Russia’s luxury downturn
Russia’s slump into recession has hit many luxury goods companies hard, forcing them to cut prices, and in turn costs in an attempt to limit the damage. And there are few signs things will get better soon, with a fragile ceasefire in eastern Ukraine doing little to ease international tensions over Moscow’s support for pro-Russian separatists in the region.
The Russian Rouble lost almost half of its value against the U.S. dollar last year after oil prices crashed and the West imposed sanctions on Moscow. That has crushed Russians’ spending power, forcing them to cut back and put pricey holiday plans on hold.
Spending on international travel by Russians fell by 6 percent in 2014, according to the UN World Tourism Organization, a sharp drop from growth of more than 20 percent previous years. Russian tourists are major buyers of luxury goods, particularly in European capitals such as Milan where they are regular customers of brands such as Ferragamo , Moncler and Kering’s Italian tailor Brioni. Clerks at the menswear department of posh Milan department store Rinascente said Russian clients had virtually disappeared.
According to tax-refund company Global Blue, spending by Russian tourists fell 17 percent last year, and plunged 51 percent in January following a 44 percent fall in December.Although there was an unexpected spike in sales for some in December as Russians offloaded the fast-depreciating roubles for durable luxury goods such as Cartier watches, many brands are preparing for a tough 2015.
As for tourism, Egypt, whose tourism sector gets 30 percent of its business from Russia, saw a 50 percent plunge in visits from Russians in December, and another 20 percent in January year-on-year. The posh ski resort of Courchevel estimates its Russian clientele has shrunk by 20-30 percent this year, and those that have come have spent less. Several airlines, such as Emirates, have responded to the decline in Russian travel abroad by offering fewer flights or seats to the country.
adapted from Reuters