February 5, 2016 / 4:58 PM / a year ago

Russia's luxury flagship store turns to Chinese spenders

4 Min Read

MOSCOW (Reuters) - Framed by Swarovski crystal figurines and crocodile skin-clad smart phones, sales promotions at Moscow's exclusive TsUM department store are being publicized in two languages: Russian, of course, and now Chinese.

The bi-lingual signs, promising to match the prices of all luxury goods with those on sale in Milan, are part of a push by store operator Mercury to encourage high-spending Chinese visitors to shop in TsUM'S neo-Gothic store, rather than the boutiques of the Italian fashion capital.

Luxury retailers have fared better than many mass-market brands during Russia's economic crisis but they still need foreign shoppers to compensate for falling spending by local consumers.

Mercury, a holding group of more than 100 premium stores and boutiques across Russia, plans to increase sales in euros by 10-12 percent this year by targeting Chinese spenders in particular, said General Director Alexander Pavlov.

Shoppers from China accounted for 7 percent of the group's sales in 2015 and while the country's economy is slowing sharply, at least it is still growing unlike Russia's which is shrinking.

Chinese visitors have become a more frequent sight in central Moscow, some carrying bright orange shopping bags from TsUM, and Pavlov has high hopes. "We think that the number of Chinese customers in our shops will increase significantly and could reach 30 percent," he said.

TsUM's store in Moscow, a stone's throw from the Kremlin, has recruited 25 Chinese-speaking sales assistants and slashed prices to compete with western European rivals, he added.

Opulent Spending

Founded as an upscale haberdashery store at the turn of the 20th century, TsUM became a center of opulent spending in Moscow during the last years of the imperial Russia.

The Communists nationalized it after the 1917 Bolshevik revolution, making TsUM (Central Universal Department Store) a showcase for the Soviet Union's meager offering of consumer goods. After the fall of communism, it returned to private hands, again serving wealthy consumers from home and aboard.

A boy views an iPad at an Apple shop in the Central Universal Department Store (TsUm) in Moscow, Russia, July 31, 2015.Maxim Shemetov

Those from China are particularly welcome. They frequently make lavish purchases abroad to avoid high prices at home, but for years did this in Western European cities rather than in Moscow.

Russia's economic downturn has helped to change that. The rouble has dived against most leading currencies including the yuan since the economy slid into recession, hit by a collapse in global prices for Russia's main export, oil, and Western sanctions over Moscow's actions in Ukraine.

As a result, prices of accommodation, meals and entertainment in Moscow have become increasingly attractive to visitors armed with foreign currencies.

Most of the luxury goods on sale in Moscow's boutiques are from the West, so the cost of importing them has jumped in rouble terms. But stores such as TsUM have cut into their profit margins, aiming to make their offerings internationally competitive.

A Givenchy Blue Antigona handbag currently sells for 139,500 roubles ($1,810) at TsUM, compared with 1,650 euros ($1,845) at the Excelsior department store in Milan.

Pavlov said Mercury's group sales in euros, an indicator that the buyers may be from outside Russia, increased by 2-3 percent year-on-year in 2015.

Chinese visitors spent between $800 million and $1 billion in Moscow last year, Interfax news agency cited city tourism officials as saying.

Pavlov said prices would be reviewed if the rouble gained or lost more than 10 percent against the euro. The rouble traded at 86 to the euro on Friday, down more than 10 percent year-on-year.

As well as foreign customers, Pavlov said he hopes eye-catching discounts will also attract well-heeled Russians who have cut down on spending in Paris, London and New York after the West slapped the sanctions on Moscow.

"I can't specify the number of these consumers, but since the beginning of 2014 they have increased significantly," he said.

Writing by Jack Stubbs; Editing by David Stamp

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