Academic journal article Review of European Studies

Possible Scenarios of Russian Luxury Market Development under Economic Uncertainty and Turbulence

Academic journal article Review of European Studies

Possible Scenarios of Russian Luxury Market Development under Economic Uncertainty and Turbulence

Article excerpt

Abstract

Unstable political and economic situation in Russia and in the whole world affect all the product markets. In 2014 in Russia, the downturn of purchasing activities of customers was registered and as a result the decrease of the sales on the auto moto market, the retail market as a whole were registered as well. The market of luxury and premium products and services is also affected by economic uncertainty and turbulence. Experts had forecasted the changes in the consumer behavior and turn of the consumers to the less expensive and prestige products and services. This article is describing the typology of consumer behavior in Russia during economic unstable external marketing environment and turbulence. It also gives the description of possible scenarios of the Russian luxury market development during the period of economic sanctions.

Keywords: luxury, luxury products and services, customer loyalty, typology of loyalty, scenarios of luxury market economic development

1. Introduction

Luxury market in Russia had been developing very fast since the end of 1900-Th. Most of the well-known luxury brands are now presenting in Moscow, Saint Petersburg and other big cities of Russia (including the cities on Far East part of Russian Federation-Magadan, Yughno-Sachalinsk, Vladivostok). The distributors of luxury brands such as Mercury, Bosco di Chilegi, Gimeney Trading house and others are very active in Russia. In 2014 the downturn of the sales of automobiles, cloth, accessorise were registered in the sector of middle or low priced products. This situation is affected the market of premium and luxury goods and services as well, because of the changed in consumer behaviour. The economic sanctions of the Western countries to Russia, than the dramatic change of the Russian currency rate in autumn of 2014 created stressful situation for the importers and distributors on the market of luxury goods. The possible scenarios of the economic development of Russian luxury products markets are: "Iran scenario", scenario "As it was in 2008-2009", scenario "Using social and psychological factors of consumer behaviour", scenario "Changing the notion "Luxury" as a whole" are developed and described. The possibility to use the consumer loyalty can also help to maintain the luxury market in Russia during recession.

2. Literature Review

Thorstein Veblen and Werner Sombart, the founders of institutional economics and the theory of luxury consumption examined the phenomenon when consumption of luxury brands grew in early 20-s. Their research proved that luxury is a symbol of consumer's status which exclusively belongs to upper class, a so-called leisure class. According to Veblen and Sombart luxury brands serve to enhance a person's status and prestige in society and to exalt him above others. At the same time these authors mentioned that luxury is usually regarded by consumes or other members of the community as "expenditures that exceed required limits" (Veblen, 1984; Sombart, 2008).

Moreover, Simon Kemp's research shows that "goods are perceived as luxury if they are able to evoke positive emotions more than discomfort (for example the sum of money the customer paid for the product)". In other words consumption of luxury products and services is capable to decrease consumers' cognitive dissonance. Kemp compares scale "luxury-necessity" with Maslow's hierarchy of needs which ranges customer's motivation of behaviour from physiological (food, accommodation) to self-expression and self-esteem (status, luxury) (Kemp, 1998). In early, 2000-s Michael Silverstein and Neil Fiske introduced a new term "affordable luxury". The term appeared as a result of changes taking place within the luxury market at the end of 90s to early 2000s. Particularly at that period of time such countries as China, India, Russia and Brazil demonstrated the emergence and development of the luxury market. High class premiums were included into the "affordable luxury" category, as affordable to customers. …

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