Harvard Paper

Influence of globalization on fashion market in Post-Soviet Russia

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The dynamics of the fashion market in the Post-Soviet Russia have been greatly influenced by globalization. The globalized world of today creates numerous opportunities for fashion marketers to promote their products not only within Russia but also in the international market. Similarly, it has created an enormous impetus for foreign fashion designers and marketers to venture into the Russian market. One of the segments that have been significantly affected by this dynamism is the luxury fashion market.

The thesis of this paper is that globalization has led to a rapid increase in the popularity of luxury fashion items in the Post-Soviet Russia. Prior to the onset of globalization, luxury fashion consumption was mostly the reserve of the ruling class and the high-income earners. However, with the advent of globalization, the proportion of the country’s population embracing high fashion has been increasing, particularly within the middle class.

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Luxury consumption in Russia is not a new phenomenon. The behavior has been developing for a long time. The tendency and desire to buy personal, home, and experiential luxuries is part of the mainstream Russian culture. However, only the richest in society and members of the ruling class are known to indulge in this practice. However, with the onset of globalization, all this seems to be changing. The fashion market seems to be undergoing a revolution. Prior to the onset of globalization, high-end items such as footwear, clothing, jewelry, leather goods, and eyewear used to be the reserve of the most affluent people in society. However, globalization seems to be changing all this through market dynamics that drive the country’s middle class into trying out these expensive fashion items.

To understand this new trend, one ought to understand that explicit manifestations of personal wealth remain a critical element of the Russian way of life. Russians interpret these manifestations as a way of expressing their freedom from the political limitations and restraints on travel to many Western countries. These limitations and restraints were particularly very common during the Soviet era. This pattern has been greatly promoted by the impressive macroeconomic growth that the country has achieved in the Post-Soviet era. Other related improvements have been observed with regard to low public debt, a high level of investment activity, growth of consumption, and growth in the banking system. These factors have led to a trend of upward mobility within the upper middle class.

Globalization remains at the heart of the fashion market changes occurring in Russia (Kivenzor, 2007). This becomes evident upon an in-depth analysis of the ways in which luxury goods are increasingly being driven by the emerging markets. For instance, 23 percent of all luxury-fashion sales between 2003 and 2008 are estimated to have been attributed to the emerging markets (Kaufmann, 2012). In contrast, developed markets remained stagnant or had been declining. In 2008, the growth rate of the luxury market in Russia was expected to grow fourfold by the year 2015 (Ostapenko, 2010). Attractive rental values in the commercial sector have greatly support the Russian retail sector in the post-Soviet era. Other factors that have positively influenced the retail sector include unlimited outsourcing opportunities primarily from China and India and new mall openings.

Today, Moscow is responsible for purchasing 80 percent of Russia’s luxury products mainly in the form of luxury clothing and high-market accessories at an approximate value ranging between $ 4 billion to $9 billion (Barnier, 2011). Luxury consumption is also a predominant aspect of the country’s culture in St. Petersburg and Yekaterinburg. Most of the most successful fashion chains in Moscow usually proliferate in these two areas. In the post-Soviet era, the need to spend more on luxury fashion has increased. This has led to a rapid growth of the fashion market across the country, which is reputed for having one of the highest concentrations of billionaires in the world.

During the recent global economic downturn, the Russian economy, which is driven largely by commodity prices and energy prices, faced numerous challenges. The economic recession had a far-reaching impact on the richest people in the country. One would expect this to have impacted significantly on the country’s luxury fashion market. However, literature on this issue remains scanty. Nevertheless, it is evident that the worsening macroeconomic situation across Russia triggered a wave of pessimism in the country’s retail industry. Moreover, this was a reflection of globalization-related trends taking shape across the world. Even the famous luxury-fashion stores in Moscow were not spared from this economic turbulence.

Some of the luxury fashion stores that closed their stores during the global economic recession include Lavin, Stella McCartney, and Alexander McQueen. Another luxury store, Vivienne Westwood, also pulled out of Russia during the recession. As the economic fortunes of the country continued to worsen, it became increasingly difficult to find stores that sold majestic British gowns, fancy Italian-made coats, and high-fashion British footwear. Soon after the momentary disappearance from the market, the fashion products came back with huge discount tags on them in order to promote economic optimism as well as trigger a trend of fashion consumption.

Another major boost for the fashion market in the post-recession Russia came when customers started being lured into purchasing luxury fashion items in many luxury stores such as H&M. However, other fashion outlets that were last seen in the country in 2008 such as Tom Ford and Donatella Versace are yet to make a comeback. This indicates the extent to which the fashion market in Russia has become globalized. It also shows that in this age of globalization, the fashion market is being affected by the international business environment just like other sectors.

In Moscow, Stoleshnikov Pereulok may be said to be the equivalent of Bond Street in London (Vigneron, 2004). It is arguably the heartbeat of Russia’s fashion market (Vigneron, 2004). In this location, the impact of globalization is far-reaching. This is demonstrated through the presence of many foreign fashion outlets. In many ways, the operations of these outlets reflect trends in the international market. Therefore, when the global economic recession finally started affecting Russia, Stoleshnikov Pereulok was the first area to show signs of struggling fashion retailers, marketers and franchisers. When crisis-spurred shutdowns started unfolding at Stoleshnikov Pereulok, many fashion enthusiasts knew that it was just a matter of time before other areas across Russia started feeling the heat of the global economic recession (Salmenniemi, 2012). Some of the Russian fashion brands that have been affected by the globalization of the fashion markets include Marc Jacobs, Diane von Furstenberg, and Agent Provocateur. When the economic recession hit the Russian fashion market, sales for these brands plummeted by as much as ten percent.

Today, the consumer market shrunk considerably. Many Russians feel uncomfortable about spending too much of their disposable incomes on fashion items. This is largely because of the hard-hitting impact of the recent recession, particularly on the country’s wealthiest people. These fashion consumers fear that although things are getting better in the global financial system, they may suddenly get worse. In efforts to spur confidence in the mass market, many luxury outlets have been providing huge discounts to the majority middle class buyers while retaining very high prices for the exclusive club of the country’s affluent class. This has necessitated the segmenting of the fashion market in order to meet the specific needs and expectations of these categories of consumers.

It is will take some time for most Russians to psychologically adjust to the idea that the bad times are over as far as turbulence in the global market is concerned. The country’s luxury consumers have not been spared from this perception either. However, this has not stopped them from attaching a lot of importance to price as one of the main indicators of prestige. This continues to happen because the primary objective is normally to impress others. In light of this behavior, they may be said to fall in the category of what Vigneron & Johnson (1999) refer to as Verblenian-effect customers. This attitude was in display in 2006 during the annual Millionaire Fair in Moscow. The Herald Tribune (2006) reported that during this fair, a fashion enthusiast bought a diamond-studded phone for a whopping $1.27 million (Ferdinand, 2007).

In today’s world of globalization, fashion brands that have achieved remarkable success in many countries have found their way into the Russian fashion market. Two brands that stand out in this category include Louis Vuitton and Chanel. Both fashion companies are in the process of establishing a new boutique at the heart of Yekateringburg. Chanel is also being actively marketed in Moscow as a luxury brand targeting both middle class and upper middle class consumers. On the other hand, Louis Vuitton is planning to establish new stores in Sochi, the Black Sea resort city that will host the Winter Olympics in 2014. In this city, some of the other international fashion brands that have already opened shop include Dolce, Gabbana, and Christian Dior. International fashion brands also continue to venture into Rostov-on-Don, a city to the south of the country.

The globalization of the fashion market in Russia has demonstrated a counter-phenomenon in which people with less money tend to spend it only on the best quality. Whenever economic crises in regional and global markets hit the country, fashion brands that offer the best quality continue to maintain consistency in terms of revenues. For example, during the recent economic recession, Louis Vuitton continued to maintain consistency in revenues (Yükseker, 2010). Shoppers tended to go for fewer, high-quality, and more classic fashion products (Yükseker, 2010). This trend has in recent years put Louis Vuitton in a position of unique competitive advantage in its efforts to succeed in the highly competitive Russian market. To cement this success, the fashion company has been stepping up efforts to maintain quality products, maintain a professionalism sales workforce, and establish outlets in advantageous locations within the country.

In many cases, the dynamics of competition in the context of globalization pose a serious threat to the growth of indigenous fashion brands (Paulicelli, 2008). Foreign brands get the backing of their home-country headquarters. For this reason, they are able to establish and maintain flagship stores in up-market areas. These outlets enjoy numerous competitive advantages compared to indigenous fashion outlets. They enjoy greater visibility to the high-end market while at the same time directing the limelight away from the traditional home-made fashion products. For example, a recent trend has emerged where most luxury shops are being relocated to the prestigious dacha suburbs of Russia’s biggest cities. For example, the Barvikha village, a Moscow suburb that is home to the Russian elite, accommodates many fashion stores, including Ralph Lauren, Prada, and Giorgio Armani, most of them foreign.

In today’s globalized world, trends in the Russian fashion industry have attracted the interest of numerous international brand names. This is mainly attributed to the emergence of a new class of Russians with an appetite for luxury items. Today, Russian fashion sales are so important for these fashion outlets that they in many cases help offset lost revenues in other countries. In fact, in light of this observation, globalization seems to be a contributing factor as far as the decline of the local fashion industry is concerned.

For many Russians in the high-end fashion category, it is normal for a lot of awareness to be maintained as far as the emergence of prestigious foreign brands is concerned. Their level of awareness seems to be higher than that of customers in many major emerging markets including Japan, India, and China. The two main Russian brands that have succeeded in withstanding this fierce competition include Zaitsev and Yudashkin. The main competitors for these “homegrown” brands include Giorgio Armani, Chanel, Dior, and Versace.

In terms of factors influencing purchase decisions, globalization seems not to have had a far-reaching influence in Russia. Traditionally, most Russians focus on three critical factors when making fashion decisions. These factors include good reputation, high quality, and high fashion. Similarly, the line of fashion products that Russians are interested in today has not changed much. The most popular fashion items especially in the luxury category include jewelry, watches, art, electronics, car accessories, interior design items, exclusive spirits, cosmetics, designer clothes, and beauty products.

According to Ferdinand (2007), globalization has not changed the carpe diem or “spending madly” attitude in Russia. If anything, only the concept used to refer to this attitude has changed. In mainstream literature on globalization, the notion of “consumerism” is used (Ferdinand, 2007). There is abundant literature indicating that globalization has ushered in the era of consumerism. However, the reality of the matter is that consumerism has traditionally been a core element of the Russian culture. What globalization has done is simply to bring in a new dimension to the culture of consumerism by making it seem fashionable to the country’s middle class.

In conclusion, globalization continues to influence the market in post-Soviet Russia in very significant ways. This paper confirms the thesis that globalization has led to a rapid increase in the popularity of luxury fashion items in the Post-Soviet Russia. Many Russians today are keen to embrace foreign luxury brands as a way of asserting their freedom from Soviet-era repression. This preference for foreign brands puts local brands such as Zaitsev and Yudashkin in jeopardy because of stiff competition. The recent global economic recession impacted negatively on the Russian fashion market. This is a clear indicator of the interconnectedness between Russia’s fashion market and the international business environment.

 

References

Barnier,V. (2011). Which luxury perceptions affect most consumer purchase behavior? A cross cultural exploratory study in France, the United Kingdom and Russia. Heinemann, London.

Ferdinand, P. (2007). Russia and China: Converging responses to globalization. International Affairs, Vol. 83, No. 4, pp. 655–680.

Kaufmann, H. (2012). Perception of luxury: idiosyncratic Russian consumer culture and identity. European Journal of Cross-Cultural Competence and Management, Vol. 2, No. 3, pp. 209-235.

Kivenzor, G. (2007). Brand Equity Aberrations: Heritage Brand Perception Effects in Russian Markets. Academy of Marketing Science Review, Vol. 3 No. No. 10, pp. 1-20.

Ostapenko, N. (2010). Celebrating Recession in Style: Mainstreaming of Attitudes Toward Luxury Consumption in the Balkans and European Russia. Oxford Business & Economics Conference (OBEC), March 23, 2010.

Paulicelli, E. (2008). The Fabric of Cultures: Fashion, Identity, and Globalization. Princeton University Press, Princeton.

Salmenniemi, S. (2012). Rethinking Class in Russia. Ashgate Publishing, London.

Vigneron, F. & Johnson, L. (1999). A Review and a Conceptual Framework of Prestige-Seeking Consumer Behavior. Academy of Marketing Science Review. Vol.3, No. 5, pp. 53-97.

Vigneron, F. (2004). Measuring perceptions of brand luxury. The Journal of Brand Management, Vol. 11, No. 6, pp. 484-506.

Yükseker, D. (2010). Shuttling Goods, Weaving Consumer Tastes: Informal Trade between Turkey and Russia. International Journal of Urban and Regional Research, Vol. 31, No. 1, pp. 60–72.

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