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- 29 Sep 2010
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10 Vital Tips for Doing Business in Russia’s Luxury Market

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A piece by one of the WINZAVOD gallery artists (Sasha Frolova; Aidan Gallery)


Russian boutique owner, Rosa Kamenev, offers a unique insider-outsider perspective on the luxury trade in Russia. Having lived abroad for nearly 20 years, first in Italy and then in Australia, where she worked as a diplomatic interpreter and for telecommunications giants, in 2007 she launched Cara & Co. in the WINZAVOD Moscow Centre for Contemporary Art back in Moscow.

As a Russian-born Australian citizen who had to acclimatise to both new and old Russian realities while establishing an alternative vision for luxury retail (up-and-coming intellectual designer brands), Kamenev is both a radical outsider (her slogan is ‘No Logos; Fashion Only’) and a niche retail insider who has also learned how to play the game in Moscow’s high-end fashion market. Here is the advice she offers to independent international luxury brands hungry for a slice of the Russian market::

1. MARKET RESEARCH SPIES

Before starting your business have your own marketing research well underway. Unfortunately, (with all due respect) there are few reliable market research companies in Moscow. They might have had developed good marketing researching methods but, in all honesty, it feels like swimming in a pool without water. This is because you need statistics on the commercial income of similar businesses versus your future expenses, which are either unavailable or incomplete due to official – and unofficial – reasons. In places like Australia and South Korea, by contrast, this kind of information is available through government bodies. Having said this, do have your “spies” in the industry; it’s much better this way than to make mistakes.

2. THE HOLIEST OF HOLIES

Find your perfect rental space in Moscow – always remember, that your rental expenses should not exceed 15% of your turnover. For example, if you want to open your shop in the “holy of holiest” – Stoleshnikov Pereulok – then your rent would be around €2,500 Euro per square metre per year, making your annual rent for 200 metres of shop space €500,000. Think of the maths. That means your sales will have to be around €3,333,333 per year, meaning you will have to sell for €9,130 per day. If your neighbours of similar size (Aizel, Simachev, Chanel, etc) are able to make this amount, then, as we say in Australia, “you’re cooking with gas”.

 It feels like swimming in a pool without water 

3. LEGAL LOOPHOLES

Get yourself an excellent lawyer – in accordance with a slightly re-phrased Russian expression, “Law is like a shaft of a cart; it points wherever you turn it to”. Lawyers in Russia do not normally take responsibility for their legal advice unless you pin them down for an exact quote from the legislation. A good lawyer, however, will take responsibility and will sometimes be able to find a legal loophole in the most restrictive legislation.

4. TAX INSPECTORS

Get yourself an excellent bookkeeper. Russia has the most draconian tax inspectors who are happy to skin you alive for not paying your taxes beforehand.

5. CAREFUL CUSTOMS

Make sure you understand how Russian customs work. Your logistics department should be the best in the world. The customs duty nominal value is 20% + 18% VAT (which is charged upfront) and reconciled (if you are lucky) many months later. Knowledge of customs is directly connected to your pricing policy formation.

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Cara & Co concept shop in Moscow


6. SAVE YOUR TEARS

“Moscow does not believe in tears” – a very famous movie – remember, Moscow is not easily conquered in the retail sector. New brands are difficult to nurture in an environment where the city is still one of the biggest consumers of logos/ Duty Free name brands in the world. You definitely have to bring the legend of celebrities, the accolades, the fame behind the new names you are selling.

7. COLD STARES

When you open a good shop in London, Paris, Sydney, LA (you name it) you instantly become the centre of attention – and this interest in the new will last for, well, sometimes for years. In Moscow, you get the cold stare, the cynicism of the media, crowds of people who compare the prices (they will be higher than in Europe) and people whose retail geography does not go beyond the big brands. Sometimes it takes years to be accepted in Moscow. We had recognition in the Wallpaper Moscow city guide, in The Guardian (in the best 10 shops in the world) and more recently in the Wall Street Journal. Recognition in Moscow came later…

8. WHEN IN ROME

I hate snobs, I am not a snob, but in the city where one of the popular magazines is called Snob, where you are always judged on your “bella figura”…You really have to do as they say in Latin, ‘Ut homines sunt, ita morem geras’, or, in English “When in Rome, do what Romans do”. Be a bit of a snob with the snobs, be yourself with the good people…

 Moscow does not believe in tears 

9. RECORDED, SIGNED, AUTHORISED

Welcome to the Mother of all bureaucracies in the world – Her Majesty the Russian Bureaucracy. All of your sneezes and snuffles will have to be notarised and recorded and signed and authorised again and again. It’s crazy. After flying out from Moscow, take a deep breath and pray that, next time, the queue at Notary Office will be less than 10 people…

10. THE ‘WELCOMING COMMMITTEE’

Be prepared for troubles with your visa. Russia is the depositary of one of the most complicated immigration legislations in the world. Also, be prepared to fall in love with Moscow. Sometimes, most often, this happens too…

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Rosa Kamenev, owner of Cara&Co