Crisis “in the brain” dropped sales in luxury by 20%

Market players and experts alike expect the Russian clothing and footwear market to recover only next year. The luxury segment is no exception. At the recent conference of the Franco-Russian Chamber of Commerce and Industry, "La Jounrée Luxe," preliminary results for 2015 were announced, according to which a decline of 20% will be achieved, compared to 8% in 2014. "Luxury is a fairly stable segment; that is, if we say that the mid-price segment is declining by 35%, then in luxury, the decline will be around 10%. It's safe to say that the luxury market will be less affected. The main impact will be felt by the mid-price market. The share of the luxury segment in absolute terms will decrease by 10%, in the worst-case scenario, by 20% by the end of the year. "Consumer activity has declined sharply, with customer traffic in shopping malls falling by 20 to 49%, and street retail down 60%," Anna Lebsak-Kleimans, CEO of Fashion Consulting Group, reported at the conference. Daria Yadernaya, CEO of Y-consulting, believes the reasons for the decline in luxury sales are purely psychological and linked to the "poor rich" paradox. During a crisis, the income of the 20% of wealthy shoppers who account for 80% of revenue in the luxury segment typically declines only slightly. However, we are increasingly confronted with the paradox of the "poor rich"—ultra-affluent shoppers who are cutting back on their purchases and shopping frequency, rationalizing their choices, and shifting toward more affordable options. Interestingly, this is largely a symptom of the current recession, and its causes are primarily psychological and social, rather than economic. This category of shoppers' income structure is highly diversified, allowing them to experience financial stability even with currency fluctuations, or their income level is so high that a reduction in income doesn't push them into a different social category. At the same time, the index of shopper expectations, including in this group, is very low, which impacts their marginal propensity to consume. The psychological sense of crisis is proving more important than the economic realities in the budgets of individual shoppers. As a result, the frequency of visits, as well as the number of items per check, is declining. " , said Daria. "Today, the Russian luxury market ranks 11th compared to other countries, with a volume estimated at €4,6 billion last year, with Moscow accounting for €3,5 billion. For comparison, the Russian market is one-tenth the size of the American luxury market, and Moscow's luxury market is three times smaller than the Parisian luxury market," said Vladimir Biryukov, partner at Deloitte CIS. The bulk of the luxury market in Russia, as already mentioned, is accounted for by Moscow and St. Petersburg. The regions currently account for 25%, divided between Yekaterinburg, Rostov-on-Don, Novosibirsk, Samara, Nizhny Novgorod, Chelyabinsk, Kazan, Krasnoyarsk, Perm, Volgograd, Ufa, Omsk, and Voronezh.