Industry Events

Russia, the CIS and the Baltic states started to receive Russian language broadcasts from LUXE.TV. This is an international television channel focused on luxury and top-end brands, which has spread its network over more than 20 world cities: Paris, London, Geneva, Monaco, Milan, Nice, Los Angeles, New York, Shanghai, Tokyo, Peking, Bangkok, Marrakech, Moscow and others.

The launch of the Russian language channel was possible due to a newly opened Moscow subsidiary.
The LUXE.TV content is aimed at a broad television audience. Reports and stories are distributed in the TV lineup between seven major topic broadcasts: Interior Design, Beauty and Fashion, Jewellery and Watches, Leisure Time and High Technologies, Cars, Airplanes and Yachts, Gastronomy and Hotels.

Mass media have not missed that Lev Levayev’s Moscow Jewellery Plant (MJP) bought Lukas, a company producing jewels for Valentine Yudashkin’s Fashion House and owning the exclusive rights for the Playboy and Pamela Anderson trademarks in Russia (in terms of jewellery).

Sources from Lev Levayev’s environment told to the “Kommersant” daily that after the deal the companies entering into Lukas (and responsible for production, sales, etc.) would be brought together into a single framework – Lukas Gold.

The Playboy brand rabbit, reminds the daily, is one of the most well known trademarks in the consumer market. Playboy Enterprises, the right holder (based in Chicago), founded by Hugh Hefner, sells the Playboy trademark rights from 1999 to more than 130 countries. The products bearing the Playboy trademark include men’s and women’s clothing, shoes, jewellery (gold and silver earrings, bracelets, cuff links with Playboy symbols), furniture, etc. According to Playboy Enterprises, the annual sales of Playboy products in the world account for $800 million.
By the end of 2009, OAO Moscow Jewellery Plant plans to extend its retail network up to 250 outlets including stores in the Russian Federation and in the CIS. This has been told to the RBC news agency by Denis Adamsky, General Manager of Moscow Jewellery Plant. Presently, the MJP network comprises 105 stores in 32 cities of the Russian Federation and one in the Ukraine.

The diamond-encrusted platinum skull created by modern British artist Damien Hirst has been sold for $100 million. This established Hirst as the most expensive modern artist in the world.
The skull is just the fifth work of art in the world reaching the bar of $100 million (according to public information). From now, it will stand next to the abstractions by Jackson Pollock and Willem de Kooning, “Golden Adele” by Gustav Klimt and “Boy with a Pipe” by Pablo Picasso. However, Hirst is the only one of the mentioned five who can enjoy the pecuniary side of his creative work, since all the others had died long before they became so much valued by their descending auctioneers. The added value created by Mr. Hirst was estimated at $80 million: the precious materials (platinum and 8 500 diamonds, the largest of which weighed 55 carats, were worth $8 million) and their processing cost about $20 million. As reported by the art gallery, the platinum skull was bought by a “group of investors”.

In the end of August, it was reported that De Beers Diamond Jewellers was going to open two boutiques in Moscow in the nearest future. One will be opened at the GUM trade mall and the other in Stoleshnikov Lane. Discussing the news, mass media have tried to obtain answers to some of their questions.
Jamilco will become the Russian partner of De Beers. “We have chosen this company because of Jamilco’s impressive turnover in the Russian luxury market and its great experience”, told Guy Leymarie, CEO of the jewellery company.

In Russia Jamilco Group presents such brands as Burberry, Chaumet, Dormeuil, Hermes, J. M. Weston, Salvatore Ferragamo, SoniaRykiel, Wolford and Escada. Jamilco runs 120 stores in Moscow, Saint Petersburg and in cities with a one million population. Its major owner is Haled Jamil, a businessperson. According to estimates provided by market participants, Jamilco’ sales turnover in 2006 was equal to about $400 million.
Top-end market participants were utterly reluctant to comment on the partnership of Jamilco and De Beers. “Their alliance has a very arguable outlook – De Beers is primarily known as an extracting and processing company and its retail business looks rather weak. On the other hand, Jamilco has a quite a modest experience in developing jewellery brands: its only trademark in this segment is Chaumet. Currently, many world luxury operators give up intermediaries in Russia and most likely after a short market testing period De Beers will start operating there on their own”, believes Dmitry Fedosov, Managing Partner of Ralph Inc, an official agency of Hugo Boss and Louis Vuitton in Russia, the Ukraine and Kazakhstan.

This version of developments seems to be quite grounded if we remember that this scenario was already followed by other companies, which worked with Jamilco but later abandoned it.
In 2005, Jamilco services were declined by Swatch Group and in 2006 Christian Dior brought its cooperation with this company to an end.

This is how it was commented then by Russian experts. “Dissociation of brand owners from distributors is an evident tendency in luxury business”, said Nadezhda Ivantsova, Marketing Director of Richmond Luxury Group, a distributing company. “On the whole this is a positive trend showing maturity and civilized ways of the Russian market.” General Director of Matrix (developing the Esprit, Lulu Castagnette and Peacocks networks in Russia) Vladimir Lunin noted, “A company needs a distributor to solve problems arising in the local market with customs services, tax agencies and other organizations. However, now such problems are being left in the past.”
Frankly speaking, there are still some reasons, which prompt certain Western de luxe companies to search for partners in Moscow. One of such reasons is the difficulty to find an adequate space in the most expensive city in the world.

As early as one year ago Moscow real estate experts noted that Stoleshnikov Lane is the leader among the most prestigious de luxe areas of the city. Its good location and the neighboring trading malls (Petrovsky Passage, TSUM Trading House, Berlin House), long established de luxe zones (Petrovka Street, B. Dmitrovka Street and Kuznetsky Most Street), available areas with large show-windows, agreeable format of stores – all these aspects consolidate its reputation as one of the most expensive trading areas of the metropolis. Sometimes finding a building for a store to accommodate some world-famous fashion houses or companies trying to penetrate the luxury market segment becomes a pipe dream. Offers of real estate for commercial purposes are not just limited, they are virtually non-existent, and so any newly opened store turns here into a significant event in the world of fashion.

According to the “Commercial Real Estate” magazine, Jamilco is an indisputable leader by the number of its stores in the whole segment.
Curiously enough, but opening its stores at GUM and in Stoleshnikov Lane De Beers will be able to test two kinds of trading environment and sure enough to obtain some idea about Moscow consumers. As always, GUM remains to be the most democratic of the central Moscow stores, while Stoleshnikov Lane is a concentration of luxury. It is evident that the company may count on both interested audiences although they differ from each other. Besides, in both cases the company boutiques may attract not only Russians, but also foreigners staying in Moscow.
What is awaiting De Beers Diamond Jewellers in the Moscow market?

General Director of MJP Denis Adamsky says that Chopard and Cartier are the most popular brands in Russia. Due to this, they may cost two or three times as much as in Europe. However, De Beers will feel tangly at first here in Moscow. This brand is well known to diamond cutters and diamantaires, but it is less familiar as a jewel trademark, believes Adamsky.

Production and sales of jewels in Russia is averagely growing by 25% every year, says Valery Radashevich, General Director of the Guild of Russian Jewellers. According to him, the demand for diamond jewellery is increasing at “priority rates”. Russians have always had a soft spot for jewels and nowadays they are becoming good investments.

“The De Beers store will be popular among our buyers. However, the company is unlikely to open more than one boutique in the nearest future”, affirms Ararat Evoyan, Vice-President of the Association of Russian Diamond Producers. “De Beers will need some time to grasp the trends of the Moscow market.”
Asked by the “BusinessWeek Россия” about further plans of the company in the Russian market, Leymarie said, “It is too early to discuss how many stores we are going to open in the future. We are sure that the Russian market has a big potential and that jewellery proficiency here is highly cultured. But we shall study the results of work of our first two stores here before we decide to expand our presence in Russia.”

Adamas, a jewellery-producing holding, informed that they are launching a network of wholesale centers in the Urals area. The first such center will start its operations in Chelyabinsk and during the coming six months wholesale centers will appear also in Kurgan, Yekaterinburg and Perm.
According to Vladimir Meshalkin, CEO of OOO Urals Jewellery Wholesale Center “Adamas”, this network will permit to triple the sales in the Urals – up to 200 kg in a month.
So far, Adamas is selling its wares in the region both independently and through its agent, which is OOO Urals Jewellery Wholesale Center “Adamas”. After the wholesale network will be completed, all the supply operations will be managed by this agent. “This will improve sales of jewels since now local players buying in Moscow often incur shortages. This happens because in half of all cases priority is given to orders from large-scale companies”, states Mr. Meshalkin.

Adamas products will be sold through its company stores and through other retail outlets, which are now executing contracts with this manufacturer. Among them are the “Trade Route” and “Gold Fish” networks. As estimated by the Finam Investment Company, the expenses for the wholesale centers and marketing will account for $1.5-2 million.

OOO Adamas was established in 1993 in Moscow. In 2006, the company produced 12 tons (4 million pieces) of jewellery items. It operates in economy and medium-price segments. There are 70 company stores currently working in this country. The company is providing for wholesale supplies to one thousand stores in Russia and to the Ukraine, Kazakhstan, Moldova, Belarus, Latvia, Lithuania, Estonia, Britain, Germany and Canada.

Market participants and experts point out that on the one hand Adamas’ plans to expand its operations in the Urals are connected with the fast jewellery market growth rates and on the other hand with the oversaturated market in Moscow. Thus, according to Finam analyst Sergey Filchenkov, the current Russian jewellery market is estimated approximately at $2 billion a year and it demonstrates stable growth at the rate of 15-20% every year. At the same time, as it was stressed by Artem Podstreshny, General Director of the Russian Jewellery Network Analytic Agency, unlike Moscow, which was facing superabundant supply right now, there was an even greater potential for development in Russian provinces. According to experts, Adamas (21% of the market) will be followed by other large-scale federal-level players like Almaz-Holding (16%), Yashma (9%), Russkiye Samotsvety (5%) and others, which will start their expansion to provinces.

Anatoly Kostarev, representing Sole Trader M.B. Tsivilev (which controls the Russkoye Zoloto jewellery retail network in the Urals) emphasized another reason for buoyancy demonstrated by federal players in the Urals area. The point is that on August 24 there was effected Order No. 489 of the Federal Customs Service (FCS) “On conusance of customs agencies to perform customs operations related to precious metals and gems”, which passed a significant part of functions belonging to the Yekaterinburg Customs Terminal (which used to clear jewel retailers in the Federal Districts of the Urals, the Volga River and the Far East) over to the Central Excise Customs Service (Moscow). This will greatly complicate the work of regional players increasing their expenses. This is why, sums up Mr. Kostarev, it is just the right time for federal players to start their expansion to provinces.
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