Top brands pull out of Russia, but their goods remain easy to find

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MOSCOW — Trucks carrying Coca Cola

roll across the border into Russia, tourists return from abroad

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laden with Zara’s latest designs, and local online marketplaces

snap up IKEA’s furniture stocks. Western brands may have left

the country, but their goods haven’t.

Despite European, North American and Japanese companies

exiting Russia over its actions in Ukraine, the impact on

Russian consumers is minimal, although delivery times can be

longer and some goods more expensive.

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The main change has been to supply routes, but the products

remain available both online and in stores. Buyers just need to

know where to look.

Crucially, the vast majority of goods concerned are not

subject to sanctions and these cross-border flows are legal. And

Moscow is happy to let them in, whatever route they take.

Brands’ continued availability shows the challenge companies

face in controlling supply chains when exiting a market.

ZARA IN MINSK

Zara-owner Inditex shuttered its 502 Russian stores

after Moscow sent troops into Ukraine, and then sold them to

UAE-based Daher Group.

Now, small-scale imports and online sellers are keeping them

alive, a Reuters review of six major online marketplaces and

conversations with a dozen buyers and sellers showed.

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Albina, 32, took an empty suitcase to Minsk last summer and

returned 24 hours later with 33,000 roubles ($442) worth of

Inditex-brand Zara, Bershka and Massimo Dutti clothes for

herself and friends.

While most Western brands that have halted Russian

operations have also pulled out of Belarus – a staunch Moscow

ally – Inditex has not. The company did not respond when asked

about this.

Albina told Reuters she has also bought clothes in Paris and

Dubai and used a network of online sellers.

“There are pages on Instagram, on Telegram, there are girls

I know who moved to live in Europe or Istanbul or Dubai,” she

said. “They collect orders, let’s say in Istanbul, they take

15%-30% (as commission), then get them delivered here and you

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pay for the delivery.”

Last year’s strong rouble and weak Turkish lira played into

Russian consumers’ hands.

Currency dynamics were partly responsible for a seven-fold

increase in deliveries from Turkey on CDEK Forward, a delivery

service from foreign e-commerce sites, its marketing director

Dinara Ismailova told Reuters.

“As soon as brands said they were leaving, some kind of

panic started, and the number of volumes and orders rose

sharply,” Ismailova said.

Dealing with small, private deliveries, CDEK Forward’s

turnover doubled in money terms last year, with 80% of that

coming from clothes, while its goods turnover tripled.

“It’s comparable to if you personally went to a Zara store

in New York, bought something there and sent it on to your

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friends in Moscow,” Ismailova said.

ONLINE MARKETPLACES

As supply chains broke down, Russia legalized so-called

parallel imports, allowing retailers to bring in products from

abroad without the trademark owner’s permission.

E-commerce sites sell a wide range of imported goods, and

sellers often advertise that they bring products from abroad.

Market leader Wildberries sells old stock from Inditex

brands and has almost 17,000 goods in its Zara catalog. A

source close to Inditex said these were clearance stocks that

were in Russia when it suspended activities there.

Wildberries did not respond to a request for comment.

One ubiquitous Western product Wildberries and its peers

Ozon and Yandex Market sell is Coca-Cola, often

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advertised as imported so buyers know it is the real thing.

While Coca-Cola Co stopped producing and selling

drinks in Russia last year, others have been importing them,

with labels on cans and bottles showing they have arrived from

Europe, Kazakhstan, Uzbekistan and China.

One quirk of this arrangement is that prices vary. In one

Moscow supermarket, three cans of Coca-Cola were on sale for

three different prices, imported from Denmark, Poland and

Britain respectively.

A senior employee at a major retailer explained how

companies have adapted.

“Contacts were quickly established and new contracts with

new partners signed, new money flows and logistical supply

chains with Turkish, Polish and Kazakh companies were launched,”

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he said on condition of anonymity.

Coca Cola is available from even more countries now.

“However, as usual, it is the buyer who pays more for these

new inconveniences,” the employee added.

‘FRIENDLY’ IMPORTS

As new routes are developed the extra logistics, travel and

scaling costs will fall, and though trade remains relatively

inefficient, these new relationships are here to stay, said Ram

Ben Tzion, CEO of digital vetting platform Publican.

“The parallel importing mechanisms have been consolidated

and expanded, meaning that pretty much everything is accessible

and still will be in the future,” Ben Tzion said, pointing to

border truck queues and new entities springing up in nearby

states.

“Coca Cola can easily notice the ‘surge in demand’ from

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countries neighboring Russia, where most parallel imports come

from,” Ben Tzion said. “It is not in their interest to do

anything about it.”

Coca-Cola declined to comment.

“Friendly” countries not imposing sanctions have ramped up

exports to Russia, their trade data shows. Russia itself has

stopped publishing such figures.

China-Russia trade hit a record 1.28 trillion yuan ($186

billion) last year, while Turkey’s exports to Russia jumped

61.8% to $9.34 billion and Kazakhstan’s rose 25.1% to $8.78

billion.

Informal supply routes could lead to more poor-quality goods

entering Russia, however, as regulators lose oversight, Ben

Tzion said.

REPLICAS

Some brands face years battling copies and unauthorized

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imports. Meanwhile, Coca-Cola’s Russian rivals have increased

bottling capacity and launched new Cola beverages.

Swedish furniture giant IKEA sold its stock to Yandex

Market, tech giant Yandex’s e-commerce division, when

it left Russia. IKEA brand owner Inter IKEA Group said it sold

remaining stock for an undisclosed amount to Yandex as it

down-scaled IKEA Retail Russia.

Yandex Market says it puts suppliers who previously sold

goods via IKEA stores in direct contact with customers.

But former suppliers are also ready to sell lightly modified

IKEA items under different names. One already advertises a

bedding set it calls “ARUA (analog of IKEA BERGPALM).”

IKEA said it was looking into goods being advertised as

similar to IKEA online.

Although new opportunities are opening up for Russian firms,

the fixation with Western brands may hinder efforts to boost

local production.

“Over time, market forces will continue to drive the

products Russians are used to into the market and while there is

an aspiration to move to ‘Made in Russia’ it will be very

difficult to actually get people hooked up on Russian coke,”

said Ben Tzion.

($1 = 74.7045 roubles, 6.8775 yuan)

(Reporting by Alexander Marrow; Additional reporting by Olga

Popova in Moscow, Corina Pons in Madrid; Editing by Hugh Lawson)