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. Last Updated: 07/27/2016

Paninter Holding Together After Loss

MTGalina Panikina with Alexander Panikin's portrait
When fashion chain Paninter's founder Alexander Panikin died last month, condolences came from political luminaries including Mikhail Gorbachev, Grigory Yavlinsky and Alexander Lebed, and a flood of tributes appeared in the press.

In addition to having started what was to become one of Russia's most successful mass-market fashion manufacturing and retail businesses back in 1989, Panikin was a self-made philosopher and intellectual who opened a publishing house that, among other things, published transcripts of his political discussions with the likes of Viktor Chernomyrdin and Vladimir Zhirinovsky.

But to many consumers, Panikin will be remembered simply for being one of the first people to give them stylish, high-quality, affordable clothing.

"The basic task for us has been to capture the greatest mass of people who will want our products, and not just those people with high incomes," Paninter deputy director Larisa Yelezova said in an interview.

Perhaps because of its success, the loss of its general director was not something the 2,000-strong Paninter team was prepared for.

"We're in a period of uncertainty," said chief designer Vladimir Zubets. "But the company is now in the hands of [Panikin's] wife. She's choosing an administrative team, and she's planning to preserve the company as it is now."

For her part, Galina Panikina, 43, is willing to take the reins at the frugal fashion company her husband left behind.

"We have a big network of stores, and continuing his work will be difficult," Panikina said in an interview. "I've been his partner for 22 years. I've been part of the life of the company ... and I need to turn around now and feel things out here."

As general director, Panikina will have the ultimate authority in all of the company's activities, but her leadership will rely much more than Panikin's did on the advice of the team he assembled. One of her immediate tasks will be to find a director of marketing, which is an area that Panikin generally dealt with himself.

"In the past, we relied mostly on him to decide our [marketing] strategy, because he had good, strong intuition," said Nelly Ilisova, director of experimental production. "He had a surprising ability to choose the right people and put them in the right places. He could bring out the creativity in people. And by creating us, he was able to find this gap in the market. He just had this excellent intuitive ability to feel things out."

Because of the change in leadership, the company has put a hold on expansion plans for this year, Yelezova said. "We've got our hands full and can't take any big risks, but we're hoping to open another company store next year," she said.

Over the course of about 12 years, Panikin built Paninter into a network of nine company stores in Moscow, two of which were opened in 2001, and eight kiosks in metro stations and pedestrian underpasses throughout the city. Paninter also has sales partnerships in seven locations outside Moscow, mostly in St. Petersburg and Novosibirsk. But Yelezova said one difficulty the company has encountered is that styles are much different outside of Moscow.

"People dress differently in the regions," Yelezova said. "They have a different mentality, and the differences are quite visible."

The company refuses to release sales and profit figures, but Yelezova said turnover grew by 30 percent in 2001. The magazine Kompaniya recently wrote that Panikin valued his business at about $30 million.

Paninter currently designs, manufactures, markets and retails three separate lines of clothing: a sportswear line, a young adult line under the Euphoria label -- its most profitable -- and a line of women's formalwear under the Eventail label. A children's line was recently scaled back because of competition from other successful children's clothing manufacturers and a desire to focus more on women's wear, Ilisova said.

The company produces on average 30 to 40 new models on top of 10 to 20 older models each month. In contrast, Ilisova said, the norm for a Russian clothing manufacturer is 10 to 20 new models a month.

Despite following a business formula that might seem quite straightforward, Paninter's biggest and most common problems are anything but straightforward.

"Our biggest problem is with raw materials, both the quality and timely delivery of them," Ilisova said. "Often this is connected to problems [our suppliers] are having, like a loss of electricity or bad water, which is needed to clean yarns and fabrics. ... So our problems are global."