Western Brands Eye Return to Competitive Russian Markets Amid Domestic Dominance

Western Brands Face Competitive Russian Markets as They Consider Return

MOSCOW (Reuters) – As U.S. President Donald Trump suggests a swift end to the Ukraine conflict, speculation grows that Western brands may consider returning to Russia. However, the markets they vacated have become more competitive, dominated by domestic and Chinese brands.

Henderson, a men’s clothing chain, has benefited from the departure of foreign retailers, securing better locations within shopping centers and growing sales three times faster than the overall 8% annual growth of the menswear market. Despite this, Western brands remain available in some locations, having transformed their sales channels.

Shopping malls’ prime locations, once reserved for Western flagship stores, are now occupied by Russian rivals. Pavel Lyulin, vice president of the Shopping Centres Association of Russia, Belarus and Kazakhstan, notes that these prime spots are highly contested due to long-term contracts.

Moscow is unlikely to welcome returning brands with open arms. President Vladimir Putin has emphasized the preferential treatment of Russian manufacturers if foreign firms return. Kirill Dmitriev, Putin’s special envoy on international economic and investment cooperation, expects some U.S. companies to return as early as the second quarter of this year.

Over a thousand Western companies have exited Russia since the conflict began, with many citing costs, disruptions from sanctions, and payment issues. The retail sector has yet to fully recover, with shopping centers still seeing 20% fewer visitors than in 2019. However, Russian shoppers have embraced local brands, finding them comparable in quality to Western ones.

Stockmann, a retailer that acquired Hugo Boss’ Russian business, has observed an increase in sales of domestic brands. Moscow resident Anastasia Efremova notes that while Russian brands have raised prices, the impact has been minimal, with everything in stock, including spare car parts.

Foreign carmakers’ departure left a gap filled primarily by Chinese competitors, which now account for more than 50% of new car sales. Domestic carmakers account for about 30% of sales, up from closer to 20% before February 2022.

Western companies are currently ruling out imminent returns. Executives from Arla Foods and InterContinental Hotels have stated there are no plans to re-enter the Russian market for now. Renault has also indicated that returning under the terms agreed when exiting in 2022 is “very unlikely.”

Russian brands are confident in their market share and are prepared to compete with international players if they return. Ultimately, consumers want the freedom to choose, as expressed by Moscow resident Laysen Faskhutdinova.