Luxury goods demand rebounds during 1Q 2010

Russian luxury goods demand is recovering, with the market growing 15% year on year in 1Q 2010, according to a Vedomosti report.

The Russian 1Q figures have already outstripped a Bain & Co forecast for global luxury goods demand which tipped a global increase of 4% to €158 billion for the year. Alexey Mogila, director of commercial real estate from Penny Lane Realty, believes the upturn stems from lower prices in Russia’s real estate market.

“The major players in Russia’s luxury market are experiencing a new turn in their development: there are more opportunities, while the real estate prices remain quite low, and people show renewed interest in expanding and opening new stores.”

According to Alla Verber, Vice President at Mercury Group, luxury sales in the central department store in Moscow (TSUM) grew 15% in 1Q 2010, reflecting the market trend. Verber says the luxury sales growth doesn’t reflect rising incomes, but was mainly due Russians calming down in the wake of the economic recovery and returning to usual spending behaviours, adding that the economic outlook will determine further growth in luxury sales.

Most of premium class goods distributors in Russia reached an average of 20% year on year sales growth in March and April according to Olga Mamonova, vice president at Dzhamilko group. She says this has ben helped by a rebounding rouble and also by the low base effect in comparison with 2009, a year in which many distributors were forced to sell goods at a markdown in the wake of weakening solvency. She also believes that buyers from regional Russia have added to the boom in Moscow, with regional retailers cutting their spring summer luxury goods or ceasing them completely, and that it is far too early to talk about sustained real demand rises.

According to the Vedomosti report Bentley Moscow increased its sales 50% year on year to 63 cars during the quarter, with L'Oreal, sales rising 24%, and the sales of luxury Swiss watches rising 41.6%.