34% of wealthy Russians to cut their luxury spending budgets, Dubai is directly affected
According to a research by Boston Consulting Group quoted by the Financial Times, 34% of wealthy Russians cut their spending budgets on luxury goods in one or more categories in 2009. The percentage is by 11% higher than in 2008 which sends worrying signals regarding the solidity of the Russian luxury goods market. The same study also reveals more than half of wealthy Russians are likely to cut their spending on travel which implicitly means cutting their spending budgets. The same article quotes the head of COTY Russia saying the crisis has set back the Russian economy by at least 2 years, sales being down more than 20% in 2009.
As the market where Porsche sold more luxury cars than in USA, Russia’s wealthy remain deeply affected by the crisis. CPP Management Consultants Ltd estimated that sales to Russians in Dubai, one of their top international luxury spending destinations have dropped by 30% in 2009 compared with 2008. It would have been previously unseen for the largest and most luxurious mall in Dubai (Dubai Mall) to open without a PRADA boutique and one of the smallest GUCCI stores in the Middle East. Russians who used to be the second largest nationality to buy luxury residential units in Dubai are now replaced by Chinese and Indian customers.
With Russian society having adopted Western shopping and lifestyle culture, it remains to be seen which luxury brands will be able to maintain their strong sales to Russians on the long run, especially considering their changing tastes and motivations.