Moscow mall opens to Russian businesses after big brand exodus

Mannequins wrapped in plastic are seen inside a closed Victoria’s Secret store at a shopping mall in St. Petersburg, Russia June 14, 2022. REUTERS/Maxim Shemetov

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  • This content was produced in Russia where the law limits coverage of Russian military operations in Ukraine

MOSCOW, June 30 (Reuters) – Western fashion brands are conspicuously absent from a gleaming new mall on the outskirts of Moscow – and shoppers say they barely miss them.

Following Moscow’s decision to send thousands of troops to Ukraine in late February, international fashion brands from Adidas (ADSGn.DE) to Zara (ITX.MC) suspended operations in Russia, while Nike (NKE .N) is one of the handful to commit to a permanent exit from the market.

“I’m neutral about it whether we have them or not,” customer Alexandra Moskunova told Reuters at the Khovrino mall. “I can very well do without it.”

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Another customer, Irina Stakhanova, said: “I really only liked H&M and one other that I can’t remember. It’s not that I need foreign things, I just need something that fits me and looks good, to lift my spirits.”

There are few obvious signs in the Russian capital that the mood needs to be calmed down. Buskers sing and play, restaurant terraces spill out onto the sidewalk and, as temperatures hit 30 degrees Celsius (86°F), Muscovites cooled off in a fountain near the Kremlin.

But on the capital’s most popular shopping streets, closed stores of luxury Western brands stand out.

The TsUM department store, owned by Russian luxury goods group Mercury, is one of the last places Russians can get authentic luxury items from international companies.

While Chanel’s Russian boutiques are closed, the brand has an outlet inside TsUM where a handful of watches are on display, although a staff member, who declined to be named, said that These were the last remaining.

“We only had in stock what we had already purchased,” she said. “We had a lot of people. We’re the only place you can buy Chanel items.”

Chanel, like many others, said in early March that it was suspending operations in Russia due to “increasing concerns about the current situation”.

“HELL WITH THE SANCTIONS”

While consumers may be ready to buy what they can, Khovrino mall officials said not everyone managed to open in time for the June 23 official opening.

Nadezhda Tsvetkova, director of retail leasing, said at the mall’s opening that some businesses did not open their stores due to “acute problems” with logistics and deliveries.

Viktor Chernykh, project manager at MR Group, which owns the mall, said some tenants have had problems.

For example, Russian consumer electronics retailer M.Video-Eldorado (MVID.MM) has encountered logistical problems, he said, and will not open until early July.

“In March-April, like many in the Russian market, the company was primarily focused … on expanding the product line and controlling pricing,” Mr. Video said. “We needed time to assess the prospects of the various sites under the new economic conditions.”

Some companies have avoided publicity for fear that drawing attention to themselves could land them on a sanctions list. Retail businesses were remarkably quiet at Russia’s flagship international economic forum in St. Petersburg this month.

A McDonald’s (MCD.N) restaurant was supposed to open in the mall, Chernykh said, but the company’s withdrawal from Russia made that impossible. Vkusno & tochka, the Russian brand that emerged after McDonald’s was sold to a local licensee, will open, although it’s unclear when. Read more

The only foreign food chain present so far is KFC, owned by Yum Brands Inc (YUM.N).

It has suspended its investments in Russia and suspended operations of its 70 KFC-owned restaurants, but the rest of the 1,000 KFC outlets in Russia are run by independent franchisees, over which Yum has limited control.

Asked for comment, Yum referred to remarks CEO David Gibbs made in May when he said he had suspended investment and development in Russia.

Crocus Group, which also operates shopping malls, said Russian malls were “turned off” and had lost about 30% of footfall since the departure of Western brands. Read more

For all issues, Tsvetkova was optimistic, predicting that the current daily traffic of around 7,000 people is expected to increase to 15,000 once the 18,300 square meter center is fully operational.

Customers said some closures, such as that of French sports equipment retailer Decathlon on Monday, were sad, but they would adapt. Read more

“It’s a shame, of course,” Decathlon customer Magomet told Reuters. “To hell with the sanctions. People have lost their jobs, including me. But everything is fine, everything will be fine. Go Russia.”

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Reuters reporting; edited by Barbara Lewis

Our standards: The Thomson Reuters Trust Principles.

Luz W. German