LVMH followed Cartier’s example and suspended sales of high-end luxury products in Russia. Hermes, Chanel, and other brands including Ikea, Apple, Microsoft, and Nike have also stopped Russian sales. The only hold-out is Gucci, but from this armchair, it looks like they too will suspend activity.
The timing of these actions is telling. Over the past week, wealthy Russians have been observed sinking their cash into luxury goods as small-scale investments. The elite are doing this because a Bulgari bag will not lose its value even as the rouble plummets.
This investment rule holds true for all luxury items unless the brand purchased becomes tarnished. One way brands can become tarnished is if they become associated with war criminals and their families… The rational fear of negative brand association motivated the big brands’ decisions to halt business in Russia.
Although I would like to believe that these actions are symbols of solidarity, they are not. The big brands are suspending sales activity because it is risky to be associated with the Russian elite, the financial systems are freezing out the Russian economy, and customer sentiment demands action. As business owners, we can see that this move is a financial decision based on a decrease in performance, fear of negative association, and as a response to the rightfully outraged customer base.
The money that these brands have donated to causes and foundations that provide aid is an action of solidarity – more so than the store closings. You can help by donating. If you can’t donate right now, you can sign petitions and take other actions to help those in need.
Be an informed consumer and think for yourself.
Until next time, thank you for joining us at Pendant and Ring!
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