By Jukka Aminoff
After the Cold War Russia has penetrated the global luxury market. Russians are in London, Stockholm, Helsinki, Paris, Monaco, Marbella, Dubai and many other places. People have seen how extravagance Russians are with their shopping habits. It is in Russian culture to embrace lavish lifestyles and fashion. They live their lives to the fullest. In London, it is possible to discover expensive perfumes, which are heavily branded around Russian symbols to lure Russian shoppers.
Before the Ukrainian crisis and Russia's economic downfall, Helsinki, the capital of Finland, was one of the best places to see how major the Russian influence was for Finland's luxury industry. Russians consumed and shopped almost everything that they could find from pieces of jewellery to fashion, and from luxury apartments to supercars. As a result, Finland's luxury industry was booming and business people were planning to open new high-end destinations to satisfy the increasing demand. It was a great time for Finland because the country was able to lure luxury buyers in a new way. A big world feeling conquered Helsinki.
However, after 2014 Russians almost disappeared and the nascent growth was diminished. Growth and expansion plans were put aside. In 2016, Finland saw a slight growth in the Russian market but good times are behind us - at least for some time. This also demonstrates how fragile the global market is, and why business communities value peace and cooperation. Thanks to digital marketing, Finland was able to lure new buyers from around the world. Hence, Finland was not depended on Russian luxury consumers.
In 2015 Russia's personal luxury goods market was the 12th largest in the world with 3.2 billion euros. In contrast, the United States was the biggest one with 78.6 billion euros. Global turmoil around Ukraine and trade sanctions affected the whole global luxury market negatively because it harmed growth numbers.
As we now that luxury buyers are global. Hence, they do not just consumer in their home countries. Personal trade and travelling restrictions towards UHNWI and HNWI have played also a negative role because international luxury consuming is harder because of financial restrictions. However, domestic consumption might increase in Russia as a result.
In 2018, McKinsey&Company made research, which said that 85 per cent of experts believe that Russia's luxury market will grow in the next three years but only 14 per cent of consumers will increase their spending. Russians, like other nationalities as well, are gathering brand and product information increasingly through social media.
Since 2016, we have heard positive news coming out of Russia. There are some stability and predictability in the economy, which increases spending. Russians are bouncing back into the market, which also means that luxury brands should stay in Russia because domestic spending is on the rise.