FT: Russians turn to ‘personal shoppers’ to smuggle luxury bags

Photo: business-standard.com

Wealthy Russians are routinely sidestepping trade curbs on luxury brands, using a cottage industry of personal shoppers, resellers and cross-border smugglers to stay in step with the best of European fashion. Social media platform have filled with resellers catering to both large retailers and private buyers in Russia, promising a path to circumvent sanctions on expensive handbags and haute couture. European luxury brands were hit with restrictions on sales into Russia after the SMO beginning at Ukraine in 2022, with the EU restricting legal sales to items valued at under €300, reports ‘The Financial Times’ from Moscow.

Yet despite average prices for high-end fashion being well above the limit, Russians continue to sport latest western collections in Moscow, bought through a flourishing shadow supply chain. One buyer Lliyenish who has more than 10,000 followers on social media promises to source “anything on your wishlist” from the United Arab Emirates and Europe. Lliyenish did not respond to a request for comment.

Customs records indicate that sanctions curbs are diverting trade through resellers in third countries which do not apply any such restrictions. In September, for instance, a shipment of more than 300 Italian-made Bottega Veneta bags, priced at an average price of $1,800, was shipped into Russia from Dubai by a China-based reseller. Bottega did not respond to a request for comment.

Some brands and Russian importers have also adjusted their offerings to ensure items fall below the sanctions thresholds, according to analysts and customs data.

IBC Real Estate, a Moscow-based retail property consultancy, said about half of major western designer brands that were present in Russia at the start of 2020 are still available and are bringing new clothing lines into the country.

Middlemen saw business boom after sanctions came into force. From an apartment packed with luxury handbags, one buyer in Italy said he shipped 10 to 20 parcels to Russia each week, earning up to €6,000 per week in commission.

“The Italians don’t care,” said the buyer, who asked to be called Mikhail. “For them it is important to sell the product, and what happens to it later is our business.”

Mikhail, who before 2022 scouted the European market for clothing lines to launch in Russia, claims the destination of the goods he buys is an open secret. “Everyone knows me in these shops already, and they know my colleagues. Everyone knows very well where these clothes are going,” he said.

Latvian customs officials told the Financial Times that they have, since the start of the year, rejected 60 shipments of luxury goods into Russia, many of which had an artificially low price marked on the customs declaration. Middlemen often try to disguise shipments as personal deliveries by, for example, taking tags off the bags.

Western brands can be liable for breaches of export controls if their products appear on the Russian market, regardless of the route into the country.

“In order to establish a defence you’d have to show that you didn’t know, and had no reasonable cause to suspect that the goods were ultimately destined for Russia,” said Gavin Irwin, a barrister at 2 Hare Court chambers.

FT analysis of Russian customs dockets shows that men’s suits sent to the country by the Italian company Canali were priced for wholesalers at an average of around €600 in the year before the outbreak of the war.

After sanctions hit, the unit price of almost all of the shipments dropped to just under the sanctions threshold of €300. This did not appear to reflect a general change in pricing strategy for the company: Canali suits declared on entry to India, for instance, show no such change.

A representative for Canali stated that they are “fully compliant with all applicable regulations”. Asked about their pricing strategy, they said pricing decisions are “highly confidential and commercially sensitive”. But, they added: “Prices have not fallen for Russian buyers.”

The company said that the price drop reflects that buyers in Russia “select and buy the items available to them, which are those that are able to be exported at a price below the regulatory threshold”.

Some suits made by Canali are currently priced at Tsum, a major Moscow department store, at around Rbs170,000 (€1,600/$1,650).

One Russian, who asked not to be named, said export controls have only had an impact on middle class shoppers like her, who do not buy luxury often and now stopped completely due to the high mark-ups charged by resellers. 

“Rich Russians, who could easily afford it before, continue to get everything through fashion buyers, nothing has changed for them,” the 28-year-old web designer living in Moscow told the FT.

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