Fashion's Breaking Point

Russian clothing brands are increasingly warning that they are in crisis. Some are holding clearance sales, while others are closing workshops or reducing their retail footprint. According to some forecasts, as many as 40% of clothing stores in Russia could shut down by the end of 2026.

Novaya Gazeta Evropa interviewed several Russian fashion entrepreneurs, suggesting the industry is facing a combination of falling consumer demand, rising costs, and mounting regulatory pressure.

Appeals for support and announcements of emergency sales have become increasingly common on social media since April. Industry data point to a broader slowdown: purchases of clothing and footwear fell in 2025, while business closures accelerated in early 2026. Many founders say the current downturn is more damaging than the disruption that followed Russia’s full-scale invasion of Ukraine in 2022.

"At first we thought the drop in sales was temporary," said Aglaya, founder of a small fashion brand. "But now we’re at the point where working capital has almost run out." Other business owners described a similar pattern: Demand began weakening in 2025 and has continued to deteriorate.

Entrepreneurs overwhelmingly blame declining purchasing power. Customers are spending more on essentials, while wages fail to keep pace with rising prices. High interest rates have added to the problem, encouraging consumers to  save rather than spend, while making business loans increasingly expensive.

Many brands report that discounts have become one of the few reliable ways to attract buyers. At the same time, operating costs continue to climb. Expenses for raw materials, logistics, rent, and labor have increased steadily, while some regional wholesale partners have gone out of business, further straining supply chains.

Founders also point to growing regulatory burdens. Tax changes introduced in 2026 have hit medium-sized businesses particularly hard. Russia’s value-added tax (VAT) rate increased from 20% to 22%, while the revenue threshold allowing small businesses to avoid VAT obligations was sharply reduced. Several entrepreneurs said their tax bills multiplied as a result.

Another frequent complaint is the Chestny Znak ("Honest Sign") product-labeling system, which tracks goods throughout the supply chain. Business owners say the concept is reasonable, but implementation has been difficult, forcing many companies to hire outside specialists and invest in additional technical infrastructure to comply with the requirements.

Restrictions on social media have also reshaped the market. Several founders said advertising bans and platform blockages deprived brands of one of their main tools for attracting new customers. 

The pressure is prompting some companies to move production abroad. Clothing giant Gloria Jeans has already shifted most of its manufacturing to Bangladesh, Vietnam, and Uzbekistan. Smaller brands are following suit, citing lower costs, better access to materials, and more favorable business conditions in countries such as China.

Despite the challenges, some entrepreneurs remain cautiously optimistic. Others say they are operating on the edge, uncertain whether their businesses will survive. For many, the goal is no longer growth but endurance.