhibitions, make some forecasts, and try to maintain our position over the next six months and build some perspective for the future. Tuffoni, for example, is launching a clothing line. We're not standing still either. First and foremost, we want to preserve what we have and enter the new season in a position to attract new customers. Our current priorities are developing logistics, labeling, and participating in exhibitions.

By the way, in the shoe market, the pandemic coincided with the introduction of mandatory labeling. I know distributors who gave the labeling to logisticians and got big problems as a result. That is, now we also need to be technologically well organized.

At the Euro Shoes Premiere Collection exhibition in Moscow in August 2020

Renat: We're also cutting costs, specifically by reducing our participation in exhibitions. Our participation in MICAM is currently in question, and we'll likely skip another exhibition. We won't be at MosShoes or Izmailovo. These are precisely the same cost-cutting measures. We'll be exhibiting at Euroshoes in February and are currently moving to a new office in a business center in Rumyantsevo, where we'll also open a new showroom around February.

Interviewed by Marina Shumilina