Seeking Russian Gold: Despite Turmoil, Brands Rush to Booming Market

Fashion and retail firms are heading to Russia in droves, attracted by a vibrant economy, a free-spending elite and a demand for style and status.

Vuitton opened its first boutique in Russia only 18 months ago — but in grand style, with a “global store” selling all categories of product, from leather goods and shoes to rtw. At present, sales are growing at a pace in excess of 30 percent on a like-for-like basis, and Vuitton this summer opened a location in Moscow department store GUM with an entrance on Red Square — within view of Lenin’s tomb.

Making an observation echoed by most luxury players, Carcelle noted that Vuitton sells a higher percentage of rtw in Moscow, especially men’s rtw, than in any other market.

Ditto for Hermès International. While rtw represents only about 15 percent of the French brand’s sales worldwide, executive vice president Christian Blanckaert noted the figure is well over 30 percent in its Moscow store. “Russian people love our ready-to-wear, especially our men’s ready-to-wear, which is a huge success. [Hermès men’s wear designer] Veronique Nichanian’s style is very appreciated in Russia and I’m sure the new [women’s collection] by Jean Paul Gaultier will be, too. They are waiting for it.”

Harald Stolzenberg, ceo of beauty firm La Prairie Group, describes Russia as a polarized market, where top-level and mass brands work.

“Of course, our parent company [Beiersdorf] does fantastically with Nivea,” he said. “The problem is in the middle. Russia is not exactly what I’d call a democratic market.”

As the AT Kearney survey pointed out, low per capita spending remains a risk for foreign retailers. Russian per capita spending of $1,950 is only half that of neighboring Lithuania, at $3,750.

“The great question is, ‘How will the middle market develop?’” according to Aliona Doletskaya, editor in chief of Russian Vogue, which was founded six years ago just as the country went into an economic crisis. “That’s where the biggest gap exists right now, and I think if H&M were to set up in Moscow, they would become billionaires. We need stores like Gap, Marks & Spencer, H&M.”

The Metro Group, Germany’s fourth-largest retail group and the world’s fifth largest, has been active in Russia since 2001. It operates seven Metro Cash & Carry wholesale hypermarkets and will open up to eight Cash & Carry stores in Russia this year, a spokesman said.
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