The latest Ukraine standoff has resulted in economic sanctions against Russia. This has caused concerns amongst leaders especially in the local fashion industry, already bearing the brunt of inflation, pandemic and the volatility of the rouble. Imposition of new sanctions reduces international projects and investments in Russia and a further weakens its local currency, says Anna Lebsak-Kleimans, Fashion Consulting Group.
Russian fashion leads amongst European markets
In 2021, the Russian apparel and footwear market surged 4 per cent year-on-year to $38.93 billion. However, the market still remains 15 per cent below 2019 levels, as per the data by Euromonitor International. How much of this decline is attributed to the lingerie effects of sanctions is yet to be determined, as per a Business of Fashion report.
However, Russia’s luxury market continues to lead amongst other European markets thanks to the robust return of the consumer spending in the sector, say Claudia D’Arpizio and Federica Levato, Authors, 2021 Luxury Report, Bain & Company. Both the pandemic and the sanctions failed to dent the spirit of the luxury consumers in the country.
In 2021, Russia’s personal luxury goods market surged 1.6 per cent to $6.77 billion over 2019-levels, as per data by Euromonitor International. This year, the market is estimated to grow by 0.65 per cent and by 2024, it is expected to surge by additional 3 per cent. As per Euromonitor International projections, the overall Russian fashion market will decline 1 per cent this year while by 2025 it will drop 2.7 below 2021 levels.
Surge in luxury spenders to sustain market growth
Sergey Suverov, Investment Strategist and Economic, Arikapital opines, though new sanctions may lead to a decline in people’s incomes, they would not directly impact fashion sales due to an increase in the number of wealthy consumers in the country. Lebsak-Kleimans opines, Russia’s previous experience of dealing with economic sanctions may also boost its fashion industry’s resilience to future sanctions. Previous sanctions encouraged brands to strengthen their position in the market with the help of numerous e-commerce platforms that have grown in the recent past, she adds.
Euromonitor data shows, H&M’s sales in Russia increased 280 per cent from 2014 to 2021 while Zara’s sales increased 85 percent for the same period. Sales of Tommy Hilfiger surged 25 per cent while Gucci and Valentino saw their sales shoot up 638 per cent and 96 percent respectively since 2014.
Consumers shift focus to domestic market
Rather than being concerned about the effects of new sanctions, fashion leaders in Russia seem to be still preoccupied with declining business due to the pandemic. Consumers continue to focus on current issues rather than on long-term plans. International travel restrictions have increased spending in the domestic luxury goods market. Consumers are diverting their travel budgets to categories like fashion, beauty and luxury.
The trend of revenge shopping continues in Russia as consumers step up investments on their wardrobes. As Alexander Shumsky, President, Russian Fashion Council says, consumers continue to focus on the present as they shift attention to local brands. Even in case of the devaluation of rouble, wholesale players may choose to buy more from local rather than international brands. In any case, the economic sanctions will not have a major effect on the fashion market in Russia. The market will be affected only if the sanctions have a significant impact on the Russian economy.
