The Russian luxury goods market grew by about 5-10%, year on year, in 2016 to an estimated €3.4-3.5bn, according to a report by Exane BNP Paribas, an investment company specialising in cash equities, and Contactlab, a provider of digital direct marketing services. The jump came after the significant slump in the market of 25%, year on year, in 2015 caused mainly by the strong depreciation of the rouble.
The market’s recovery in 2016 was due to the ongoing shift by Russian consumers from foreign products to domestic goods as well as an increase in tourist shopping because of the favourable 10-20% price differential with Asian countries, Exane and Contactlab stated. In addition, new tax-free legislation introduced this year should further promote tourist shopping in Russia and positively affect the country’s luxury market, the companies noted.
Russia’s VAT refund systems on purchases by foreigners (tax free) is planned to run in 2017. Russia’s Ministry of Finance published the requisite draft of amendments to the tax code last November. The pilot regions for the project are Moscow and Moscow Province, Sochi and St. Petersburg.
According to Exane and Contactlab, almost all of the 33 analysed brands have mono-brand stores in Russia. Most brands have stores in Moscow, St. Petersburg and Yekaterinburg. Moreover, even during the 2014/2015 economic crisis, many luxury brands continued to invest in the Russian market by opening new locations. The luxury goods chains with the largest number of stores in Russia are Swatch, Armani and Hugo Boss followed by Zegna, Michael Kors, Dolce & Gabbana, Gucci and Valentino, based on the companies' estimations.