As Western Retail Brands Disappear, Russia Looks East to Replace Them

A man looks at a closed H&M store in a shopping mall in Moscow, Russia March 21, 2022. REUTERS/Maxim Shemetov

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March 25 (Reuters) – Russia is looking to China, India, Iran and Turkey to fill the gap created by the exodus of Western retail companies, an industry body said on Friday, as Moscow is struggling to find ways to combat its growing isolation in the face of sanctions.

The Russian Shopping Centers Council (RCSC), an organization representing developers, shopping center owners and operators of retail chains, said it was negotiating with its corresponding representatives in the four countries to find alternatives to western brands.

“A list of foreign companies that have temporarily ceased operations in Russia has been sent to them so that suitable equivalents can be found,” a statement on the RCSC website said.

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“Over time, this will help complement or completely replace products from defunct brands with products of similar quality and design.”

Dozens of major brands have temporarily suspended operations or left the country since Russia sent tens of thousands of troops to Ukraine on February 24 in what it calls a special operation.

Sanctions have hampered supply chains and fueled panic buying among some Russians, with drug and sugar shortages reported, and accelerating inflation expected to push prices higher. Read more

At an RCSC meeting of more than 100 market players, the challenges facing Russian retailers were discussed.

RCSC quoted Igor Maltinsky, director of development at Melon Fashion Group, as saying that the main challenge faced by domestic retail companies was the uncontrollable growth of production costs, due to the considerable increase in the cost of supply and logistics, as well as many other related factors.

Melon owns four fashion brands, mostly for women – Zarina, Befree, Love Republic and Sela and had 846 stores across Russia and the CIS at the end of 2021. It had planned to hold an initial public offering (IPO) this year. Read more

On Thursday, Swedish property company Eastnine, a minority shareholder in Melon, said the planned IPO had been postponed. He said Western sanctions had had a negative impact on the company, making his assessment very difficult.

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Reuters reporting; Editing by Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

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