By Roman Churikov, Olga Popova and Yevgeniy Matveev
MOSCOW (Reuters) – Washington’s push to swiftly end the conflict in Ukraine has sparked speculation that Western brands may want to return to Russia, but from fashion to cars, the markets they vacated now look more competitive than three years ago.
As Ukraine marked the anniversary of Russian troops flooding across its border, U.S. President Donald Trump suggested that the conflict could end within weeks, though it is not yet clear how.
Western sanctions that complicate cross-border payments and trade flows would probably need softening for companies to return in large numbers. Those that do take the plunge will find markets now dominated by domestic – or in the case of cars, Chinese – brands.
Henderson, a men’s clothing chain that listed on Moscow Exchange in late 2023, said the departure of foreign retailers had given it a development boost, mainly by making better locations within shopping centres available.
That has helped the company grow its sales three times faster than the overall 8% annual growth of the menswear market, even though Western brands are still available in some places.
“The market itself has not changed significantly, as the majority of foreign brands (60-80% of global manufacturers, according to our estimates) did not leave,” Henderson’s press office said in response to Reuters questions.
“(They) just transformed sales channels, using the services of local, multi-brand stores to sell products, or by changing the signage on their stores and introducing new trademarks.”
Consumer goods are not under sanctions, but as many companies refused to do business with Russia, Moscow legalised grey imports through third countries that allow retailers to sell foreign goods without the trademark owner’s permission.
BATTLING FOR SPACE
The difference is that shopping malls’ prime locations, in the past reserved for Western flagship stores, are now taken by Russian rivals.
“The best spots, where Western brands used to be stationed, are already filled,” said Pavel Lyulin, vice president of the Shopping Centres Association of Russia, Belarus and Kazakhstan.
“These are long-term contracts, so every such venue will be battled for.”
Moscow is unlikely to greet returning brands with open arms. President Vladimir Putin on Friday said Russian manufacturers must be treated preferentially if foreign firms return.
Kirill Dmitriev, Putin’s special envoy on international economic and investment cooperation, last week said he expected a number of U.S. companies to return as early as the second quarter of this year, without giving further details.
More than a thousand Western companies have exited Russia since Moscow sent troops into Ukraine. Some left because of costs and disruptions brought by sanctions and payment issues while others, particularly retailers, in protest against Russia’s actions.
The retail sector has yet to fully recover, with shopping centres still welcoming 20% fewer visitors than in 2019, according to Lyulin.
But Russian shoppers have taken to local brands.
“In the very beginning, it was really hard because the Russian retail market for clothing and footwear was underdeveloped,” Moscow resident Anna, 29, told Reuters on one of the Russian capital’s main shopping streets.
“But now, absolutely not. Our local brands produce things that are absolutely no worse (than Western ones).”
Stockmann, a retailer which sells foreign and domestic clothes and acquired Hugo Boss’ Russian business last year, has noted an increase in domestic brands’ sales, Darya, a salesperson in one of the company’s Moscow stores, said.
MORE CHOICE
Moscow resident Anastasia Efremova told Reuters that Russian brands had raised prices, but otherwise the impact had been minimal.
“I am talking not only about clothing or cosmetics but also about spare car parts, for instance,” Efremova, 38, said. “There were fears we would not be able to buy something for cars, but everything is in stock.”
Foreign carmakers helped grow Russia’s car market when they began building factories in Russia in the early 2000s.
The sudden departure of automakers like Renault, Volkswagen and Nissan left a gap that was filled primarily by Chinese competitors, which now account for more than 50% of new car sales compared with less than 10% before the start of the conflict.
Domestic carmakers account for about 30% of sales, up from closer to 20% before February 2022.
For now, Western companies are ruling out imminent returns. Executives from Arla Foods, maker of Lurpak Butter, and InterContinental Hotels last week said there were no plans to re-enter the Russian market for now. France’s Renault said returning under the terms agreed when exiting in 2022 was “very unlikely”.
Russian brands will want to defend the market share they gained and feel confident they are strong enough to compete should international players come back, said Valeria, a salesperson in a central Moscow fashion store.
Ultimately, consumers want to be free to decide for themselves, said Moscow resident Laysen Faskhutdinova.
“I’d rather they return. Russians should have a choice.”
(Reporting by Roman Churikov, Evgeniy Matveev and Olga Popova; additional reporting and writing by Alexander Marrow; Editing by David Goodman and Tomasz Janowski)
EMEA Tribune is not involved in this news article, it is taken from our partners and or from the News Agencies. Copyright and Credit go to the News Agencies, email news@emeatribune.com Follow our WhatsApp verified Channel
