Russia still on West’s retail map despite political chill

Store chiefs and industry analysts are confident that Russian consumers’ voracious appetite for Western products will continue, despite the coolest political climate since the Cold War.

Hostilities between Russia and neighbouring Georgia, as well as business rows, such as the one involving oil firm TNK-BP, have sparked the biggest flight of foreign capital from Russia since the country’s 1998 currency crisis.

But Mosaic Fashions deputy chief executive Mike Shearwood, whose Oasis, Principles, Karen Millen and Warehouse chains operate 22 stores in Russia with local partners, claimed the political face-off would not affect foreign retailers.

He said: “All four brands are performing very well. We have a very good relationship with our partners. A lot of consumer-facing businesses are in joint-venture or franchise arrangements with local operators and are well integrated into the business community. Oil conglomerates, for instance, might [be run by] foreign nationals, which is different.”

Ernst & Young head of retail Gavin George said: “There’s such a strong pull for Western brands that it will overcome short-term issues. Designer brands are absolutely what the consumers want.”

He added, however, that Russia had always been perceived as relatively high risk and political uncertainty would add to that, potentially reducing the willingness of further Western retailers to invest.

A spokesman for Marks & Spencer said: “At the moment, it’s very much business as usual [in Russia].”

Many joint-venture agreements include staged buy-back opportunities for foreign partners. Some may choose to pass on the chance if conditions deteriorate further. Last year, UK electricals group DSGi decided not to buy Russian counterpart Eldorado, citing “corporate, economic and political risks”.

Russian retailers remain keen to strike partnerships with overseas groups. Grocer X5, for instance, is seeking a partner at present.