Russians are turning to ‘personal shoppers’ to smuggle luxury bags

Wealthy Russians are routinely sidestepping trade restrictions on luxury brands, using a cottage industry of private shoppers, sellers and cross-border traders to keep pace with European fashion.

Social media platforms Instagram and Telegram have been flooded with retailers offering to big retailers and private buyers in Russia, promising a way to avoid sanctions on expensive handbags and haute couture.

In the year In 2022, after Vladimir Putin fully invaded Ukraine, European luxury brands were banned from sales to Russia.

Although the average price is above the threshold for high-end fashion, Russians are bought by a chain of attractive shades of new Western collections in Moscow. A shopper with more than 10,000 followers on social media, Lillynish promises “anything on your wish list” from the UAE and Europe. Leilanish did not respond to a request for comment.

Customs records indicate that sanctions are diverting trade through sellers in third countries that do not apply any restrictions. For example, in September, more than 300 Italian Bottega Veneta bags, purchased at an average price of $1,800, were shipped from Dubai to Russia by a seller in China. Bottega did not respond to a request for comment.

Some brands and Russian importers have adjusted their supplies to ensure their goods fall below the sanctions limit, analysts and customs data show.

Moscow-based retail property consultancy IBC Real Estate said at the start of 2020, about half of the major Western designers in Russia are still present and bringing new clothing lines to the country.

After the sanctions came into effect, the middlemen saw business activity. From an apartment crammed with luxury handbags, an Italian buyer says he earns up to 6,000 euros a week in commissions by shipping 10 to 20 packages to Russia every week.

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

In the year Mikhail, who scouted European clothing lines on the Russian market before 2022, said the destination of the items he bought was an open secret. “Everybody in these shops knows me, and they know my colleagues. Everyone knows exactly where these clothes go.

Latvian customs officials told the Financial Times that they had rejected 60 luxury goods to Russia since the start of the year, most of which had artificially low values ​​on the customs declaration. Media often try to make deliveries look like private shipments, for example by removing tags from the bags.

Western brands can be held liable for export control violations if their products appear on the Russian market, regardless of the way they are imported.

“To establish a defence, you have to show that you had no reason to suspect that the goods were ultimately imported into Russia,” said Gavin Irwin, a lawyer at 2 Hare Court.

In some cases, price constraints shaped decision-making.

The FT’s analysis of Russian customs dockets shows that men’s clothing imported to the country by the Italian company Canali was sold to wholesalers for an average of €600 in the year before the war.

After sanctions were imposed, the unit price of all shipments dropped to the €300 sanction limit. This does not seem to reflect a general change in the company’s pricing strategy: Kanali’s charges announced when it entered India, for example, show no change.

“We fully comply with all applicable regulations,” a Kanali representative said. Asked about their pricing strategy, they said pricing decisions are “highly confidential and commercially sensitive.” But, he added, “prices have not decreased for Russian buyers.”

The company said the drop in prices meant that buyers in Russia “selectively buy the goods they offer, which shows they are exportable . . . at prices below regulatory limits.”

Some clothes made by Kanali currently sell for Rbs170,000 (€1,600/$1,650) at Tsum’s flagship Moscow department store.

According to Ekaterina Nogai, the head of the IBC real estate analysis department, some other Western brands were releasing “capsule sets” of prices to meet the price requirements for selling in Russia.

“Perhaps not as obvious as the export of Western components used in Russian weapons, but the export of luxury goods also plays an important role in suppressing Putin’s regime,” said Vitaly Volovoy, a researcher at Skuzzing Putin who tracks companies’ response to Russia. A full-scale raid, first seen in Kanali’s wholesale pricing.

“Any public sanctions circumvention will reduce the overall benefits of sanctions against Russia and help the Putin regime build this narrative that they still have access to new Western products,” said Yulia Paviska, sanctions program manager at the Kyiv Institute of Economics. .

The Russian, who spoke on condition of anonymity, said the export controls only affect middle-class consumers like her, who don’t often buy luxury and now stop altogether because of the high markups paid by resellers.

The 28-year-old web designer, who lives in Moscow, told the FT that “wealthy Russians, who could easily afford it before, continue to get everything from fashion buyers, nothing has changed.”

“I’m always trying to make more, to earn a little more to buy these luxuries, and I feel like I’m in a social class with the war.”