Luxury outlet shopping in Russia gears for major expansion in 2011 and 2012

First luxury fashion outlet centre in Moscow, Modapolis, will more than double its surface this year from 12.000 sqm to 30.000 sqm. Modapolis is situated near the Crocus City Mall, on the outskirts of Moscow. Currently, Modapolis has a majority Italian mix of brands such as Gianfranco Ferre, Valentino, Versace, Canali. In the new extended surface, the number of brands will increase from 40 (at present) to more than 100.

American retailer Hines announced in September 2010 plans to open this Fall, Outlet Village Belaya Dacha, a 38.000 sqm mall on the outskirts of Moscow, with a total number of 120 boutiques. Investors in the project are the Hines International Real Estate Fund and Belaya Dacha. The total volume of investment into the project was estimated at US$160 millionn, with US$100 million spent on Phase 1, including the cost of the land. The Outlet Village will contain is 38,000 square metres, and will accommodate more than 200 retailers. The mix of brands announced in September 2010 included brands such as Ralph Lauren, Pal Zileri, Karen Millen, Burberry, CK Jeans, Naf Naf, Adidas, Reebok and Levis. Besides stores, the facility will also accommodate restaurants, cafes and a childcare centre.

In april 2011, Hines announced that over 93% of the space in Outlet Village Belaya had been leased and confirmed a mix of brands more of medium level such as Levi’s, Reebok, Adidas, Rockport, Strellson, Lacoste, Louvre, Ochnik, GIZIA, Joymiss, Incanto, Time Avenue, Giovane Gentile, BML, Michelle Design, Meucci, Van Laak, OASIS, GANT, Le Coq Sportif, US Polo, and Cacharel.

The company is seeking to persuade major local luxury retailers to sell stocks directly, instead of going to an international third party wholesaler, which is presently the case. Hines confirmed intentions to open a second outlet mall near Sankt Petersburg by the end of 2012. According to Oliver Petcu of CPP Luxury Industry Management Consultants Ltd, indicated that it will take major international luxury brands several key factors to decide upon such direct local sales of their stocks: first, an extensive education and awareness campaign on the Russian market for consumers to understand the outlet concept and to learn how to differentiate between outlet products and old collections products versus counterfeit products, and second, to build trust that the respective retailer will maintain a certain level of pricing. There are still major pricing issues, considering the very high taxation and red tape. Prices of international luxury branded goods are at least 20 to 30% higher than in Europe, the US and Middle East.