CONSUMERS
Ukraine’s booming luxury market in the post-crisis climate
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As the Ukrainian luxury goods industry picks itself up, Alexander Chetchikov, managing partner of LUXOR management, offers an overview of a sector which saw the worst of times and the…
Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.
PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.
In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”
The Fondation Cartier pour l’Art Contemparain building in Paris
As the Ukrainian luxury goods industry picks itself up, Alexander Chetchikov, managing partner of LUXOR management, offers an overview of a sector which saw the worst of times and the best of times
As the Ukrainian luxury goods industry picks itself up following two tough years of economic inactivity, Alexander Chetchikov, managing partner of LUXOR management, offers an overview of one of the sectors which benefitted most from the post-Orange Revolution economic boom of 2004-2008 only to be among the hardest hit by the subsequent crash.
Insights to historical development of the luxury segment
We can identify two main stages in the development of the Ukrainian luxury market. The first period lasted from 1990 till 2003. During this period the luxury market developed chaotically. Many of the world’s most prestigious international luxury brands were represented illegally with goods often counterfeit or sold unofficially. As a result many Ukrainian consumers bought luxury items abroad because they were simply not available on the domestic market. The second period lasted from 2004 till 2008. This boom period saw the Ukrainian luxury market at its most dynamic. Market growth was estimated at 60-70% in both physical and monetary terms annually. The highest peak in luxury consumption came in 2006 when the market accounted for approximately Euro 500 million. Demand exceeded supply throughout the luxury sector with newly flush Ukrainian consumers lining up to purchase luxury watches, cars and yachts. It was during these boom years that vast majority of today’s boutiques and official distributors arrived on the Ukrainian market.
Impact of the recent global financial crisis
The economic downturn has severely damaged the Ukrainian luxury industry as lots of the sector’s most enthusiastic consumers have cut down on non-essentials as previously mega-rich families begin to exercise increasing economic caution. Across the luxury sector we’re seeing drops of around 30% to 40%, rising to up to 60% in some high price segments. The never-ending political instability within Ukraine also didn’t help as it sapped consumer confidence at the top end of the market. As a result in the past two years a number of market entries have been postponed while luxury brands already operating in Ukraine have put plans to expand into the regions on hold.
Contemporary trends
At present we can talk about a return to relative market stability – the consequences of the crisis have become clear and predictable and luxury goods consumers are beginning to get back into their ordinary buying habits. Across the sector luxury operators are near unanimous in their opinion that the market is reviving. In the first quarter of 2010 there was a significant rise in sales, but despite this optimistic appraisal I think that we won’t reach the sales level of 2008 until 2012.
“Ukrainian” approach to the essence of luxury
The high demand for luxury brands in Ukraine is based as much on a desire for enhanced social status as it is on economic or quality considerations. Whereas the majority of European customers purchase expensive luxury items primarily for themselves, in Ukraine it is common for consumers to be motivated by a desire to engage in ostentatious public displays of materials wealth. As a general rule, Ukrainian consumers will immediately make a beeline for the most expensive and exclusive brands.
Still over the last two decades the notion of luxury has been transformed from being something regarded as unaffordable into something seen as attainable. Today it is no longer only Ukraine’s millionaires and billionaires who can afford to purchase luxury items. Most relatively affluent people (especially the vast majority of home owners who face no mortgage repayment commitments) can aspire to a luxurious car, timepiece or jewelry and go on vacations to a luxurious resort. Like Ukrainian society in general, the luxury sector has become more democratic.
Alexander Chetchikov, managing partner of LUXOR management
