Abstract

The influence of sanctions imposed on Russia and its further affection of the current fashion market and changes of consumer behavior towards luxury segment of clothing while shopping abroad is analyzed in the dissertation. Since 2014, when the Russian economy demonstrated significant decline as a result of numerous factors like sanction for the country’s annexation of Crimea and the Eastern Ukraine, drop in oil prices etc., the current fashion market and consumer behavior of Russian travelling abroad have been influenced as well. Many Western companies started to leave the Russian market, but luxury segment became less influenced and, importantly, many luxury brands claimed that they will continue to operate in Russia, since despite all problems people do not decrease their spending while buying luxury clothing. The number of Russian tourists has been decreased since 2014. Analyzing their consumer behavior and changes towards luxury while shopping abroad one must remember that in fact the number of Russians travelling abroad has declined, whereas their purchasing power remained the same. In other words, Russians still spend much on the luxury market, which is seen from the collected data, but since less people from Russia travel overseas, their ratio in the total of luxury spenders is not so significant as it had been before the sanctions’ imposing. In Russia people started to spend less money on clothing. Anyhow, the majority of respondents claimed that they would spend less money, but despite deterioration of economic situation they still prefer famous brands. Anyhow, manufactures of clothing should take this fact into account and change their strategy inside the country to attract more clients.

Acknowledgements

First of all, I have sincere intentions to express my heartfelt thanks to my tutor (please, insert the name if Your Tutor here…) for the brilliant knowledge and excellent skills, unique expertise and cheerful support, marvelous understanding and patience, which have been demonstrated over the our entire working process while completing the dissertation. The precious assistance of my Tutor, his/her calm and placid approach and in the meantime constancy to purpose, persistence and seriousness were invaluable, Tutor’s insights on this subject area have contributed significantly when I was writing the research paper and facilitated the completion of the dissertation. In addition, the support of my Tutor helped me to demonstrate my best qualities.

This paper would have never been possible without support and guidance of my mates from the University, assistance of my friends, support from my family, relatives. I want to extend my thanks to all these people for their diligence and sincere kindness, which they demonstrated while helping me during my work over the research paper.

In addition, I am indebted to my many of my acquaintances who supported me (please, write down the names of your host friends) when I have travelled abroad – to Russia. I consider it an honor to work with all of my friends and I must admit that their encouragement and support have motivated me to a large extent. Also I would like to emphasize that the dissertation would not have been written without their assistance.

Finally, let me express my sincere gratitude to all people working in the fashion industry (both in the UK and Russia) who were willing to provide me with all the necessary information about current situation of fashion industry and other related issues. Their devotion, time and efforts are highly appreciated.

Contents

Introduction
1.1 Background…………………………………………………………………..…5

1.2 Rationale …………………………………………………………………….…6

1.3 Aims and objectives of the research paper ………………………………….…9

Literature Review
2.1 Studies regarding the deterioration of fashion industry in Russia after

sanctions.. ………………………………………………………………………….10

2.2 Studies about the luxury segment of fashion industry and preferences of the

Russians…………………………………………………………………….16

2.3. Studies about the purchasing behavior of the Russians travelling abroad after

imposed sanctions………………………………………………………..…21

Methodology
3.1 Research Philosophy…………………………………………………………….23

3.2 Research Design………………………………………………………………….24

3.3 Research Methodology………………………………………………………….25

3.4 Quantitative Research……………………………………………………………26

3.5 Qualitative Research…………………………………………………………….27

3.6 Data Analysis……………………………………………………………………29

3.7 Secondary Data/Research……………………………………………………….29

3.7 Limitations of the study…………………………………………………………30

3.8 University’s Code of Ethics……………………………………………………..30

Results and Analysis
4.1 Quantitative research ……………………………………………………………32

4.2 Qualitative research……………………………………………………………..34

Discussion and Conclusion………………………………………………………….40
References…………………………………………………………………………..48
Appendices………………………………………………………………………….8

Chapter 1.

1.0 Introduction

1.1 Background

This dissertation focuses on the current political situation in the world, which is having a dramatic effect on economics. This had changed the rules of the game for many industries. Economic sanctions imposed against Russia affected various areas, including the fashion market. This sector has been chosen for further analysis. This research paper changes in Russian consumer behavior in the luxury sector as well as their shopping patterns when abroad.

The Russian Federation (like its predecessors, namely the Russian Empire and the former Soviet Union) has always been a powerful country with powerful global leaders. After 2000 Russia has reached a virtual macroeconomic revolution. It became one of the top-creditors of the U.S. debt worldwide in 2010 (“Economic Change in Russia” 2016, para 1). The global financial turmoil of 2008 had damaging effect of Russia’s economy, but the country managed to recover and achieved a maximum GDP in 2013 of USD 2079.02 bn throughout its history (“Russia GDP” 2016, para 1).

In the meantime, the new aggressive external policy of Vladimir Putin led to situation, where Russia began to invade independent foreign states which were once part of its sphere of political and economic influence. In 2008 it occupied 20 per cent of Georgia, but the UN has failed to react robustly on this occasion. Six years later Russia annexed Crimea, a territory belonging to Ukraine, and also sent its troops to the Eastern part of this country, where self-proclaimed “Donetsk People’s Republic” and “Luhansk People’s Republic” have emerged. Almost all countries condemned the Crimea’s annexation, and only 11 countries (including traditional partners of Russia like North Korea and Syria) rejected the UN General Assembly Resolution on territorial integrity of Ukraine (“General Assembly Adopts Resolution Calling upon States Not to Recognize Changes in Status of Crimea Region” 2014 para 2). Consequently, economic sanctions were imposed against Russia. The drop in oil and natural gas prices also had a negative impact on Russia’s economy – the price for 1 barrel of oil decreased from almost USD 130 in 2010 to less than USD 30 in 2016 (“Average annual OPEC crude oil price from 1960 to 2016 (in U.S. dollars per barrel)” 2016, para 2). These factors led to an economic decline in Russia. It is necessary to have a more in depth analysis of its economy and market.

1.2 Rationale

1.2.1 Overview of the Russian economy and market

The economy of Russia has decreased significantly over the last two years, hindered by the mixture of low prices for oil and natural gas, an economic sanctions and a sharp depreciation of the national currency – Russian Ruble (RUB). The structural weaknesses of Russia’s growth model has also a negative effect on the national economy.

Almost all main economic indicators has fallen in 2015 compared to the previous years. The proposed Table 1 displays this decline.

Table 1. Main indicators of Russia’s economic development.

2013 2014 2015
GDP (USD bn) 2,204 2,210 1,710
Economic Growth (GDP, annual variation in %) 1.3 0.7 – 3.7
Retail Sales 3.9 2.7 – 9.7
Exchange rate (versus USD) 32.73 56.26 72.88
Inflation Rate 5.5 11.4 12.9
Stock Market – 5.5 – 42.3 – 4.3
Source: “Russia Economic Outlook”, 2016. Available from:

http://www.focus-economics.com/countries/russia

Date of access: 14 April 2016.

Moreover, the deterioration covered all areas of Russia’s economy. In accordance with Rapoza, retail sales and construction sectors shrank by 7.3 per cent and 4.2 per cent, respectively in January, 2015. During this year investments into the economy of Russia declined by 8.8 per cent in the second quarter and 13 per cent in the third quarter. Real wages decreased by 6.1 per cent in comparison to the previous year (2016, para 7).

Over the last decade Russia was considered as an emerging market for international retailers. Nevertheless, because of above mentioned political issues and further economic sanctions many businesses chose to leave the country. Factors such as inflation, the budget deficit, corruption and low level of trade openness are key indicators of poor economic growth. The market closed for new entrants and new investments became more expensive, it was closed for new entrees, expensive to shop or requests costly investments. Corruption is a significant challenge for the economy’s development. Depending upon the prevailing level of corruption, the country could be considered a ‘trusted’ or ‘untrusted’ place for investment. In case of a high corruption’s level, the national economy is unlikely to develop, poverty level will rise, resources will be located inefficiently, and in such a way politicians will have a chance to embezzle money rather to spend investments on economic improvement of the country.

Russia had to respond to such challenges and therefore Central Bank of Russia (CBR) abruptly increased interest rates from 10.5 per cent to 17 per cent at the end of 2014. This has surprised financial markets all over the world. The aims of such action were to shore up the Russian ruble, together with the exchange rate with other currencies; in order to preserve the fiscal stability and forestall inflation and prevent global investors from pulling their assets out of the country. A large credibility gap has emerged between Russian Policy makers and the consumer market (Sherter 2014, para 5).

Peter Hall suggests, that in order to improve political situation the radical innovative economic changes are required, whereas Blyth, in his turn, argues that ‘the mechanism by which an economic crisis is resolved through institutional change are not limited to either puzzling, an apolitical process of discovering workable policies, or powering, political struggle’ (1997, p.459 cited in Mandelkern and Shalev). One way or another, both politics and economics are mutually connected nowadays. Thus, one may see the worsening situation within the Russia’s economy, caused in part by its aggressive foreign politics. Sectors including the banking sector, construction are negatively affected along with other foreign investments including the Fashion industry. This study explores the adverse effect of sanctions on the fashion industry in Russia. Russia forms the largest fashion market in central and eastern Europe and based largely upon imported goods.

1.1.2 The importance of this paper

This dissertation aims at investigation of the political factors, which have had impact on international retailers who have wished to enter the fashion market in Russia. It has also had an adverse impact upon local retailers. This study will also explore the problem of consumer behavior of Russians willing to make purchases in the fashion industry abroad is to be investigated as well. Currently there Is evidence that sanctions have had a negative that sanctions have a negative influence of the Russia’s fashion industry and market. There are no significant large scale studies which cover this issue to the large extend and explore the changes of consumer behavior of those Russians who buy fashion production abroad. In addition, this research will help To explore the intentions of consumers and other players in the fashion market.

1.3 Aim and objectives of the research paper

The aim of this dissertation is to explore the implication of economic sanctions on the Russian fashion market and consumer behavior of Russians when they do shopping abroad.

Objectives of the research paper:

To explore the key economic factors in fashion market as a result of political sanctions in Russia.
To investigate Russian consumer behavior and its changes towards luxury while shopping abroad.
To examine trends in current Russian fashion industry and critically evaluate the possible outcomes of crisis inside the country and on consumer behavior abroad.
To suggest an alternative luxury sectors for foreign investment: e.g. expensive cars, alcoholic beverages, watches, jewellery etc.

The dissertation, namely the Chapter 2 begins with the literature review and covers such issues as the situation in fashion market in Russia before and after the economic sanctions’ imposing. Articles, papers and other related information about changes of consumer behavior inside the state and their behavior while shopping abroad are analyzed as well. The next Chapter 3 deals with the research methodology and it justifies the choice of methods and techniques for research conducting. The limitations of the study and ethical consideration are also present in the chapter. Chapter 4 covers the results and analysis of the research. In addition, these results are analyzed in the context of existing secondary published research. Lastly, the last Chapter 5 includes the discussion and conclusions of the research paper.

Chapter 2.

Literature review

2.1. Studies regarding the deterioration of fashion industry in Russia after sanctions

There is a great number of articles, reports, online sources, interviews from experts who are aware of this industry, stressing the unfavorable conditions for the fashion industry in Russia and its worsening situation. First of all, the emphasis is on the decreased volumes of sales, the shrinking revenues and the subsequent closing of some brand stores which have operated in Russia prior to 2014. Thus, according to Denisov, who in his turn cited the report of Fashion Consulting Group, in 2014 the fashion market plunged by 8 per cent compared to the previous year. The author also made a prognosis the Russia’s USD 33 bn fashion market would shrink by at least 20 per cent in 2015, and depreciating national currency which was caused by sanctions would be the main reason of it (Denisov 2016, para 1). Furthermore, UK’s New Look and River Island left the Russian market in 2014. Marks & Spencer, Sweden’s Stockmann, Spain’s Mango reduced the number of stores. Some other brands postponed their intentions to open the new stores in Russia. In March, 2015, Adidas which is the second sports retailer globally, announced its intentions to close 200 shops in Russia during the year (Denisov 2016, para 7).

Other fashion retailers like the US Esprit and the UK clothing brands (e.g. New Look) left the market in Russia as well. In the mid of 2015 the US retailer American Eagle Outfitters shortened its activities in Russia. At the same time, those foreign retailers having decided to continue their work in the country had to respond to these new economic realities by closing of certain number of their outlets (Bazenkova 2015, para 15).

Abnett (2014) stressed the fact that Russia possessed the largest mall development pipeline across Europe in 2014, with nearly 100 new shopping centers which were scheduled for construction in the near future. Furthermore, Russia also surpassed Great Britain in terms of mall space per person, having ranked the second in Europe. Anyhow, as a result of sanctions which led to consumer panic, the mall traffic before the beginning of educational process (the 1st of September – when children and students go to schools and universities respectively) declined by approximately 25 per cent in comparison to the previous year (para 12). Moreover, many brands left the country. For instance, Omega and Pandora (jewelry) were among these brands, which have recently closed their shops on Tverskaya Street, considered to be as one of the most prestigious streets in Moscow. The author also stressed on the aggravation of the whole fashion industry in Russia (Abnett 2014, para 14).

Some experts stress the shift of ordinary Russians towards domestic manufactures. Their motives can be explained not only by decreased number of foreign brands in Russia but also the new anti-Western patriotism when almost all Russians accuse the USA, Europe, Ukraine in the deterioration of their living conditions, admitting that sanctions is the punishment for Russia’s intentions to resist America’s hegemony (Bevins 2015 para 3).

Some experts highlight the decreased level of penetration to the Russian fashion market of different countries. Italian companies, the majority of which are known as a benchmark in this industry, may serve as a spectacular example of it. Thus, Italian fashion industry declared that shipments fell by 12 per cent in the first of 2014, with a drop to EUR 950 million compared to the figure of EUR 1.1 billion in 2013. The share of Russian’s market was only 4.2 per cent of Italian fashion exports in 2014, and this has been the lowest figure since 2005 (Botelli 2014, para 4). On the other hand, the author stressed that large companies operating in the luxury segment, did not have such problems. For instance, she cited the words of Gucci CEO and President Patrizio di Marco, who claimed that “By the end of the year, we will open two new stores in Moscow… The market is certainly going through a peculiar phase, but being able to control nearly all the retail stores is key.” Another brand – Versace – demonstrated confidence in spite of political tensions and ambiguity. Thus, in July, 2014, this brand Italian brand opened the second boutique in Moscow (Conti 2014, p. 2). Nevertheless, the situation with the large amount of Italian companies is quite opposite (Botelli 2014, para 2).

Some other fashion retailers like the US Esprit and the UK clothing brands (e.g. New Look) left the market in Russia as well. In the mid of 2015 the US retailer American Eagle Outfitters shortened its activities in Russia. At the same time, those foreign retailers having decided to continue their work in the country had to respond to these new economic realities by closing of certain number of their outlets (Bazenkova 2015, para 15).

Several experts claimed that despite the troubles in Russia which have negative impact on the national currency and trade partnerships, the luxury segment is far from decline. In accordance with “Market Forecast” report (2014), the luxury market will have grown by 29 per cent by 2020. This figure is rather insignificant in comparison to the real potential of the country, but the main deteriorative factor was the forecasted decline of luxury expenditures by 4.3 per cent in 2015. Furthermore, a significant share of luxury purchases in Russia had been made online from abroad by 2014, but after that, the government of Russia restricted on the duty-free import of goods through Internet with the purchase ceiling price of EUR 150 per one order. Such custom duties will probably have not lifted before 2017, and that is why the availability of international luxury brands in Russia will be limited (p. 16).

It is also necessary to underline the effect of decreasing oil prices for the Russian economy. The matter is that 45 per cent of its government’s budget comes from the oil revenues, and therefore the Russia’s economy has been affected significantly. During the period of June-December 2014, the price for a crude oil decreased by 40 per cent – to USD 60 per barrel. Furthermore, the oil price did not grow more than USD 60 per barrel during the year of 2015. The Russian GDP has contracted by 4.5 per cent and the national currency has been affected as well. Consequently, the spike in inflation was recorded, interest rates raised up to the very high level of 17 per cent. Thus, the luxury market of Russia deteriorated by almost 14 per cent in 2014, and lowering oil prices was among the main reasons for this event (“Outlook / Store Locations | Global Airport Retailing” 2015 p. 15).

Other experts also stressed on the importance of oil for the Russian economy. Thus, Benedictow, Fjærtoft and Løfsnæs (2010) stated that before the global financial downturn in 2008, the average GDP of this country growth had been more that 7 per cent since 2001, surpassing almost all other countries. The growth for oil prices has yielded a real appreciation of the national currency (p. 29).

Barnes (2011) also underlined the importance of oil prices for the national economy. He summarized the reports on world process for oil and Russia’s GDP and presented such figure.

Figure 1. Correlation between Oil Prices and Russia’s GDP

Source: Barnes A 2011, “The Political Economy of Oil in Russia”.

It is obvious that when the price for oil was USD 100 per barrel or more – there was positive tendency for GDP, with its steady growth. On the contrary, after the global financial downturn the oil prices dropped to USD 60 per barrel, which led to deficit in the Russian budget and negative GDP at the amount of -8 per cent. In 2010, when oil prices increased up to USD 80 per barrel, GDP started to recover (Barnes, 2011, p. 2).

Another negative aspect of decreasing oil prices is the deterioration of Russian rouble. According to “Russia Economic Report: The Dawn of a New Economic Era?” at the end of 2014 the pressure on the Russian national currency intensified since the global oil price slid dramatically. In addition, sanctions heavily affected foreign exchange liquidity limitations. The following Figure 2 displays how the dropping oil prices resulted into currency exchange ratio of rouble against USD.

Figure 2. Prices for Oil and Currency Exchange Ratio of Russian Rouble

Source: “Russia Economic Report: The Dawn of a New Economic Era?” 2015, p. 9

The situation remained the same in the following year. Thus, the GDP 3.7 per cent fall and extremely low currency exchange ratio to USD were recorded (Luhn 2016, para 2) in 2015. As for the situation by April 2016, still there was no growth of GDP during the last three months and decreased oil prices is amongst the main factors of such situation. People in Russia spent more than a half of their income of food and the number of Russians having lived below the poverty level continued to increase (Tomkiw 2016, para 1).

Several experts claimed that despite the troubles in Russia which have negative impact on the national currency and trade partnerships, the luxury segment is far from decline. In accordance with “Market Forecast” report (2014), the luxury market will have grown by 29 per cent by 2020. This figure is rather insignificant in comparison to the real potential of the country, but the main deteriorative factor was the forecasted decline of luxury expenditures by 4.3 per cent in 2015. Furthermore, a significant share of luxury purchases in Russia had been made online from abroad by 2014, but after that, the government of Russia restricted on the duty-free import of goods through Internet with the purchase ceiling price of EUR 150 per one order. Such custom duties will probably have not lifted before 2017, and that is why the availability of international luxury brands in Russia will be limited (p. 16).

2.2 Studies about the luxury segment of fashion industry and preferences of the Russians

There are several studies about the luxury segment of fashion industry and its target audience. Thus, Husic and Cicic (2009) provided the definition of “luxury”, having cited Grossman and Shapiro luxury goods or status goods have been defined as goods for which the mere use or display of a particular branded product brings prestige to the owner, apart from any functional utility” (p. 231). Researchers also stressed that luxury consumers were not average by any means and consumers from one country had little differences in comparison with consumers of another, since they used the same brands, these people had similar incomes, having wished to buy luxury clothing (Husic and Cicic 2009, p. 242).

Okonkwo (2007) put emphasis on the fact the Russia is to be considered as a separate market for luxury brands. The researcher differentiated six main regional markets for luxury brands: North America, Europe, China, Russia, Japan and India (p. 37). Importantly, four out of six markets are emerging markets and Russia is highlighted separately. In the line with “Market Size: Marketing | Global Luxury Retailing” report (2014), Russia was considered to be a part of general European luxury market, but in the meantime its market is amongst the main factors which influenced the slowdown global luxury market and the problems in Russia were the one of the main challenges for the growth of this market (p. 7). In 2014 the double digit drop of the luxury market by 13.9 per cent. In addition, the sales on this market have been influenced not only in Russia but also across the globe, when the small number of Russians travelled abroad. Taking into consideration the fact that people from Russia have always been among the richest spenders on the market of luxury goods, European shopping hubs were affected significantly, limiting growth in this region (“Market Size: Marketing | Global Luxury Retailing” 2014, p. 18).

Several authors stress on the importance of emerging markets which clients are considered as essential target for luxury companies around the globe. Seo , Buchanan-Oliver and Cruz (2015) mentioned about the unprecedented demand for the luxury segment of clothing by international consumers BRIC (Brazil, Russia, India, and China) and CIVETS countries which includes Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa (p, 141). Castelli and Sianesi (2015, p. 944 ) stressed that in emerging markets, namely Russia, Brazil, Indian and China, there is a raise in expenditures by high net worth individuals on luxury goods. Shukla (2012), in his turn, provides the explanation for such behavior among Russian consumers. The expert emphasized that Russians tended to materialism and hedonism which were significant predictors of luxury purchase intentions (Shukla 2012 p. 577). Hassan, Husi?-Mehmedovi? and Duverger (2015) provided the forecast of emerging market and the luxury segment, dated by the year of 2010. Firstly, they concluded that growth trends will not be equally spread across the globe. Secondly, the highest growth rate will be in among these very markets. In Russia it to grow will have increased fourfold by 2015; in China the raise also will have taken place – from USD 2 to USD 11.2 billion; and in India is was supposed to increase tenfold (p. 417).

Karpova, Nelson-Hodges and Tullar (2007 ) investigated the consumer behavior of students from Saint Petersburg and their finding are very essential in terms of general understanding of Russians’ passion and increased attention towards clothing. They interviewed 13 girls and 4 young men and found out that respondents used clothes to differentiate themselves from other people, and to highlight the social status. They also paid much attention on clothing as part of the overall appearance. Compared to buyers from established market-based economy, Russian consumers had a unique perceptions of attributes of clothing (e.g. brand name, quality country of origin etc.) and decision to buy certain product highly dependent on these attributed. Moreover, young men in Russia were seriously affected by their female partners’ clothing choices (Karpova, Nelson-Hodges and Tullar, 2007 p. 118).

In 2013 Russian market of luxury clothing was estimated at the amount of USD 6.8 bn, with such outstanding brands like Chanel, Louis Vuitton, Dolce & Gabbana etc. at the top.

Figure 3. Top 10 brands by sales, the Russian fashion luxury market

Source: Avins J. & Karaian J. (2014). Available from:

Rich Russians are buying up luxury goods before they surge in price

Date of access: 29 April 2016.

Russians who prefer luxury segment are also influenced by sanctions, and that is why they prefer to make purchases abroad. According to “Market Forecast” report (2014), sanctions will not just impact luxury expenditures in Russia, but the surrounding markets like France and Dubai were affected as well, since these are the places where Russians often buy luxury products (p. 15). In the meantime, several experts stressed that the situation with buyers of luxury goods became unchanged. Thus, the richest shoppers, who are the main consumers at luxury market, would be less affected and will continue to travel abroad (“Outlook / Store Locations | Global Airport Retailing”, 2015 p. 16).

Conti (2014) cited the words of Ledbury Agency, specializing on analysis of the luxury fashion market: “Russians are unlikely to close their love of luxury brand”, stressing on the fact that despite sanctions, in 2014 Russian continued to prefer luxury brands like Lancel, Tiffany, Swatch, Louis Vuitton, Hermès, Gucci, Stefano Ricci, Loro Piana and Kiton (p. 7). Some of these companies did not mention the anticipated decline in sales in Russia during 2014. For example, Diderich (2014) provided the words of Patrick Albaladejo, who was the deputy managing director in charge of strategy and image at Hermès International: “We had not observed any measurable effect on our business of the events in Ukraine” (p. 2). Neumeyer and Ellis (2014) stressed that despite growing negative attitude of Russians towards the West, such feelings haven’t translated to clothing industry and Russian continued to buy western brands and luxury goods. Essentially, more than 80 per cent of percent clothing was imported in 2014 (p. 3). Hartog (2015) explained such high figure by the fact that in spite of the sanctions, there were no domestic alternatives to foreign luxury brands (e.g. Louis Viton or Chanel). That is why premium market had nothing to do but to keep on importing these goods, despite a rise in price almost by 100 per cent (para 2).

In accordance with the Global Blue report of 2013, in 2013 Russians were second only to the Chinese in terms of spending and shopping, namely in duty-free shopping abroad. What is important, nearly 25 per cent of their expenditures took place in Italy, mostly in luxury segment. (“Research confirms Chinese are still the most valuable globe shoppers”, 2014, para 3). There is a phrase which clearly describes the purchasing habits of Russians abroad: “Whenever the ruble depreciates, the population prefers to mobilize resources for the purchase of luxury and large goods, knowing that tomorrow may be even worse.” Such explanation was provided by the director of Center for Analysis of income and living standards Ovtcharova (“Spend now, worry next year” 2014, para 9). Consequently, many Russians preferred to spend money on luxury goods overseas.

Several experts stress on worsening of the overall situation of luxury market in Russia. Thus, Roberts (2015) claimed about the decline of luxury goods sales in Russia, stressing on the figure of 5 per cent in 2015 and the fact that it was the second worst-performing market, surpassing only Ukraine. Moreover, the expert cited the Euromonitor International and according to it the luxury goods market in Russia would demonstrate such poor performance poor performance up to 2020, with value sales increasing by a CAGR of just only 1.7 per cent (para 17). Hartog (2015) forecasted that the luxury clothing sector was expected to decrease by up to 25 per cent in 2016.

3. Studies about the purchasing behavior of the Russians travelling abr