I just read an article from an industry network I belong to regarding the Luxury Segment in Russia. Here's an interesting fact: Decrease in demand for products of Luxury, Premium and Upper Middle segments in Russia in 2009 amounted to 15-20% (in Rubles), which is equal to the drop of 40-45% because of the exchange rate difference. Most luxury operators had stopped their expansion and focused on the development of their existing projects in large Russian cities.
This might seem like a fact that has nothing to do with the luxury clients in the rest of the world, or even the average global consumer, but in reality, it effects us all. The internet has revolutionized retail in general. More than ever, a consumer's ability to visit a store is no longer a factor driving sales. Whether your neighbourhood shop is Harrods, Target, or Myer - everyone has access to everything. Gone are the days when you could only get Henri Bendel candles is you visited the flagship location - now you simply call or click and the inventory is virtually and literally yours.
It's important for stores to retain a physical presence in strategic markets. From a small counter inside specialty department stores, to a boutique in a trendy area, and billboards or advertisements throughout the city, brand awareness is huge.
Location and exclusivity brings a specific value to brands. Just a few months ago in vacation-centric Orlando, Florida, consumers could buy Chrisitan Dior at a boutique, a counter inside Saks Fifth Avenue, and even snag a bargain at the French Couture brand's own outlet store. In a tricky economy, the brand had become over saturated; all that remains is the outlet location.
Just because there might be a small market or magnetism for a luxury brand or service in a seemingly random location does not require the company to invest in opening a location or store. When your goods are too accessible, the brand as a whole loses it's lustre. It's no longer special. You want your clients and potential customers to retain brand awareness and feel that your goods aren't too out of reach, but at the same time, you want them to remain special.
Anyone can go out and buy a purse at virtually in any marketplace. But not everyone can go out and purchase the Lady D - Dior's collection established at the request of Madam Chirac for Princess Diana to serve as a symbol of France, complete with the Louis XVI print Canage. The bag is artfully made, in limited quantity, and isn't sold just anywhere.
My point is this: when companies over extend their reach, they often lose sight of their essence. The customer experience, the product availability and assortment, and the driving force behind the inspiration and identity is lost.
In Russia, I'm sure there is still a huge population of luxury clients. Just because their "local luxury" stores have closed, doesn't mean the brand awareness and desire isn't present. The few who shopped in St. Petersburg or Moscow probably preferred to shop in Europe or North America anyway. Just as those who shopped Dior in Orlando probably preferred to shop Rodeo Drive or Fifth Ave.
Striking a balance and mastering the craft of remaining exclusive and not out-of-reach is definitely an art form in constant evolution. Regardless, luxury is always en vogue and will remain in demand.