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Russia

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TABLE OF CONTENTS
CHAPTER 1
CULTURAL HISTORY OF EUROPE 3
CHAPTER 2
CONSUMERS. 5
TRENDS 7
CHAPTER 3
LUXURY INDUSTRY 8
MAJOR PLAYERS 9
BIBLIOGRAPHY 12 CULTURAL HISTORY OF LUXURY
Russia has a longstanding history of luxury with a large emphasis on furs, gold, diamonds and the booming caviar industry. It has some of the most grandiose palaces in the whole world. We can consider Russian culture closely linked to term of luxury, because of the rich history and long tradition of impressive achievement in arts. We can say that Russian literature; ballet, classical music, architecture and paintings are part of there, as well as worldwide heritage in cultural and luxury world. SOME CHRONOLOGICAL FACTS
EARLY 18TH CENTURY After the decree of Peter The Great, Russia became more opened for European way of life and traditional Russian appearances and fashionable Western clothes replaced dresses.
MID 18TH CENTURY
One of the most interesting facts regarding luxury has been related to Catherine the Great coronation gown. It was one of the most prestigious and glamorous dresses of that time in world of aristocracy. It was made out of luxuriant silver silk, with glamorous sleeves, lace bertha, blue sash, etc. Her crown was a byzantine throwback, joined by two rows of pearls. It contained a 4,936 diamonds and a giant 415-carat ruby perched on top of it. 1911
French master of haute couture Paul Poiret was amazed by Russian culture and he created the first European fashion collection with Slavic motifs; dresses with gold embroidery, coats with a printed floral pattern, Siberian fur hats… This collection delighted Parisian public and became a classic style a la russe. From that time to the present day Russian couturier style is associated with aristocratic elegance and luxury.
1920-1930'S
Designers Paul Poiret, Jeanne Lanvin, fashion houses Worth, Paul Caret and others offered to client’s hats for evening and wedding dresses, stylized dresses with Russian Folk ornaments and long coats with recognizable collars. Coco Chanel was also mesmerized by Russian style, inventing a dress-shirt with an embroidered collar and belt, shoulder bags, coats, suits, all trimmed with fur. 1976/1977 Yves Saint Laurent held a fashion event simply called "Russian Ballet" (Fall-Winter). This collection created a great interest of the Western Europe for the mysterious traditions of Russia. High-waisted skirts, painted scarves, jackets, coats with a printed pattern and a white crocheted doll dress defined the standards of the future and modern Russian style. 1980-1990'S Fashion house Balmain and Christian Dior made long trend coat with high collars and massive hats with earflaps. Russian style is still relevant today. Its elements can be seen in the collections of Karl Lagerfield, Jean-Paul Gaultier, Diane von Furstenberg, Roberto Cavalli, Christian Lacroix, Fendi, Oscar de la Renta, Giorgio Armani, Vyacheslav Zaitsev, etc. BOLSHEVIK REVOLUTION
Before Bolshevik Revolution Russia was a major market for Western luxury goods. For example, tsar Alexander I was one of Breguet's first and most influential Russian customers. During the communism the tradition of luxury died out because people didn't have financial assets and showing the wealth didn't fit communism philosophy. Also, there were no public attempt to become wealthy and the Soviet people were excluded from the world of luxury and fashion. After the collapse of communism situation changed dramatically and nowadays Russian market and Russian people are playing very important role on the market of luxury goods.

CONSUMER PROFILE
REGION
Moscow and St. Petersburg (Central Russia) is known as the luxury capital of the Russia. Moscow alone has 80% of the total luxury market.
Around 50% of luxury market belongs to these two cities, which consist of only 10% of the total population. Also its market worth is US$ 2billion, which is more than the New York luxury market worth. (Okonkwo, 2007)

CHARACTERISTICS
Russian consumer can be divided into the following categories :-

1. “SHOW”: Magnets And Their Wives – This category consists of the major Russian consumers. This group are outspoken about their motivations. They are highly status – driven, demanding and materialistic. They see luxury as a mechanism by which they can benchmark their success and also prove they are doing better than others. For this kind of consumer, the brand needs to be louder and successful.

2. “SHOW YOU KNOW”: Children Of Magnates And The MBA Crowd/Professional Managers -
This group a high degree of knowledge about the products they buy, for the purpose of justification. They don’t appreciate brands deeply. The reason these consumers acquire knowledge is to further confirm their social status. This group likes to use less obvious choice of brands or expand their knowledge.

3. “CAN’T BE SHOWN-UP”: Typically, High-End Government Functionaries – This group use luxury to give themselves confidence and enable themselves to fit in. They look upon luxury as doing the right thing, buying the right thing but not over doing it. Russians consumers prefer brands with established reputation but don’t want to seek attention. They believe through luxury, other people will respect them.

4. “KNOW”: - This group buys luxury for the sake of luxury. They don’t care what other people think. They buy luxury because they love them. Russians want to flaunt economic status and demonstrate a strong desire to be considered elegant. Therefore this category consists of the very small portion of Russian consumer.

ABROAD
Russian consumers have high degree of awareness of foreign luxury brands because their luxury market is developed and more European in nature. According to CPP Report, Russians are buying 20% more luxury products in abroad between 2009 & 2010. Firstly, Political pressure and over publicized corruption cases have made Russians purchase less locally. Secondly, behind the preference to buy abroad has been pricing, pricing of luxury goods in Russia being at least 25% higher than in Western Europe and 15% higher than in Dubai, the top preferred Middle East destination for Russians. According to Citibank, by the end of 2011, Russians will have spent $40bn (£24bn) abroad with their credit cards.

TRENDS • Russian regions are becoming more influential in terms of luxury, where the main points of regional development will be Sochi, Krasnodar, Permj, Kazan and Kaliningrad.
• Sochi will enjoy the growth of luxury segment up to 7-8%, Kaliningrad 4,5% and all the other cities mentioned around 5%.
• Though Russians will not necessarily appreciate ‘Russian’ themed products, brands may need to adapt range selection to regional tastes, as regional customers’ tastes tend to differ to that of the larger cities.
• But there will be a change in the way Russians use luxury, she warned: “As the Russian consumer gets more sophisticated, the show-off factor will diminish in importance. It will no longer be enough for a luxury brand to look and be expensive; brands will have to offer consumers a unique, personalized, indulgent experience. We are already seeing this trend in luxury travel, restaurants and in personal care. The Moscow Times (Times, 2012).
• A lot of Russians are investing in real estate properties abroad, due to the high level of property rates in Russia.

OVERVIEW OF THE LUXURY GOODS MARKET Russia was one of the strongest markets for luxury goods before the global financial crisis hit in 2009, which forced the $8 billion luxury economy to contract by half. Luxury goods’ retailing has traditionally been Russia’s most developed sector, with the majority of international luxury brands present with mono-brand stores. It still remains one of the most attractive markets, offering the potential of nearly 143 million inhabitants with economy expected to develop at least 4% year on year in medium term. In 2011, sales of luxury goods increased in Russia by nearly 17% and reached around $5,3 bn. Many of its segments provide opportunities for those who are already operating in Russia as well as for those willing to enter the country. Moscow is one of the most attractive business cities after London and Paris. Some of the country’s richest regions alongside capital Moscow and second city St. Petersburg include resource-laden Chukotka, Yamal-Nenets and Kamchatka. Moscow remains the leader in terms of shopping centers development. Thus, it accounts for 30% of the total shopping center space in the country. As Russia proved to be a promising market, despite the economic crisis, luxury CFA brands tend to establish their own distribution channels, and many have withdrawn their contracts with distributors in Russia. The fast rise of Russia’s rich and migration habits combined with underdeveloped domestic production of luxury goods means that a lot of the wealthy people’s disposable income is either spent on foreign-produced goods or spent abroad entirely. With over 291,000 millionaires, the purchasing power is almost of 3billion dollars and the experts predict that the luxury market will continue to grow at a rate of 5 to 15% until
LUXURY INDUSTRY AND MAJOR PLAYERS ALCOHOL AND SPIRITS INDUSTRY
In Russia, where for years the wine’s sweet Soviet equivalent was the only option, Champagne is currently a status symbol. Russia became even closer to the famous French winemaking district in June as oil trader Boris Titov’s SVL Group bought Champagne d’Avize, previously owned by LVMH. The significant number of very rich people, combined with the Byzantine culture of flamboyancy, has made Russia a perfect target for luxury products. Nearly 45% of all luxury goods sold in Russia are alcoholic beverages (Mc Kinsey, 2010.)
FASHION
Initially entering luxury market was possible only through joint ventures. Chanel even organized a two-week, temporary boutique to bring the brand to St Petersburg for the first time. Many luxury retailers, such as the Ritter Group, intend to focus on regional expansion to other large cities of Russia beyond Moscow and St. Petersburg. Among brands that have recently decided to develop independent operations in Russia are Hermes Group and Prada. On the other hand, Hugo Boss, which will also operate on its own, to exploit the potential of the Russian regions, plans to continue cooperation with the franchisees. Then if we are talking about international brands, best-known brands in Russia are Versace and Dior, further more Russian consumers consider Dior, Dolce & Gabbana and Giorgio Armani the most "high fashion" brands and they are very loyal to them, weather they want leather goods or clothes.

BEAUTY AND COSMETICS
53% share of the market belongs to imported products. According to Luxury Business Council (2011) “The Russian Trends…”(as cited in Luxury Business Council 2011). Avon has a stronger market hold than global leader L’Oreal or Yves Rocher according to KM group data. Chanel, which also makes cosmetics, said results over recent years had been very positive, with continuous growth. In Russia, the company attributes its success to its clientele being “very sophisticated — both traditional and trendy,” explained Bruno Pavlovsky, president of fashion activity at Chanel in Russia. “Chanel’s timeless items are among the best sellers in Russia,” he added.

JEWELLERY AND WATCH INDUSTRY
Russian women like to buy jewelry, especially rings and necklaces, which they purchased on average 1.3 times in the past six months. Brand reputation and craftsmanship are crucial. On average, affluent Russians have spent $1,084 on a ring. According to Luxury Business Council (2011) “The Russian Trends...” (as cited in Luxury Business Council 2011). The watch industry is also on an up rise in Russia as more and more men are investing in statement pieces. AUTOMOBILE INDUSTRY
Car sales in Russia grew by 40 per cent last year in volume terms to over 2.6 million vehicles, recovering most of the ground lost after they halved in the slump of 2009. Insiders expect that figure to reach or beat 3 million this year, according to the (Reuters). The latest trends among luxury car manufacturers are starting to market their new vehicles to countries like Russia. Volkswagen AG's Lamborghini, for example, is due to release a super-sized SUV in an attempt to make its products more appealing to these markets. When we are talking about cars in Russia we must mention MA Russia Motors. It is a Russian sports car manufacturer founded in 2007. Its cars are notable for being the first sports cars to be made in Russia. MA Russia is the first Russian manufacturer of premium-class vehicles. It designed, developed and produces the B1 and the B2 sport cars in Russia. The MA Russia B1 was launched on the 16 December 2008 in the new Manage hall in Moscow, with the company's first showroom following in the city on the 10 September 2010. MA Russia is operated through Nikolay Fomenko. In 2010, it acquired a "significant stake" in the Virgin Racing Formula One team, which was renamed Marussia F1 Team from 2012.

TRAVEL AND LEISURE & REAL ESTATE
Due to luxury tax that can be imposed in 2013, a lot of Russian millionaire/billionaire are investing in buying properties abroad. Also a lot of luxurious hotels are up coming in various cities of Russia, Sochi as an example is getting a revamped due to 2014 Olympics. Traveling is becoming a big part of the Russian Luxury Lifestyle.

BIBLIOGRAPHY

• Rossiyskaya Gazeta.(22 sept,2011)Russians are big spenders abroad again..Retrieved from http://www.telegraph.co.uk/sponsored/russianow/business/8781227/Russians-big-spenders.html.

• Okonkwo, U. (2007). Luxury Fashion Branding: Trends, Tactics, Techniques (p. 75). Palgrave Macmillan.

• Digital Luxury Group (24 May, 2012) World Luxury Index Russia The Top 50 Most-Searched For Luxury Brands In Russia.. Retrieved from http://www.digital-luxury.com/#!/2012/05/the-top-50-most-searched-for-luxury-brands-in-russia/

• Walpole & WPP agency, A. V. (May 2005). Cracking the luxury code. Retrieved from http://static.luxurysociety.com/download/TheDNAofLuxury.pdf

• Russian luxury market, so what? (4 Oct,2012). Retrieved from http://luxuryactivist.com/luxury/russian-luxury-market-so-what/

• Petcu, O. (6AD). Russia’s luxury market unlikely to be overshadowed by newly emerged India and Brazil. Retrieved from http://www.cpp-luxury.com/russias-luxury-market-unlikely-to-be-overshadowed-by-newly-emerged-india-and-brazil/

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