It’s not only because of recovering demand, says Ekaterina Petukhova, CEO of the strategic consulting firm Esper Group. International luxury brands are learning to be more flexible, attentive and sophisticated in their strategies.

Russian luxury is reviving – in the first semester the market added 15% compared to the same period in 2009, and real growth made 11% which is pretty significant. The situation is in line with the general trend – along with financial reports for the first six months world luxury market will add 11% this year which is more than the expected 9-10%.

It is worth noting that the luxury market in Russia was more affected than other segments – in some categories the losses made up to 46-48% and turnovers on average in the industry fell by 37.4%. About 43% of profits came to retailers during extended sales period.

Such a sharp contraction on the market was defined by Russian particularities – in Russia the base started low and there were no consumption patterns in the country. In the 1990s, at the initial capitalisation stage these were mostly people loyal to a specific pool of brands. After the financial crisis new clients with fast money from investment, construction and stock market came onto the stage. Growth rates before the crisis made 15-20% seasonally adjusted and up to 30% in nominal terms which allowed Russia to top as the fastest emerging luxury market in the world.

Today even despite more dynamic growth than forecasted the market is still far from restored to pre-crisis positions of mid-2008, before September 2011. By the end 2010 growth by 12% is expected which will make 27% annually.

Such a pace of development is on the one hand due to demand revival, and on the other hand, by rational trends in consuming. Buyers consider more financial indicators – orders for accessories are on the increase as they are profit-generating. The brands themselves are reducing their set volume of minimal orders – so, a minimum for Balmain is15,000 euros and 100,000 for exclusive representation. In comparison, Viktor&Rolf, far from being luxury, used to have a 50,000 euro minimum order and now have come up with 10,000 euro.

 By the end 2010 growth by 12% is expected which will make 27% annually. 

Communication policies are changing as well – luxury brands are now conquering the Russian web whose status as a luxury brand advertising instrument has long been under doubt. It’s no secret that a lot of agents in the market used tricks placing popular anchor brand ads practically for free to attract other advertisers. However, this time it is different – French fashion houses representation in Moscow Chanel took a decision to place advertisements online more actively and chose two resources for cooperation – Look At Me popular among young prospective customers and Condé Nast Digital online resources –

Luxury brands’ intentions are serious now – the online campaign budget is comparable to that for glossies. The websites show banners with Chanel watch and this season more special projects are expected. Lookatme attended by 900,000 users a month also cooperates with Burberry. For instance, it showed a special men’s collection show online. It is worth noting Burberry in general is a pioneer in online marketing especially for upper market players. This year a quarter of the marketing budget was destined to online projects. Besides, when opening a monobrand in Serbia in April 2010 Burberry did not send invitations to quite a few local celebrities – but they did invite all the local fashion bloggers and each one got a special present from the brand after some time.

Such activity by luxury brands is logical – it has long become clear that young credible consumers do not place traditional media especially TV at the top of their trust. However, the internet’s popularity is geometrically rising. It’s another point that brands do not fully realize how to treat this new generation watching bloggers’ opinions rather than glossies’ editorials. At the dawn of the crisis in Russia, the internet was no more than an alternative to conventional media to launch a cheap efficient campaign, but now it’s an effective free-standing instrument taking more and more from TV and print media’s budgets.

On the whole, the luxury clothing market in Russia takes about 6-7% of the whole apparel market, meaning its value is up to 2.5 billion euros. Luxury has become even more competitive on the one hand as customers are more demanding and sophisticated on the other, and aspire for eternal values and essentials from collections along with a wish for affordable luxury on the other. Moreover, luxury has become more consolidated as a lot of market participants who called themselves luxury bearing no clear DNA to the brand went bust in the crisis or turned out to be a difficult sell in Russia – a lot of American designers and some Belgians,in particular. In the end Russia stayed with fewer luxury brands but held strong positions, loyal audiences, clear positioning and brand individuality.


Ekaterina Petukhova, CEO, Esper Group

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