With the ruble hitting record lows, Russians are scrambling for hedges against wartime inflation.
To counter their dwindling spending power, many are rushing to ATMs to withdraw cash in euros and other foreign currency. But others are looking for alternatives to cash.
Some are buying electronics and appliances before their rubles depreciate further. Spending on those goods, which are often imported brands, jumped 80% last week compared to the one prior, according to Check Index, which analyzes consumer trends, Reuters reported.
Others have made a beeline to luxury stores like the jeweler Bvlgari. Russian sales at the LVMH-owned house, which retails necklaces costing anywhere between a few thousand dollars to $1 million, have risen since the outbreak of the crisis, the brand’s CEO Jean-Christophe Babin told Bloomberg.
Assets like gold, watches, and jewelry have often acted as safe havens during conflict because of their liquidity and their compact size and portability. Michael Berstam, an economist at Stanford’s Hoover Institution, recalled how his grandmother who was a dentist in the Soviet era exchanged gold and silver teeth fillings for imported penicillin after World War II.
Sales of durable luxury goods like watches, jewelry, and leather goods can spike during a crisis, but such surges are unlikely to last, said Mario Ortelli, founder of luxury advisory firm Ortelli & Co. “In the mid-long term any economic and social issue is not supportive for luxury demand,” he added. “Luxury is a business driven by economic growth and by the ‘feel good’ sentiment of the consumers: War is not supportive of either of the two.”
Some of the luxury sales spike in Russia can be interpreted less as an attempt to shore up wealth, and more as a chance to snap up expensive goods at a discount while the local currency falters.
Luxury brands are extremely cautious about the environment in which their goods are sold. Over the past few years, they have trended towards global price harmonization, accounting for foreign currency fluctuations to preserve prices integrity. However, brands typically adjust prices on a quarterly basis, not often enough to tackle the ruble’s swift collapse.
More brands and retailers are cutting ties with Russia with each new day of conflict. Swatch Group, the Swiss-owner of high-end watch brands Omega, Longines, and Tissot, halted its business in Russia, following luxury players Canada Goose, Mytheresa, Matchesfashion, Farfetch, Burberry, Apple, and a host of brands like H&M, and Asos.
“In these early days, brands are trying to find the right way to condemn the decision of a government to trigger a war, without hitting at a population that has a large share people not supportive at all of this war decision,” Ortelli added.
Still, ethically driven decisions might soon be besides the point. Airspace disruptions and the pullout of logistics companies Fedex and DHL from the country will cause shortfalls of foreign-made inventory in the country. Nike, for instance, stopped online sales in the country citing delivery difficulties.
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