MOSCOW — It may have the image of a corrupt Wild West, but Samsonite chief executive Marcello Bottoli says luxury brands can’t afford to underinvest in Russia.
This story first appeared in the November 30, 2007 issue of WWD. Subscribe Today.
The Russian market is “growing at twice the rate of other luxury markets,” Bottoli said on the final day of the International Herald Tribune’s “Supreme Luxury” conference here. If U.S. shoppers spend less because of the mortgage credit crisis and high gas prices, income from branches in Russia, China and India will shore up firms’ bottom lines, he said.
“Developing nations will ensure luxury brands continue to profit,” Bottoli added.
The emphasis on the profitability, as well as the relative ease, of doing business in Russia, was echoed by other fashion executives.
Designer Julien MacDonald told WWD that Russia accounts for over half the sales of his fur lines. “I sell in multibrand boutiques all over Russia,” he said. “If young designers want to be successful, they have to look to the new markets because the old markets are saturated.”
Earlier, MacDonald told conference attendees: “The profits you can make on a fur coat are incredible. It’s a big, huge, money-making machine.”
Moscow and St. Petersburg aren’t new destinations for many brands, so they’re now focusing on regional cities and capitals in other countries that formerly made up the U.S.S.R.
The director of Bosco di Ciliegi, which runs franchises of foreign labels, told WWD that the firm plans to open 36 sports stores in 22 smaller Russian cities, including Kazan, Makhachkala and Voronezh. If they’re successful, Bosco will then bring in labels like Hugo Boss and MaxMara.
Meanwhile Salvatore Ferragamo ceo Michele Norsa said his firm is considering stores in far-flung locations like Baku, Azerbaijan, Tbilisi, Georgia and Astana, Kazakhstan.
Speakers also emphasized the importance of Russians abroad — Russians are the second largest travel customer in Burberry’s London store after Americans, said the firm’s ceo Angela Ahrendts.
Executives said the alleged difficulties of doing business in Russia are exaggerated. Christian Dior Couture president Sidney Toledano suggested Russia could be an easier place to do business than the U.S. “Bribes — we’ve never had this type of problem,” he told WWD after giving an upbeat speech on the brand’s business in Russia.
“Sometimes Americans seem more straightforward and transparent, and it turns out they’re not,” Toledano said. “When a Russian shakes your hand and says a deal is done, you can be sure it’s done.”
Still, it’s possible speakers glossed over problems their companies have had. Russia, after all, is ranked 143rd on Transparency International’s global corruption survey, level with Gambia, Togo and Indonesia.
Other panels Thursday focused on the state of Russia’s nascent fashion industry, with talks from two of the country’s most famous young designers, Igor Chapurin and Denis Simachev.
“There is no ‘Russian style’ right now,” Chapurin said. “As soon as there are seven to 10 brands with Russian roots, Russian style will develop.”
And given the wintry location of this year’s conference, it’s unsurprising fur was on the schedule. After a talk on the history of her company, Carla Fendi of Fendi told WWD she is unperturbed by animal-rights activists — especially considering fur’s popularity in places like Russia.
“We use it because people like it.” She added: “When people make silk, the silkworms also die.”
While Russia’s wealthy are often characterized as clueless nouveaux riche, speakers emphasized a sure route to failure here is patronizing consumers. “Remember Napoleon and Hitler,” advised Norsa of Ferragamo. “They didn’t approach this huge country humbly enough.”