Luxury makes its mark at Moscow conference

Outside Moscow's Ritz-Carlton, a man tries to sell fake designer watches for 1,000 roubles (about £20). Meanwhile, inside, industry representatives wax lyrical about the growth in Russian luxury.
In improbably high stiletto heels and a black dress, bodyguard in tow, Donatella Versace totters past bottles of designer mineral water.

Meanwhile, her fellow designer Tom Ford stops in the chandeliered halls to pose broodily for photographers. Later, supermodel Natalia Vodianova begins to canvass the well turned-out guests, raising cash for her chosen charity.

The event is the International Herald Tribune's seventh annual luxury industry conference. And what is striking about this year's discussion of all things unnecessary is that, for the first time ever, it is being held in Russia.

As the country's economy has boomed over the past few years, so too the rate of luxury consumption has rocketed. According to Forbes' rich list, there are now more than 50 Russian billionaires.

"Analysts now consider Russia to be the fourth largest consumer of luxury goods in the world," Bernard Arnault, chairman and CEO of international luxury brand group LVMH, told the packed conference hall. The other top three spots were held by the United States, Japan and China, he said.

Painting the luxury industry's leading brands as the original pioneers of globalisation, Arnault predicted that, within five years, the total global luxury industry will have doubled in size to 300bn euros ($445bn).

In 10 years, Russia, China and India will account for one third of all sales in the world.

Other industry bigwigs were also lining up to underscore the value of the Russian market.

"It is an incredibly important market for us," said Laurence Graff, head of Graff Diamonds.

"Our business here has grown and grown and is still growing."

And 26 years after Estee Lauder visited Moscow to launch her products, John Demsey, group president for the company, reported that Russia now represented the Lauder's fastest growing market.

Demsey said that as wealthy Russians have flocked to top-end destinations around the world, such as London, the French Riviera and Dubai.

Indeed, in his view, the Russian diaspora and Russian travellers abroad were just as crucial to a worldwide market as the Russians at home.

"The consumption is well beyond what we see in Moscow," he said.

Some commentators have recently suggested that the country's once notoriously demonstrative wealthy have begun to ditch the glitzy ethos of conspicuous consumption in favour of more sophisticated modesty.

"Where they would have once been clad head to toe in Chanel, Russian women today are likely to be more discreetly, and tastefully, attired," said Suzy Menkes, International Herald Tribune's fashion editor and brains behind the conference.

But other industry insiders were less convinced.

"Consumers in emerging markets are still enjoying the `more is more' phase," said Tom Ford.

"Conspicuous consumption still rules."

But, because of the reach and speed of communications today, Ford said Russian tastes would develop "exponentially faster" than they had in the West.

Currently accounting for 4pc of global sales, the Russian market is growing at a rate of around 30pc per year, said Melanie Flouquet, head of luxury goods European equity research at JPMorgan.

She singled out the jeweller Cartier as a particular success story in Russia.

"Jewellery and watches tend to be more exposed in Russia and the Middle East," she said.

And as the credit crunch hits sales in the United States, analysts said attention would increasingly turn toward Russia to stave off hard times.

"We are not in Moscow doing this conference by mistake," remarked one delegate.

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