So far, a number of leading brands and fashion groups have successively announced the suspension of operations in Russia.
On February 28, Giorgio Armani honored the unfortunate people of war in eastern Europe with a men's and women's fashion show with no background music. Giorgio Armani became the first brand to respond to this event at Milan Fashion Week this season.
Giorgio Armani released a brief statement before the show, announcing that there would be no background music on the show
On 2 March, lvmh group announced that it would make an emergency donation of €5 million to the International Committee of the Red Cross to help the direct or indirect victims of the Russian-Ukrainian crisis. Then, on March 4, an LVMH spokesperson told WWD that the group would close 140 stores of its brands in Russia, but would still pay salaries and benefits to 3,500 employees in Russia as usual.
LVMH posted a statement on its Instagram account
On the same day as LVMH, Hermès announced the closure of three of its stores in moscow, the Russian capital. Chanel posted a statement on social media saying that in view of the current situation, it will no longer ship to Russia, while closing physical stores and online sales channels.
This was followed by Kering's announcement that it would make a substantial donation to UNHCR and close its branded stores that it operates directly. Its brand, Balenciaga, has emptied all fashion content on social media, announced a donation to the United Nations Food Programme and launched a call to donate to Ukraine. Another Kering brand, Gucci, also announced a $500,000 donation to the Office of the United Nations High Commissioner for Refugees to provide humanitarian assistance to refugees fleeing Ukraine.
Balenciaga emptied its Instagram account
On March 5, Prada Group announced the suspension of its retail operations in Russia. Luxury down brand Moncler has also said it has suspended all business activities in Russia. Italy's OTB Group and its OTB Foundation announced a donation to UNHCR and will provide direct financial assistance to those on the run. Burberry announced that it would stop supplying to Russia, and Canada Goose also decided to close its operations in Russia, including e-commerce and wholesale sales.
In addition to fashion luxury brands, sports and fast fashion brands have also made recent moves. Nike announced the closure of online sales channels in Russia; Adidas announced the termination of its sponsorship agreement with the Russian Football Federation; and ASOS and H&M, two fast fashion brands, announced the suspension of all operations in Russia and Ukraine to ensure the safety of employees and partners. H&M said it was donating clothes and other necessities to local ukrainians, and the H&M Foundation also donated to Save the Children and UNHCR.
A statement posted by Nike on its official website
Zara's parent company, Inditex Group, said in a statement to the Spanish Stock Exchange that it had suspended operations in Russia and closed 502 stores, 86 of which were Zara, as well as online businesses. However, Uniqlo's parent company, Fast Retailing Group, founder Yanai Masaharu, told the media a few days ago that Uniqlo will not suspend its business in Russia, "because Russian consumers enjoy the same right to normal life as everyone else." ”
Compared with soft luxury, fast fashion and sports brands, hard luxury brands have unexpectedly ushered in a "crisis opportunity" in this crisis. The ruble has now depreciated sharply as the international community imposed unprecedented and severe sanctions on Russia, leading Russia's wealthy to spend their wealth on luxury watches and fine jewelry. Just as gold futures are often used as a tool to hedge against risks and hedge inflation in economic and social crises, luxury watches and fine jewelry are also regarded as a hard currency, so the sales of hard luxury brands in Russia will still rise in the short term.
Bulgari CEO Jean-Christophe Babin previously said in an interview with Bloomberg that the brand's sales in Russia have risen significantly in the past week, describing fine jewelry as a "safe investment".
It is worth mentioning that there are not a few hard luxury brands that insist on "opening their doors" like Bulgari. Cartier, Rolex and Swatch Group stores in Russia, which own jewelry and watch brands such as Omega, Longines, Breguet and Blancpain, are still in normal operation, but Rolex and Swatch Group have announced that they will stop exporting to Russia.
It is historically rare for so many head brands and groups to react similarly to international political events. But in fact, as one of the most dynamic and influential industrial sectors in the socio-economic and cultural sector, the fashion industry has never really hidden in small buildings to become unified. From the anti-racial discrimination movement that swept the world in 2020, the affirmative action movement for women and minorities, to the current Russian-Ukrainian crisis, not only the fashion industry itself continues to show enthusiasm for participation, these actions have also attracted more and more attention from public opinion - consumers also require brands to have a clearer position, and the previously ambiguous or outright blind approach has now become a risky coping strategy.
Maria Grazia Chiuri, creative director of Womenswear at Dior, expressed her support for feminism in her Spring '17 collection
But from the perspective of business logic, the suspension of business in Russia is more like a symbolic act. A brand manager, speaking on condition of anonymity, told WWD: "It is vital to provide humanitarian support to people at risk of war, as is respecting or following Western government sanctions against Russia." But brands need to understand that real life continues, and the business of brands and large companies will not stop, and companies need to consider business factors and relationships. ”
The sales of hard luxury brands in Russia continue to continue and even usher in a small growth peak, which proves this business logic.
TSUM department store, a designer shopping mall in the heart of Moscow
In addition, the deterioration of the market operating environment also needs to be considered and measured. Jean-Christophe Babin pointed out that it is difficult to predict how long Bvlgari's growth trend will last, because the financial sanctions that removed Russia from the SWIFT system are now in effect, and it will become more difficult to export and pay for goods.
With the suspension of logistics shipments, the closure of airspace, the suspension of international payment services such as Visa and Master, and the announcement of the suspension of supply to Russia by Rolex and Swatch Group, those brands that insist on opening stores will not be able to replenish stores in the future, which means that even if the demand for hard luxuries in Russia's wealthy class has risen at this stage, it will also face a situation of no goods to buy. In the face of the continuous deterioration of the business environment and the safety of employees, it is also a last resort to close stores and suspend business.
It should also be noted that Russia is not as important to fashion luxury brands as china, the United States or the European domestic market. According to a report released last week by Morgan Stanley analyst Edouard Aubin, of LVMH and Swatch Group's total revenue, the Russian market and Russian consumers contribute less than 2% of total sales, while Richemont group accounts for less than 3%, which Edouard Aubin considers to be a "relatively insignificant level". Securities investment bank Jefferies Group pointed out that Russians sell about $9 billion in luxury goods a year, accounting for about 6% of Chinese spending and 14% of U.S. spending.
Although Russia's wealthy class has always been the core consumer group of luxury goods, due to the severe gap between rich and poor and the low average national income, Russian luxury consumers have never been able to become one of the growth engines of the global luxury goods market, compared with China and the United States, Russian consumers contribute a very small proportion of luxury goods sales.
This feature is also reflected in the revenue composition of fast fashion brands. The Inditex Group told WWD that Russia accounts for about 8.5% of the Group's total profits, and that the Group does not own physical properties in Russia, and that all the stores of its brands are leased, so the Group's total investment in the Russian market is not so important for Inditex in terms of sales contribution.
In addition, H&M's financial report data also shows that Russia is only H&M's sixth largest market in the world, accounting for about 4% of group sales in the fourth quarter of 2021, and for H&M, the sales contribution of the Russian market can be negligible. Puma, which announced the suspension of its Russian operations earlier, also said that in 2021, Puma's revenue in russia and Ukraine accounted for less than 5% of total revenue.
According to a 2021 EY survey of adults in Moscow, St. Petersburg and other parts of Russia, many respondents said they were anxious about the future and even less optimistic about their future financial situation, which led to a continued decline in consumer spending in Russia. EY pointed out that the decline in the consumption index in the Russian market was caused by the slowdown in socio-economic growth and the decline in residents' incomes after the epidemic, and in the survey, 47% of respondents said that they spent more time at home and shoped less frequently. The Russian market has become more dispensable due to the multiple effects of a slowing economy, falling incomes, the pandemic, and the conflict of war.
Compared with luxury consumption, Russia's fashion creative output and supermodels may be more influential in the global fashion industry pattern.
Daria Strokous, Sasha Pivovarova, Irina Shayk, Natalia Vodianova, Natasha Poly, Anne Vyalitsyna and others are among the most sought after supermodels in the fashion world. It is worth mentioning that Natalia Vodianova is also the eldest son of Bernard Arnault, chairman and CEO of LVMH, and the wife of Antoine Arnault, the group's head of communications and image. In the incident, Natalia Vodianova announced on social media that she would donate to Ukrainian refugees and expressed empathy for what happened to Ukraine.
Natalia Vodianova 和 Antoine Arnault
In addition to fashion supermodels, Russia's past history has also spawned a post-Soviet aesthetic trend in fashion, which is also seen as the beginning of the promotion of the street fashion of haute couture. From designers Gosha Rubchinskiy and Demna Gvasalia to stylist Lotta Volkova, these fashion creators from Russia or deeply influenced by the culture of the former Soviet Union have made youth culture, underground club culture, retro street sports and a grainy post-Soviet aesthetic a "Russian force" sweeping the haute couture landscape. In addition, the eponymous fashion brand founded by Russian designer Ulyana Sergeenko is also a "regular" at French Couture Fashion Week.
Gosha Rubchinskiy
Luca Solca, an analyst at Bain, believes that the decision of the fashion luxury brand to suspend its business in Russia will cause a certain loss of sales and the loss of a part of the consumer, but this impact can be offset by business in other markets, and the brand can also establish a more positive brand image.
Russian supermodel Sasha Pivovarova
However, in the context of high globalization, fashion brands also need to realize that whether it is taking sides, taking a stand, expressing a stance, or supporting, it is not a foolproof strategy, and each decision will have a reaction and impact on their own development in some aspects. Just like now, with the international community's sanctions on Russia coming into effect, there has been obvious turmoil in international finance, energy, supply chains and other fields.
International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on March 5 that the ongoing war and related sanctions would have a serious impact on the global economy. The current situation in Russia and Ukraine has caused international energy prices such as oil and wheat to soar, exacerbating the inflationary impact of the COVID-19 pandemic and shortages in global supply chains.
On the other hand, with high global inflation, the continued impact of the epidemic, the continued shortage and chaos in global supply chains, and the impact of the Russian-Ukrainian crisis, many banking institutions have lowered their expectations for global economic development this year. It should be pointed out that the world's two largest economies, China and the United States, also hold a relatively cautious attitude towards their respective economic development this year: "steady growth" sets the main theme of China's economic development this year, while for the United States, "anti-inflation" is its primary goal in the domestic economic field.
In this market context, luxury consumption in the Chinese and US markets is likely not to have a high-speed growth trend like in 2020 and 2021, but will maintain growth in a more gentle trend. For the fashion industry, this also means that future growth will enter a stable stage, and it will become increasingly important to revitalize fashion consumption in other regional markets. The loss of a Russian market may not matter at the moment, but in the long run, its subsequent impact will be increasing.
At this moment, while it's more important to take a stand than to increase sales, brands should also be very careful not to lose sight of a strategic market with growth potential. In 2020, EY released a survey report showing that 92% of foreign companies consider Russia to be a strategic market, and half of them plan to strengthen their presence in Russia. However, for now, fashion brands under the tide of globalization have no other way, the superposition of objective and subjective factors has made them walk on thin ice, "careful" and "balanced" is the only way. WWD
Written by Nion
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