As RBC Daily informs, the luxury market in Russia is hibernated. Those of its participants who continue their operations deal only with a narrow circle of clients and cannot dream of its expansion. At the same time, according to some forecasts, the Russian luxury market whose decline in 2009 was more serious than the world’s average setback this year will begin to rise.
According to a Bain & Co survey, the slump in some segments of Russia’s luxury market was 20% to 40% that is much more serious than on the world’s average. For luxury vendors 2009 was the most unhappy year but global sales in this segment dropped only 8% as compared to 2008 and were 153 billion euros. As it is expected, in 2010 sales will be up 4% reaching 159 billion euros. Such a forecast was based on the 4Q 2009 – 1Q 2010 statements when a number of companies managed to obtain positive results.
Bain & Co. forecasts that in Russia its more serious slump will be followed by an equally more substantial rise by far exceeding the world’s 4% growth. It will be driven by discounts and promotion actions offered by retailers as well as by higher consumers’ fastidiousness – now instead of buying several cheep things they prefer to buy one luxury item.
However, the participants of the St. Petersburg market say they do not feel positive trends. Consumers of luxury items though still shopping are utterly picky and frugal in every purchase they make. As a result, the market continues to decline. For instance, not long ago it was reported that Nord, one of the largest boutique galleries in Nevsky Avenue, was closed, though to be exact, not all of the lessees in this center belonged to the luxury market. The place will be occupied by the competitor of Dom Knigi, a large book store of the Bukvoed network. The overall area of a three-storey building which will have the name of Press Books Media A Gifts Citi Center is more than 3,000 sq. m.
Evgenii Gurevich, Vice President and co-owner of Adamant Holding, who develops jewelry boutiques for Korloff, Boucheron and Gavello, says: “The present situation on the market may be characterized as cautiously optimistic meaning that people slowly begin to take interest in shopping and inquire after something new, but I cannot call it a rise in demand.”
Depending on the categories of goods, trends may be different. For example, the clothing market is said to have suffered most of all – according to some estimates the volume of consumption there more than halved. As for more narrow segments in which purchases are rare and made not only for personal needs the situation, on the contrary, appeared more stable.
“Demand for clothing continues to fall,” Oksana Alekseeva, co-owner of the Selectio perfume chain and Firma boutique, says. “As for the perfume market, nobody there feels any serious decline - for instance, we even continue to expand our client base. To a large extent it is due to the fact that such purchases are made more rarely, usually once in six months. Besides, the market of elite perfume is younger than others and at the time the crisis started many people just began to discover it.”
Experts also note that currently one can say how efficient the strategies chosen by companies were. They say that the crisis had far fewer consequences for those who were more active and did not strive to limit their spending to maximum. Now they can even enjoy some benefits from lower competition.
“Before the crisis many luxury vendors were simply sitting at their cash registers waiting for customers to bring money in,” says Vyacheslav Zaitzev, CEO of the Eves Delorme network (textile). “Later, when the situation changed they went frantic reducing their inventories, product range and personnel costs, while consumers turned more picky and demanding and as a result those who were striving to save at any cost lost even more clients due to such a strategy.” According to Mr. Zaitzev, now the turnover in his stores in Moscow and St. Petersburg has already been restored to a great extent due to reduced competition, but sales in provinces are low and there is no positive movement there.
In general, experts note that currently it is out of question to increase the number of luxury operators. According to Lyudmila Reva, Business Development Director of Astera St. Petersburg, lately there was only one instance when a new player entered the market: Cartier opened its first store in St. Petersburg (the company occupied the four-storey building in 55 Moika Street, where the first two floors will be occupied by a Cartier boutique spanning over an area of 280 sq.m., while the rest will be taken up by the operator’s office). “Naturally, there are some operators who open knew sales outlets but in 90% of cases it is optimization with other less profitable stores closing down,” Mrs. Reva says.
