From fashion to cars, Russian markets pose new test for Western brands weighing return – Harris International Group LLC HIG Consortium

Written by Roman Corikov and Oga Bubova and Yivgene

MOSOCON (Reuters) – Washington's batch to end the conflict in Ukraine rapidly raised speculation that Western brands may want to return to Russia, but from fashion to cars, the markets that have now evacuated are now more competitive than three years.

While Ukraine was referring to the anniversary of the Russian forces overwhelmed by its borders, US President Donald Trump suggested that the conflict ended within weeks, although it has not yet been clear.

Western sanctions that hold boundaries and commercial flows may need to soften companies to return in large numbers. Those who take diving will find markets now dominated by local – or in the case of cars, Chinese brands.

Henderson, a series of clothing for men listed in Moscow for exchange in late 2023, said that the departure of foreign retailers gave them a development boost, especially by providing better locations in shopping centers.

This has helped the company to develop its sales three times faster than the 8 % annual growth in the men's clothing market, although Western brands are still available in some places.

“The market itself has not changed significantly, because the majority of foreign brands (60-80 % of global manufacturers, according to our estimates) did not leave.”

“(They are) only transformed sales channels, using local multi -brand store services to sell products, or by changing signs on their stores and offering new brands.”

Consumer goods are not subject to sanctions, but since many companies have refused to do business with Russia, Moscow has legislate gray imports through the third countries that allow retailers to sell foreign goods without the brand owner's permission.

Fighting for space

The difference is that the main shopping centers sites, in the past, are intended for western leading stores, are now taken by Russian competitors.

“The best sites, as western brands were already concentrated, were already filled,” said Pavel Liolin, Vice President of the Shopping Centers Association in Russia, Blasusia and Kazakhstan.

“These are long -term contracts, so every place will be killed like that.”

The Moscow greeting the brands returning with open arms. President Vladimir Putin said on Friday that Russian manufacturers must be treated preferentially if foreign companies returned.

Putin's special envoy on international economic and investment cooperation said that he expected a number of American companies to return early in the second quarter of this year, without providing more details.

More than a thousand Western companies have left Russia since Moscow sent the forces to Ukraine. Some have left due to the costs and turmoil caused by sanctions and payment cases, while others, especially retailers, in protest against Russia's actions.

The retail sector has not fully recovered, as shopping centers are still welcoming 20 % less than visitors in 2019, according to Liolin.

But Russian shoppers have moved to local brands.

“Initially, it was really difficult because the Russian -dressed retail and shoes market was backward,” Anna, 29, residing in Moscow, told Reuters on a major shopping street in the Russian capital.

“But now, for sure not. Our local brands produce things that are not worse (than West).”

Dara, a sales representative at a company of the company's Moscow store, said that Stokman, a retailer who sells foreign and local clothes and has gained Hugo Russian's works last year, has noticed an increase in local brand sales.

More selection

Anastasia Evremova, residing in Moscow, told Reuters that Russian brands had raised prices, but otherwise, the effect was small.

“I am not only talking about clothes or cosmetics, but also about backup spare parts, for example,” Evermova, 38, said. “There were fears that we would not be able to buy something for cars, but everything in the stock.”

Foreign car makers helped develop the auto market in Russia when they started building factories in Russia in the early first decade of the twentieth century.

He left the sudden departure of auto -industry companies such as Renault, Volkswagen and Nissan, a gap that was occupied primarily by Chinese competitors, which now represents more than 50 % of new car sales compared to less than 10 % before the conflict start.

Local car makers represent about 30 % of sales, an increase of 20 % before February 2022.

Currently, Western companies exclude imminent returns. Last week last week, executive officials said that there are no plans to re -enter the Russian market at the present time. Renault from France said that the return according to the conditions agreed upon exit in 2022 was “very unlikely.”

Valeria, a sales representative in a fashion store in the Central Moscow, said that Russian brands will want to defend the market share they gained and feel confident that they are strong enough to compete if the international players return.

Ultimately, consumers want to be free to make a decision for themselves.

“I prefer to return. The Russians should have an option.”

(Participated in the Roman coverage Churikov, Evgeniy Matveeev and Olga Popova; additional reports and writing by Alexander Maru; edited by David Godman and Thomas Ganeovsky)

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