A sense of panic has struck many apparel retailers and garment brands who have been otherwise witnessing good business from Russia. They fear that the anti-Russian sanctions might take a toll on the sales of garments and have a dramatic effect on their businesses.
For many apparel and luxury clothing retailers of the West, Russia has remained a growing and focus market and have been eyeing on it for international market expansion. But considering the political situation, the progress has been put at hold by many. High-street brands like New Look and Karen Miller are taking protective measures to avoid any future losses. The sports goods and apparel label Adidas is planning to close stores in Russia in 2015 owing to the Ukraine crisis.
While some brands believe that the sanctions at present are at a low intensity and include importing and exporting of food products like milk, cheese, fruits, and vegetables and are not over analyzing or being extra cautious about it. Marks and Spencer and the apparel retail brands run by the Inditex group are not worried about the not-so-positive impact with the latter having opened three new stores in Russia in the beginning of August 2014.
Russian shoppers while traveling to the West especially to the UK have decreased by 17 percent according to research done by a tax-free shopping firm during the political crisis in Russia and Ukraine. The firm also claims that tourists from the Soviet Union spend 669 pounds per transaction, which many retailers fear will continue to decrease if the relationship between Russia and EU remains stressed.
Among the five top global shoppers in the UK, Russian travelers ranked second along with other countries like China, Japan, US, and Indonesia in 2013. Affluent shoppers of Russia flock to London for luxury brands. Some high-end retailers provide the privilege of Russian-speaking staff, unique opening hours, and free of tax services to lure shoppers. The sales of Chanel boutiques in London fell by 40 percent in 2013 and approximately 35 percent of their shoppers constitute Russians. Luxury department stores in Paris also reported a drop of 20 percent in their sales volume from the previous year in quarter two of 2014, as a result of a drop in 74 percent of Russian visitors from April to June 2014.
The sales have also dropped in the domestic market of Russia, with the ruble being strained for the past few months and many international brands ignoring any foreign investments at the moment in the country. With the number of rich Russians traveling.
to places like London, Paris, and Milan for luxury brand shopping decreasing due to the US and EU freezing visas of the high heeled in the country and the West pledging aid to Ukraine. However, many marketers and brand consultants predict it to be a short term impact and are optimistic for the crisis to resolve in the long run.
However, the sales of luxury brand items in the domestic market have remained stable. A department store in Moscow, Tsvetnoy, witnessed a 39 percent increase in the sales volume. With the purchase of luxury products remaining steady given the odds like appreciation of euro, the threatened sanctions, and the Russian economy hit by the crisis retailers are convinced that the shoppers in the country are still purchasing at home, if not, while travelling abroad. It is also a sign that Russian markets in general have a mature premium and luxury market potential since buyers are ready to pay more for the products, which are otherwise available for less at the European stores.
Many international Luxury brand retailers are not concerned about the sales in the country but are worried about the slowdown in the countrys economy and depreciation of the rouble, which as a consequence would affect the travel of luxury shoppers to the West.
The lack of access to the global markets and restriction on buying foreign branded products is believed to have a positive impact on the competitiveness among Russian companies. It also provides a good opportunity to new domestic brands and the existing high-end retailers planning to enter the newer markets within the country. Such a situation will aid re-emphasize the demand towards the domestic brands and market. Shoppers might switch to domestic brands providing more opportunities to Russian retailers, which can help strengthen the economy. Supporting local brands can boost the economy of Russia and help raise the value of the rouble in the international market.
The crisis in Ukraine might have strained relations between Russia and European Union while some luxury retailers and high end brands have put their expansion plans on hold and some seem to be optimistic about the growing domestic demand for international brand until Russian high flyers resume their travel abroad for shopping.
References:
1. Fashionunited.co.uk
2. Luxurydaily.com
3. Juststyle.com
Comments