Vuitton Tones Down Bling in Russia as Wealthy Go Discreet

When the Soviet Union collapsed 22 years ago, Russian women quickly cast off dowdy proletarian garb in favor of glitz such as ultra-tight sequined dresses and towering heels. Mira Duma is having none of it.

“Stuff with big and bright logos would be the last thing I buy and wear,” said Duma, a 28-year-old style maven and former editor of the local edition of Harper’s Bazaar magazine. “Today, it’s absolutely vulgar in fashion to scream.”

Duma, the daughter of former Russian lawmaker Vasily Duma, is emblematic of a new generation of Russians for whom the meaning of high fashion has shifted from flashy and expensive to understated and even more expensive.

As their tastes change, sales of $10,000 Hermes handbags and $5,000 Chanel dresses are accelerating in the former communist country, spurring brands such as Prada and Louis Vuitton to open more stores there. Distribution is widening outside of Moscow and St. Petersburg as well as online as Russia’s middle class grows, researcher Planet Retail reports.

Sales of luxury goods in Russia expanded 6 percent to $8.8 billion last year, versus 4.6 percent in 2011, helping reverse a 20 percent decline between 2007 and 2009, according to Euromonitor International Plc. While that’s slower than China’s 18 percent luxury growth in 2012, it’s far better than western Europe, where sales fell 1 percent last year as the debt crisis weighed on domestic spending, the researcher estimates.

“What we’re seeing now is a comeback” in Russian demand for luxury goods, said Hermes International SCA deputy chief executive officer Patrick Albaladejo.

God-given Talent

European brands such as Vuitton have already started toning down the bling as they contend with homegrown Russian labels such as Vika Gazinskaya, Alexander Terekhov and Uliana Sergeenko, who reckon they know better what shoppers want. Terekhov’s latest collection features simple silk floral dresses, while Sergeenko’s spring couture covered more flesh than it showed.

Sales of Gazinskaya’s collections of 1,500-euro ($1,980) dresses have doubled in the past year as shoppers “seek something different,” said the 24-year-old designer. With 25 outlets, including in Paris, New York and Hong Kong, Gazinskaya says she’s seeking investors to fund more expansion.

“There are no limits really,” she said by phone from Venice, Italy, where she was hanging out at the Biennale art exhibition. “God gave me talent.”

Discretion wasn’t always fashionable among Russians. Animal print bras, gaudy frocks and logoed luggage were de rigueur in 1990s as the wealthy few sought to relive pre-1917 revolution excesses, according to Alla Verber, fashion director at Tsum department store in Moscow.

Gangster’s Girls

Then, “a typical new Russian was a gangster-type man” in a garish jacket accompanied by heavily made-up girls, she said. “Now tastes have changed.”

Kering SA’s Gucci was the biggest luxury brand in Russia in 2011 with sales of 6.74 billion rubles ($208.6 million), ahead of LVMH Moet Hennessy Louis Vuitton SA’s Donna Karan and Vuitton, estimates Euromonitor. Hermes and Prada rounded out the top five, according to the researcher.

Kering gained 1.1 percent today in Paris trading. LVMH rose 3 percent, while Hermes increased 2.1 percent.

The shift to less conspicuous consumption is a familiar cycle, says Claudia D’Arpizio, a partner at consultant Bain & Co. New shoppers in fast-growing markets such as China and the Middle East, “like the display of status and buy more obvious items” such as logoed bags and bejeweled watches, she says. “More established shoppers focus on being in-the-know on which brands have cachet, and value more subtle materials and craftsmanship.”

Appreciated Consistency

Of course, flash can still sell in Russia if it’s expensive enough. Versace, a maker of $2,795 skimpy cocktail dresses, says Russian customers keep coming back precisely because it hasn’t modified its style. “The Russian market seems to appreciate our consistency,” Versace said by e-mail.

While Russians still do much of their spending on luxury goods abroad, attracted by prices that are as much as 50 percent cheaper, brands are expanding in the country as the middle class widens, according to Bain. Retail space devoted to selling luxury goods in the country has more than quadrupled to 1.65 million square meters in the last decade, estimates Moscow-based Fashion Consulting Group. Disposable incomes have risen 10-fold to 22,800 rubles since 2000, government data show, while the number of millionaire households has widened to 180,000 from 158,000 in 2011, Boston Consulting Group estimates.

“Russia is a great place to be,” said Douglas Mandel, Christian Dior Couture’s general manager in the country. The French label has four stores in Russia including one opened in 2012 in the GUM department store near Moscow’s Red Square.

Moscow Stores

Last year, Chanel, Prada, Miu Miu and Donna Karan were among the fashion houses to open or renovate stores in Moscow. Vuitton, the Paris-based maker of $935 wallets, this month opened a boutique in Sochi, the Black Sea resort that will host the 2014 Winter Olympics, according to its website. Gucci, whose sales have doubled in Russia since 2008, is buying back its distribution there.

In doing so, these and other luxury brands are following a strategy they have employed in other markets as they mature. They’re seeking to control directly the relationship with consumers such as Yulia Bushueva, managing director at Arbat Capital in Moscow, and respond more quickly to their demands.

For Bushueva, at least, it’s working as she says it’s easier for her to find the kind of clothing she likes.

“When I visit Harrods or Harvey Nichols in London, I don’t see things that excite me,” Bushueva said. “In Moscow, I do.”