Image Source: LV

BEIJING, March 7 (TMTPOST) — Luxury brands are exiting Russia in protest of the country’s war with Ukraine.

Hermes, Richemont and Cartier are among the first batch of luxury brands to announce that they will close down their brick-and-mortar outlets in Russia. LV’s parent company LVMH, Gucci’s parent company Kering, Chanel and Nike have also said that they will shut down both online and offline operations in Russia.

A spokesperson from LVMH told the New York Times that the company has around 120 physical outlets in Russia. According to LVMH, the company is evaluating the situation on the ground and will close down its outlets on March 6. The spokesperson added that the company will continue to pay its 3,500 employees in Russia and provide relevant welfare.

Wealthy Russians enjoy buying products from luxury brands but are not the main drivers of luxury brands’ growth. China and the United States are the main contributors to the growth in the luxury industry. Investment bank Jefferies Group estimated that Russia generated US$9 billion sale of luxury products every year, which is only 6% of that in China and 14% in the United States. According to LVMH, sales volume from Russia only accounted for less than 2% of its 64.1-billion-euro global sales.

Kering, LVMH, Hermes, Chanel and the world’s biggest cosmetic giant L’Oréal have been distancing themselves from Russia since the country started a war with Ukraine on February 24. It is worth noting that the European Union’s sanctions on Russia do not include the luxury industry.

Although the Russian market contributes relatively small sales volume to luxury brand sales when compared with China and the United States, wealthy Russians are known for their consumption of luxury products. Pundits believed that luxury brands’ decision to suspend their operations in Russia will offend their loyal customers and impact their revenues in Russia.