Mikhail Kusnirovich, the owner of Moscow’s GUM shopping mall, was mingling with the fashion elite at a party thrown by Gucci this month to mark the opening of the Italian brand’s two new outlets in the Russian capital.
Gucci executives from London and Milan, many on their first visits to Moscow, toasted to greater success, dismissing economic woes and Russia’s growing international isolation as temporary blips.
But Kusnirovich was more cautious. “People don’t have the courage to buy,” he told The Moscow Times.
Worries about the prospects of the Russian luxury goods market have risen this year as the country’s economy teeters on the brink of recession and the ruble plunges amid sanctions imposed on Russia by the United States and European Union for Moscow’s support of separatist rebels in Ukraine.
The luxury goods market in Russia could contract by as much as 18 percent this year to be worth 4.6 billion euros ($5.8 billion), consultancy Bain & Co wrote in an October report. The sector grew about 5 percent last year.
Heightened political tensions over Ukraine and the sharp devaluation of the Russian currency are the two most important reasons behind the problems, experts say.
Luxury goods are all imported, and their retailers suffer from a weak ruble. The Russian currency has plunged over 30 percent versus the US dollar so far this year, driving up costs.
“Some luxury retailers report that turnover has fallen 30-40 percent compared with the same period of 2013,” Anna Lebsak-Kleimans, chief executive of Fashion Consulting Group in Moscow, said in written comments.