By
with contributions from Joy Neumeyer
 on July 22, 2014

LONDON — Spending by Russian tourists is falling in the double digits, and the economic situation could deteriorate further if the European Union decides to tighten sanctions against the nation following the crash of the Malaysian Airlines passenger jet in eastern Ukraine last week.

EU foreign ministers met in Brussels Tuesday to discuss the possibility of imposing further economic curbs on Russia if the country is found to be responsible for the plane crash in a pro-Russian, rebel-held territory in eastern Ukraine.

According to a recent BBC report citing the EU’s statistics bureau Eurostat, the EU is Russia’s number-one trading partner, accounting for almost 41 percent of all its international trade. China is the country’s second-biggest trade partner, followed by Ukraine, Belarus and the U.S.

Even at the level of tourism, Russia’s trade relations with the rest of the world are under pressure. According to the latest figures from Global Blue, which tracks tourist consumption patterns, geopolitical tensions and the weak ruble have dented Russian spending.

In its report for June, Global Blue cited worldwide spending figures for tourists from a variety of countries. Some 84 percent of the spending tracked is done in European shops.

During the month, Russian spending was down 13 percent year-over-year, while among the Chinese it increased 5.7 percent, following a 1.8 percent uptick in May.

Overall tourist spend was flat for the month, following a decline of 5.3 percent year-on-year in May. The decline was 1.7 percent in the second quarter, following an increase of 5.2 percent in the first quarter.

Barclays said in a research note based on the Global Blue figures that, in its view, “The [European luxury] sector will show a deceleration in organic growth in Q2, compared to Q1…reflecting the softer tourism spending trends.”

Overall tourism spending in fashion and clothing was down 2.4 percent in June, with leather goods and bags declining 3.7 percent, and watches and jewelry falling 5.8 percent.

Meanwhile, the consumer mood inside the country remains morose, with many retailers partially canceling some fall shipments following a weak spring season, according to Andreas Kurz, founder and president of Akari Enterprises, a global retail consultancy, M&A advisory and executive search firm.

“Traffic is low; consumer confidence is low. People are holding onto their money,” said Kurz, who consults for a number of European and American brands that have done brisk wholesale business in Russia in recent years.

“Companies are bracing for lower orders going into spring 2015,” he said, estimating orders could be shaved by 15 to 20 percent following weak sell-through so far this year. “When you talk about Ukraine, the situation is much worse,” he noted, estimating orders could be down by as much as a quarter.

The depreciation of the ruble means imported apparel is roughly 20 percent more expensive, he noted.

While it’s difficult to predict the fallout of the geopolitical crisis exacerbated by the plane crash, Kurz warned it could inhibit investments, mentioning that once-full malls are now starting to advertise vacancies.

On the luxury front, however, Versace seems optimistic about Russia, despite political tensions.

Earlier this week, the Italian brand opened a boutique at No. 12 Stoleshnikov Lane in Moscow, its second in the city. The 2,700-square-foot store carries ready-to-wear and accessories for men and women, and features a new interior concept developed by the brand’s creative director Donatella Versace and the London-based architect Jamie Fobert.

Not helping the foreign cause, however, is a growing nationalism at home that has taken aim on foreign brands and was gaining momentum even before the Malaysian Airlines tragedy.

Since the collapse of the Soviet Union, clothing and accessories with American and European symbols — stars and stripes, “I [heart] NY,” the Eiffel tower — had been ubiquitous in Russia and some Russians are looking to change that.

Since May, the pro-Kremlin youth movement Set (“Network”) has been staging events around the country called “Fashionable Russian.” They encourage young people to trade in their America-themed clothing and bags, as well as items bearing English words and European symbols, for clothes emblazoned with the Russian double-headed eagle, Vladimir Putin portraits and slogans such as “I’m Russian” and “Crimea Is Ours.”

“For us, clothing is a means of communication,” said Maria Alyoshina, a Moscow organizer for Set. “If we’re waging an information war, this is our weapon.”

Calls for patriotic style have taken a variety of forms. A popular video recently posted on YouTube features a young man heckling a Taylor Swift look-alike in a stars-and-stripes tank top for “stupidly” betraying her country, urging her to burn it.

Underlying such nationalist stunts is a real, growing interest in domestic fashion, said Russian designer and street style pioneer Vika Gazinskaya.

“Something in the air is changing,” said Gazinskaya, whose clients include Russian socialite Ksenia Sobchak, as well as Hollywood actresses such as Elle Fanning. “After some positive changes in our country, like the Sochi Olympics and winning the Hockey World Championship, we’re getting into the mood that we should love our country, respect our roots, and fashion is part of what people are focusing on.”

More than a month ago, Set organized a “Fashionable Russian” event in Novosibirsk, where activists handed out 100 items of clothing to a small crowd in a central square. The most popular garment was a sweatshirt bearing a broad mishmash of Russian and conservative symbols: the Gazprom logo, cosmonaut Yuri Gagarin, a drawing of rainbow-colored men and the word “family,” separated by an equal sign with a slash through it.

Set’s biggest fashion event to date was an outdoor show in May in the Crimean port of Sevastopol. Called “Russian Spring,” the show featured work by young Russian designers with national iconography: headpieces in the shape of the double-headed eagle, folk art-inspired leggings, tops featuring the Soviet hammer and sickle.

Alexander Bichin, head of purchasing for Moscow department store Tsvetnoy Central Market, which stocks brands including Topshop and Marc by Marc Jacobs, said that demand hasn’t diminished for clothing with English words or other Western signifiers. “It’s important not to exaggerate the influence of the political situation on demand for designer collections,” he said.

“Still,” he added, “I decided not to order T-shirts with Barack Obama’s portrait from the Eleven Paris collection.”

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