Connect with us


Weakened rouble boosts appeal of Russian brands



After the collapse of the Soviet Union, the value of the luxury market in Russia ballooned to €5.6bn in the span of 20 years. This happened as large fortunes were being amassed in the hands of oligarchs and purchasing power among citizens rose. Well-off Russian citizens flocked to jewellers as moths to light — some visiting jewellers multiple times a day.

Following Moscow’s annexation of Crimea in 2014, the rouble lost about 60 per cent of its value due to sanctions and the merry-go-round of sybaritic Russians ground to a halt. Or rather a pause. It was just the time to repolish their shine.

At the end of 2015, the value of the luxury market in Russia dropped to €3.2bn and Russian travellers cut their tax-free spending in Europe by 37 per cent. “After the devaluation of the Russian rouble, the local jewellery market contracted by nearly 25 per cent (in units) and has been gradually recovering since then,” says Ivan Kotov, managing director and partner at consultancy BCG in Moscow.

While the oligarchs mostly sighed and kept spending, the devalued rouble meant less travelling and aspirational luxury for the less well-off.

It also meant more attention on homegrown talents. Gregory Kuzmin, marketing director of Moscow-based jewellery house Ichien, noticed how more Russian jewellery brands started to emerge and establish a trustworthy reputation with clients. When the rouble could not stretch as far, clients looked inwards. “You can buy a ring of a famous European brand, or for the same money a necklace from an interesting Russian brand. This of course matters,” says Mr Kuzmin.

According to Masha Fedorova, editor-in-chief of Vogue Russia, the devaluation happened when most wealthy Russians were already looking for something different, so they quickly shed their prejudice towards homegrown designers. “It has definitely become a sign of good taste to support a local manufacturer,” she says. “The choice has become very wide. There’re a lot of fashionable stuff that is suitable for you at an affordable price.”

In 2015, the Russian luxury conglomerate Mercury Group, which operates as dealer and retailer of western jewellery brands such as Chopard or Messika, launched its own eponymous jewellery brand. With simple designs that highlight large coloured stones, diamonds and pearls, the Mercury brand aimed to satiate local customers with immediate needs for important gems — which may not always be available in the country.

The same year, the iconic Moscow luxury department store Tsum — owned by Mercury — aligned its price level to those in Milan and Paris boutiques, with some items ending up cheaper than in Europe. Price-matching dented margins but boosted turnover, said general manager of the group Alexander Reebok.

Jean-Christophe Babin, Bulgari CEO: ‘Both sales in Russia and out of Russia have sharply increased within the five last years’ © Susan Wright

Jewellers in the west did not simply sit in their plush stores closer to home waiting for Russians to come — they went to them. “We opened a legal entity in Russia, three stores in Moscow and one in Saint Petersburg within two years,” says Jean-Christophe Babin, chief executive of Bulgari. “This allowed Bulgari to establish the brand into Russia and recruit many new customers that increased by far the level of the sales to Russian customers.”

“We can say that only about 25 to 30 per cent of the worldwide sales to Russian citizens are taking place within Russia. Both sales in Russia and out of Russia have sharply increased within the five last years.” said Mr Babin.

The move paid off. Since 2016, Russia has become a tourist destination for Asian tourists, peaking in 2018 during the football World Cup. Mr Kotov points out that “in 2019, about 1.5m Chinese travellers visited Russia, with St Petersburg and Moscow becoming key destinations for foreign visitors”.

The Chinese were lured in by targeted government measures such as relaxed visa requirements and a tax-free system on purchases. “We have also seen Chinese tourist-specific retail emerging close to key tourist destinations”, says Mr Kotov, “with Chinese tourists making up to 80 per cent of total traffic of such stores.”

Last year, Chinese tourists spent an estimated $1.1bn in Russia. At Bulgari’s stores in the country, the Chinese make up 10 per cent of the customers and dedicated staff have been recruited for them.

Nevertheless, Mr Kotov explains that about 45 per cent of Russian consumers make most of their purchases abroad because of monetary benefits and a wider assortment of luxury.

New Russian laws from the end of last year that allowed the sales of jewellery online gave a further boost to the jewellery industry and acted as a lifeline when Russia entered lockdown at the end of March. “Before Covid-19, the online channel was estimated to make up about 5 to 7 per cent of total sales with the expectation of major players to reach up to 20 per cent in the next two to three years,” says Mr Kotov.

Mr Reebok confirms that Tsum customers’ online spending accelerated during the lockdown and is set to triple in value this year. Yet, it is unlikely that online activity can compensate for the missed sales of high tickets items that typically happen in-store. “Jewellery and luxury markets were one of the most affected by the Covid-19 crisis, with sales reportedly dropping 50 to 70 per cent,” says Mr Kotov.

But sales figures for June and July suggest that the Russian jewellery market is resilient. The government has given support to local brands taking part in international showcases such as Mercedes-Benz Fashion Week Russia.

“Since the reopening of the stores in June, we see […] a strong increase of sales and even above last year,” says Mr Babin, who adds that one of the reasons for the robust rebound was the quick reorganisation of the company to facilitate distant sales.

While the pandemic is keeping tourists at bay, the LVMH-owned jeweller is doubling down in Russia. In 2021, Bulgari will unveil the renovation of its flagship store on Petrovka Street in Moscow. In 2022, it is slated to open a Bulgari hotel near the Moscow State Conservatory PI Tchaikovsky with a 300-square metre suite offering “magnificent views of the Moscow rooftops and of the Kremlin”. Perfect for a Chinese tourist or a wealthy Russian staycationer. 

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


FT 1000: Europe’s Fastest Growing Companies




The latest annual ranking of businesses by revenue growth. Explore the 2021 list here — the full report including in-depth analysis and case studies will be published on March 22

Source link

Continue Reading


EU plans digital vaccine passports to boost travel




Brussels is to propose a personal electronic coronavirus vaccination certificate in an effort to boost travel around the EU once the bloc’s sluggish immunisation drive gathers pace.

Ursula von der Leyen, European Commission president, said on Monday the planned “Digital Green Pass” would provide proof of inoculation, test results of those not yet jabbed, and information on the holder’s recovery if they had previously had the disease.

“The Digital Green Pass should facilitate Europeans‘ lives,” von der Leyen wrote in a tweet on Monday. “The aim is to gradually enable them to move safely in the European Union or abroad — for work or tourism.”

The plan, expected to be outlined this month, is a response to a push by Greece and some other EU member states to introduce EU “vaccination passports” to help revive the region’s devastated travel industry and wider economy. 

But the commission’s proposed measures will be closely scrutinised over concerns including privacy, the chance that even inoculated people can spread Covid-19, and possible discrimination against those who have not had the opportunity to be immunised.

In an immediate sign of potential opposition, Sophie Wilmès, Belgium’s foreign minister, raised concerns about the plan. She said that while the idea of a standardised European digital document to gather the details outlined by von der Leyen was a good one, the decision to style it a “pass” was “confusing”. 

“For Belgium, there is no question of linking vaccination to the freedom of movement around Europe,” Wilmès wrote in a tweet. “Respect for the principle of non-discrimination is more fundamental than ever since vaccination is not compulsory and access to the vaccine is not yet generalised.”

The travel sector tentatively welcomed the news of Europe-wide vaccine certification as a way to rebuild confidence ahead of the crucial summer season, but warned that regular and rapid testing was a more efficient and immediate way to allow the industry to restart.

Fritz Joussen, chief executive of Tui, Europe’s largest tour operator, said “with a uniform EU certificate, politicians can now create an important basis for summer travel”. But he added that testing remained “the second important building block for safe holidays” while large numbers of Europeans awaited a jab.

Marco Corradino, chief executive of online travel agent, said he feared the infrastructure needed would not be ready in time for the summer season: “It will not work . . . at EU level because it is too complicated and would not be in place by June.”

He suggested that bilateral deals, such as the one agreed between Greece and Israel in February to allow vaccinated citizens to travel without the need to show a negative test result, had more potential.

Vaccine passport sceptics argue it would be unfair to restrict people’s travel rights simply because they are still waiting for their turn to be jabbed. 

Gloria Guevara, CEO of the World Travel and Tourism Council, said it was important not to discriminate against less advanced countries and younger travellers, or those who simply cannot or choose not to be vaccinated. “Future travel is about a combination of measures such as comprehensive testing, mask-wearing, enhanced health and hygiene protocols as well as digital passes for specific journeys,” she added.

A European Commission target to vaccinate 70 per cent of the bloc’s 446m residents by September means many people are likely to go through summer unimmunised.

While some countries around the world have long required visitors to be vaccinated against infectious diseases such as yellow fever, a crucial difference with coronavirus is that those inoculations are available to travellers on demand. 

Questions also remain about the risk of people who have already been vaccinated passing on coronavirus if they contract the disease.


Source link

Continue Reading


EU must prepare for ‘era of pandemics’, von der Leyen says




Europe must prepare its medical sector to cope with an “era of pandemics”, the European Commission president said, as she warned the bloc was still in its most difficult period for Covid-19 vaccine deliveries. 

Ursula von der Leyen told the Financial Times that the EU could not afford to sit still even once Covid-19 has been overcome, as she described her plans for a Europewide fast-reaction system designed to respond more quickly to emerging medical threats. 

“Europe is determined to enlarge its strength in vaccine production,” she said in a telephone interview. “It’s an era of pandemics we are entering. If you look at what has been happening over the past few years, I mean from HIV to Ebola to MERS to SARS, these were all epidemics which could be contained, but we should not think it is all over when we’ve overcome Covid-19. The risk is still there.” 

Von der Leyen last month unveiled plans for a biodefence preparedness plan called the HERA Incubator, which will combine researchers, biotech companies, manufacturers and public authorities to monitor emerging threats and work on adapting vaccines. This will become part of a Health Emergency Preparedness and Response Authority (HERA). 

The concept is an attempt to mirror some of the benefits conferred by America’s Biomedical Advanced Research and Development Authority, which is charged with the job of responding rapidly to new health threats.

“The US has a strong advantage by having BARDA . . . this is an infrastructure Europe did not have,” von der Leyen said. “But Europe has to build up to be prepared for whatever comes, and also for the next possible pandemics. This is the HERA incubator.” 

The EU remains within its “most difficult quarter without any question” for vaccine deliveries, she said, cautioning “many, many problems” could always occur within the production process.

Looking towards the second quarter, she pointed out that a second EU contract with BioNTech/Pfizer for their vaccine would kick in, alongside the new jab from Johnson & Johnson, which is expected to be authorised in March.

In an EU summit on Thursday, von der Leyen addressed vaccine production and the threat of virus mutations after a rocky start to the year, when she was hit by complaints from politicians in member states, including Germany, about supply shortfalls. 

Von der Leyen acknowledged to the European Parliament in early February that mistakes had been made in the EU’s vaccination effort, and the campaign remains behind those of the US and UK. Among the difficulties are continued production problems at AstraZeneca’s European facilities. 

Von der Leyen said she was sticking with the EU’s target for the delivery of 300m doses in the second quarter, saying the challenge will shift from vaccine production to national rollouts. As for AstraZeneca’s shipments, she said: “I need to see the proof of the pudding . . . It’s very good that they also delivered from the rest of the world, but they have to honour their contract and we want our fair share.”

Ursula Von der Leyen says she is sticking with the EU’s target for the delivery of 300m doses of the AstraZeneca vaccine in the second quarter © Remo Casilli/Reuters

The good news for the EU is its access to mRNA technology, which is used in the BioNTech/Pfizer vaccine and which scientists believe can be used to rapidly adapt to mutations, said von der Leyen. 

But she also supported French president Emmanuel Macron’s proposal to share up to 5 per cent of supplies to permit the vaccination of healthcare workers in developing countries.

“We all suffer from the fact that the scaling up was not and is not as rapid as we thought at the beginning. This has a general effect all over the world,” she said. “With production picking up I think we should never forget that only if everybody has access to vaccines will we overcome this virus.”

Von der Leyen added that the EU needed to be particularly concerned about developments in its immediate area. 

“The mutant story is worrying me the most,” she said. “When the virus is still raging in the neighbourhood, the probability that mutants will occur, that will come back, for example, to Europe, is only rising.”

Source link

Continue Reading