An in-depth look at the latest trends and developments in Russia’s luxury market

Luxury retail executive Riccardo Cascianini, with over 10 years of experience in emerging markets, of which 5 years in Russia shares exclusively, with CPP-LUXURY.COM, his views on the real potential of Russia’s luxury market, with a focus on the fashion and accessories sector.

How do you see the evolution of Russia’s luxury market in the past 3 years?

It is important to remember that Russia has recently undergone, like the rest of the world, significant changes due to the international economic crisis. All this caused a ripple effect that has greatly influenced and changed the approach of the consumer, including the luxury. The customer himself became much more attentive to his purchaisng, there are  no more crazy shopping  just to show off  the ” economic status”, but for the first time we have seen purchases of necessity. Regard to markets and retails most of them were closed very quickly, because they could not withstand the competition and the lack of professional and expertise  management, able to plan and schedule a financial plans, re- organization of the company, ecc

Which are the biggest challenges international luxury brands face if they wish to expand in Russia outside Moscow?

Moscow is the political, finance and economical capital and, the beating heart of all Russia, the resonance for a entire  nation so vast. Before spreading to the rest of Russia, all brands should definitely have some valid and strong roots in this city. It is the city where everyone wants to live, to have better living conditions, there are a few other cities are ready for a plan of expansion, St. Petersburg and Yekaterinburg, but even in these major luxury brands have already  opened their stores.The others cities are not yet ready for this business, causing a lack of infrastructure, clients and money.  Important challenges I do not think, but I think is important  to live this country, understand the demands and share together the requests of this amazing  country.

In your view, which are the major international luxury brands which have best understood the Russian market and this reflects in their performance? Which brands do you think they have been missing out on Russia’s potential?

I consider myself as a small expert  of this market from the point of view of the ready to wear, I have little experience in the field of jewelry and watches, even if I know it works well. The big brands Louis Vuitton, Gucci, Chanel, Dior, Prada have fully realized the potential of this market and have decided to manage their operations directly, for me this was a strategic decision, which can only improve their performance with a management able to interact with this reality . Who lost this opportunity, many I believe, but mainly in the medium, all those companies without ideas, projects and organizations.

To what extent corruption and red tape hinder the development of luxury in Russia?

I believe that the greatest difficulty is the bureaucracy, length of which greatly affect the smooth running of business. If everything was a little bit easier and there was no obligation to fill mountains of documents, I think the results could be even better.

What is your estimate percentage of Russian wealthy still shopping abroad? Besides pricing, what do you think are the main reasons they continue to buy abroad? What should retailers do in order to persuade Russians to buy locally?

The percentage of Russians clients that still prefer to buy abroad is very high. The reasons are;  to combine shopping with a trip or leisure, the opportunity to buy at prices much  more convenient  (especially during the sales period) receive an additional discount and reimbursement (tax free), the pride of having done “shopping” in an international capital. These are mainly the reasons why Russian customers prefer  to buy abroad and then very important to remember  is that it has become much easier to get “visa”  to stay for long periods. What can do the local vendors, I think very not too much , the solution must be both producers, who must adjust selling prices with  Europe, changing forms of payment, but also the policy should intervene and try to reduce import costs which are becoming increasingly high.

Which are the second and third tier cities in Russia which present the biggest potential for luxury brands? Why?

In my opinion there is no city of the second and third level, ready for the market of luxury, there is no infrastructure to accommodate these brands, but especially in this city there are no investments or investors, with appropriate management ready to face these new challenges. The three most important cities of Russia, already offer the best of international and in these there is no more space  the market is saturated.

Fendi boutique St Petersburg – Nevsky Prospekt 152, Russia

Why do you think e-commerce of luxury branded products is still under-developed in Russia? Do you see potential for a certain category of products or ranges?

The potential growth for e-commerce in Russia are amazing in my opinion, major international operators specialized are working well , but they need more time, the first hurdles they face are the bureaucracy and distrust of the customer, still in Russia the using of e-commerce  is to find the deal or the best deal. The big brands have to invest in these projects, create platforms operating leaner and develop other channels, for the time being is still a great promotional tool, certainly still be improved.

Chanel store St Petersburg – Nevsky 152, Russia