Big luxury brands suspend operations in Russia

Hermes, Chanel and Cartier’s owner Richmont temporarily suspended operations in Russia, citing operational challenges and concerns about the team as the fallout from the invasion of Ukraine spreads.

LVMH, the largest luxury group by sales, and the owners of Gucci, Kering, the second largest, then appeared with similar announcements at the end of Friday, as did the British Barbary.

Multiple Western brands, incl Apple, MicrosoftIKEA and Nike, moved faster to suspend sales in Russia, prompting critics to say luxury groups hold out on hold until nine days after the invasion begins.

Consumers in social networks and participants in Paris Fashion Week Pressure on luxury groups to act, and some said it was obscene to leave boutiques open in Moscow when bombs fell in Kiev.

Some observers in the industry have also expressed concerns about reports Of buyers rushing to luxury boutiques in Russia to buy expensive old watches to protect themselves against rampant inflation, adding that such goods could even be used to smuggle money out of the country and abolish strict sanctions.

When LVMH’s largest brand Louis Vuitton released a message On Instagram they say she “deeply touched on the tragic situation taking place in Ukraine” and pledged to donate one million euros to refugees, it provoked a stream of negative reactions including: “Close your stores in Russia if you are serious” and “Stop selling in Russia!”

LVMH, which owns more than 70 brands from Champagne Moët & Chandon to Christian DiorEmploys about 3,500 employees in Russia and operates 120 stores.

The French brand Hermès passed first, saying it would “temporarily close our stores in Russia and stop all our commercial activities” starting Friday night. The maker of the Birkin bag did not give a reason for the decision. It has three stores in the country and about 60 employees.

Hours later, Chanel announced a similar move, citing “its growing concerns about the current situation, growing uncertainty and operational complexity.”

“We will no longer supply Russia, we will close our boutiques and we have already suspended our e-commerce,” the company said in a statement.

Chanel annoyed social media users on Thursday When She called the invasion of Ukraine a “conflict” and said she would donate 2 million euros to aid organizations for refugees operating within Ukraine’s borders. Followers demanded that the brand, which employs 300 people and has five boutiques in Russia, stop selling there.

Switzerland-based Richemont, which owns Cartier and Van Cliff & Arples, said it had suspended commercial operations in Russia on March 3, “given the current global context.”

“We will continue to monitor developments and adjust our steps accordingly,” it said.

Although the companies do not disclose specific data, analysts estimate that Russia is not a leading luxury market despite being home to an oligarchic class that has now been sanctioned. UBS estimates that LVMH, Hermès, Kering and Burberry earn less than one percent of the revenue in the market even when taking into account Russian buyers who buy abroad. In Richmont, which has a larger presence in jewelry, Russian buyers make up about 2% of sales.

The Russian luxury business is marginal compared to that of the US and China, the two largest markets of the sector where demand was boom Regardless of the Cubid-19 crisis. “In dollar terms, it’s worth around $ 9 billion, which is 6% of Chinese spending and 14% of US spending,” analyst Jeffries Flavio Sarda wrote in a comment.

This fact has led some to ask why luxury groups would risk the reputation of continuing operations in Russia when the business impact of the break appears to be manageable. In addition, the deeper the impact of financial sanctions and the disruption of the supply chain, the more difficult it will be to replenish stores in Russia or to conduct e-commerce operations that require the fulfillment of orders from abroad.

Neri Kara, an entrepreneur who has established a renowned ethical portfolio brand and teaches business practice at Oxford University, said luxury and fashion brands will need to act quickly. “They no longer have the luxury of being silent. You can not claim to be an ethical and sustainable brand and continue to sell in Russia,” she said.

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