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. Last Updated: 07/27/2016

Russian Copycat Dons H&M Mantle

bloombergA firm that owns the rights to H&M in Russia says it wants to open a dozen franchises of the popular clothing brand.
Russia's first H&M store may open without the blessing of Sweden's Hennes & Mauritz, the operator of more than 1,000 clothing stores around the world.

OOO H&M International, a Russian company that owns the rights to the H&M brand in Russia, is looking for franchisees to open shops in Moscow and St. Petersburg, Boris Kostyrin, general director of OOO H&M, said Friday.

Sweden's H&M downplayed the announcement, saying it had registered its trademark in Russia and was seeking clarification from the authorities.

Local clones of well-known global brands are not new to Russia. OOO Starbucks, holder of the local rights to the Starbucks name since 2002, has tripped up the U.S. coffee behemoth's entry into the country.

"The largest international fashion clothing chains -- Benetton, Zara, 4You, Mexx -- whose format is similar to ours, have already established themselves on the Russian market. ... The market is large, but it's not limitless. [Moving in] later will be too late," OOO H&M said in a statement on its web site, which bore red initials identical to those that are familiar to consumers of cheap, fashionable clothing in 22 countries.

"We have no immediate plans to establish stores in Russia," said Annacarin Bjorne, a spokeswoman for Sweden's H&M. The retail giant, which registered its brand in Russia "a couple of years ago," has turned to local authorities for clarification, she said. Trademark authority Rospatent could not be reached for comment Friday.

Two months ago, OOO H&M bought the rights to the H&M brand, which had originally been registered in Russia by another local company in 1996, Kostyrin said by telephone.

The brand's previous owner sold clothing online through the website, he said. OOO H&M, the site's new owner, is now seeking franchisees with retail experience and access to space at the country's top malls to operate H&M stores.

Clothing targeting Russia's growing middle class accounts for 70 percent of Russia's apparel market, which has an annual sales volume of up to $16 billion, according to Fashion Consulting Group.

Undeclared imports and a lack of transparency make precise market measurements impossible to carry out, but there is a growing interest in mid-range retailers like H&M.

Centrumutveckling, a Swedish developer and consultancy, and several local retailers have been courting Sweden's H&M for the right to become the chain's representative in Russia.

OOO H&M, however, is unlikely to profit from the H&M name, said Sergei Zuykov, a lawyer specializing in intellectual property rights.

"The H&M brand registered by the Russian company is identical to the Swedish H&M brand," Zuykov said. It will not be difficult for the Swedish H&M to prove that they have held the international rights to this brand since before 1996, he added.

However, a technicality may allow both Sweden's H&M and OOO H&M to coexist in Russia, he said, as the Russian firm holds the right to the brand for selling goods and services, while the Swedish original has registered the name in Russia only as a clothing brand.

Should OOO H&M decide to sell the brand to Sweden's H&M, it would make no more than $10,000, said Zuykov. The Swedes could easily annul OOO H&M's rights to the brand, he said, the legal costs of which would not top $10,000.

Yet OOO H&M stood firm on its intention to build on the H&M name.

"We see no need to sell the brand," Kostyrin said. Instead, the company plans to open 10 to 12 clothing stores in in Moscow and St. Petersburg as early as next year, Kostyrin said.