Hermès, Chanel and Richemont, the owner of Cartier, have temporarily suspended operations in Russia, citing operational challenges and staff concerns as the fallout from the Ukraine invasion spreads.
LVMH, the biggest luxury group by sales, and Kering, the owner of Gucci and vice-leader in the ranking, made similar announcements on Friday (4), as did Britain’s Burberry.
Several Western brands, including Apple, Microsoft, Ikea and Nike, suspended sales in Russia quickly, leading critics to say luxury groups were falling behind, waiting until nine days after the invasion began.
Social media users and Paris Fashion Week participants lobbied luxury groups to act, with some saying it was indecent to keep boutiques open in Moscow while bombs were falling on Kiev.
Industry watchers also expressed concern over reports of consumers rushing to luxury boutiques in Russia to buy expensive watches and bags and try to protect themselves from inflation, adding that such goods could even be used to smuggle money out of the country and flout sanctions. rigid.
When Louis Vuitton, LVMH’s biggest brand, posted a message on Instagram saying it was “deeply touched by the tragic situation unfolding in Ukraine” and pledging to donate €1 million to refugees, it sparked an avalanche of negative comments, which included: “Close your stores in Russia if you’re serious” and “Stop selling in Russia!”
LVMH, which owns more than 70 brands such as Moët & Chandon and Christian Dior, has around 3,500 employees in Russia and operates 120 stores.
French brand Hermès was first, saying it would temporarily close stores in Russia and pause all commercial activities from Friday night. The maker of Birkin bags gave no reason for the decision. It has three stores in the country and around 60 employees.
Hours later, Chanel announced a similar move, citing its “growing concerns about the current situation, the growing uncertainty and complexity of operating”.
“We will no longer deliver to Russia, we will close our boutiques and we have already suspended our e-commerce,” the company said in a statement.
Chanel angered social media users on Thursday when it called the invasion of Ukraine a “conflict” and said it would donate 2 million euros to refugee aid organizations operating on Ukraine’s borders. Followers demanded that the brand, which employs 300 people and has five boutiques in Russia, stop selling there.
Switzerland-based Richemont, which owns Cartier and Van Cleef & Arpels, said it suspended business activities in Russia on March 3, “given the current global context”.
“We will continue to monitor developments and adapt our measures,” he added.
While the companies do not release specific figures, analysts estimate that Russia is not a leading luxury market despite harboring an oligarchic class that is now targeted by sanctions. UBS calculates that LVMH, Hermès, Kering and Burberry earn less than 1% of market revenue, even taking into account Russian consumers who shop abroad. At Richemont, which has a larger presence in jewelry, Russian buyers account for about 2% of sales.
The Russian luxury market is marginal compared to the US and China, the two biggest markets in the sector, where demand has grown regardless of the Covid-19 crisis. “In dollars, this equates to about $9 billion, with Chinese spending representing 6% and American spending 14%,” Flavio Cereda, an analyst at Jefferies, wrote in a note.
The fact has led some to question why luxury groups would risk the reputational risk of continuing to operate in Russia when the commercial impact of the pause seemed manageable. Furthermore, as the impact of financial sanctions and supply chain disruption deepens, it will become more difficult to replenish stores in Russia or maintain e-commerce operations that require fulfilling orders from abroad.
Neri Karra, an entrepreneur who founded an ethical handbag brand of the same name and teaches business practices at Oxford University, said luxury and fashion brands had to act quickly.
They no longer have the luxury of being silent. You cannot claim to be an ethical and sustainable brand and continue selling in Russia”
Translation by Marcelo Azevedo
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
