IRKUTSK, Russia – “The Russian fashion market can still be rather uncivilized,” says Natalia Usacheva, owner of Enigma, a designer boutique in Irkutsk, a picturesque city the size of Boston located in the far-eastern corner of Siberia. From here, it is a mere 40-minute flight to Mongolia’s capital but an epic 5,000 kilometres to Moscow.
“In the EU, municipal laws dictate a single period for sales on all goods, and if someone isn’t doing well financially they’re allowed to lower their prices. Prices are regulated. There’s nothing like that here,” Usacheva laments.
Retailers in Russia’s biggest cities have survived waves of economic hardship by either dominating a niche or adapting their business models. Olga Karput’s influential Moscow concept store Kuznetsky Most 20 and Hatulia Avsadjanashvili’s boutique Nevsky 152 in St Petersburg flourish because their ultra-wealthy clientele is essentially recession-proof.
Due to heavy import duties, luxury fashion can be 20 to 30 percent more expensive in Russia than the same items at retailers in Europe, depending on product category. But Tsum, Moscow’s largest luxury department store, adopted a ‘Milan prices policy’ last year, adjusting prices down to attract international customers and make up for the shortfall in domestic spending – a pricing strategy that executives say boosted the department store’s sales by 40 percent.
There has been no such extraordinary uptick in Russia’s provinces because the customer base is exclusively local. But that doesn’t mean people aren’t hungry for international brands in the hinterland.
From the heartland to the hinterland
“I try to supply a vast variety of brands in my store – from Acne to Alexander Wang – but I can’t sincerely say that people in Irkutsk, for example, prefer one specific designer to another [yet]. They buy a little of everything,” Usacheva explains.
When faced with the largest country on the planet, it is all too easy for outsiders to equate remoteness with insignificance. That couldn’t be further from the truth, say some Russian market experts.
Irkutsk is one of about 40 cities in Russia with a population over a half million people and many of these are great distances from the country’s fashion centres of Moscow and St Petersburg. Yet luxury brands have found loyal customers as far as away as Vladivostok, the Pacific Ocean terminus of the Trans-Siberian Railway that straddles the Sea of Japan.
“Our clients used to visit Europe all the time, specifically to buy clothing,” says Pavel Reznichenko, founder of the Defile store in Vladivostok. “Now they try to get everything in our store as it’s just more financially sound. They have become incredibly careful – they used to buy several Stella McCartney and Alaïa dresses in a single purchase, but the sanctions against Russia and, in particular, our government’s responding policies have made such wild splurges a thing of the past, at least for the foreseeable future.”
Multibrand retailers operating out of Russia’s provincial cities can be roughly split into two categories. Fashion boutiques like Iqons from Chelyabinsk and Irkutsk’s Enigma appeared soon after the collapse of the Soviet Union. After managing to gather enough capital to stay afloat, more…