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Harrods latest to filter luxury sales in wake of Russian sanctions

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Harrods would follow in Chanel’s footsteps and limit sales of luxury goods to Russian consumers in a bid to comply with UK government sanctions. The Telegraph reported over the weekend that “the Qatar-owned store combed through its customer database, distinguishing those who have a Russian phone number or who said they live in the country”, and alerted them that if they “might currently or normally be [a] resident [of] Russia”, it cannot provide them with “luxury goods” worth more than £300. This means that “items ranging from jewelery and designer clothing to furniture and gym equipment are now prohibited”.

“Our priority is to comply with the regulations, to inform potentially affected customers of how this may limit their ability to shop at Harrods and to ensure that wider customers are not unduly affected. We are glad we were able to take this step and help customers inform them of recent government regulations,” said a spokesperson for the London-based department store. And while the decision to prevent people who are “currently or habitually in Russia” from acquiring designer items may allow Harrods to match escalating UK sanctions, it still risks land the business in the receiving market. end to consumer fury, including “accusations of discrimination by affected Russians.”

Chanel faced a pushback – and allegations of ‘Russophobia’ – last month when it revealed it had ‘rolled out a process’ in its stores outside of Russia ‘to ask customers whose we don’t do not know the primary residence to confirm that the items they purchase will not be used in Russia. This means that some Russian consumers have been prevented from buying coveted Chanel products following Russia’s invasion of Ukraine, part of a decision by Chanel to comply with European Union sanctions. which prohibit the export of luxury goods to Russia.

“The latest European Union and Swiss sanctions prohibit the ‘sale, direct or indirect, of luxury items to any natural person, legal entity or entity in the Russian Federation or for use in the Russian Federation'”, Chanel said in a statement in early April, noting at the time that it was “working to improve the process.” Chanel – which retains the title of the world’s second-largest luxury brand, second only to Louis Vuitton – also apologized in the statement “for any misunderstandings and related inconveniences” arising from its efforts to implement the latest sanctions. that prohibit companies in the 27-member bloc from exporting luxury goods worth more than 300 euros ($330) to Russia.

The response from Russian consumers, including models and highly-followed influencers, who have gone so far as to post videos of themselves destroying Chanel bags on social media in protest, demonstrates the risk of tarnishing that comes brands taking a stand on issues, including geopolitics. In the wake of statements by Western brands about human rights abuses in their supply chains linked to alleged forced labor in the Xinjian region of northwest China, known for its production of cotton, massive boycotts have been launched on the Chinese market. In addition to consumers insulting companies – ranging from Nike and H&M to Burberry and Calvin Klein – for expressing “concern,” major Chinese e-commerce platforms “have kicked major international brands off their sites, and a large number of celebrities denounced their former foreign employers,” reported the New York Times.

Vanessa Friedman and Elizabeth Paton of The Times called the situation, which saw adidas sales in the second quarter of 2021 down more than 16% in China “due to geopolitical tensions”, CEO Kasper Rorsted revealed, “a study perfect case of what happens when market imperatives collide with global morality. H&M also reported a drop in sales – 23% in the second quarter of 2021 – in China following consumer boycotts, with CEO Helena Helmersson calling the situation “complex”. Meanwhile, appearing to be looking to save face, Nike CEO John Donahoe claimed at the time that Nike, which has also faced comments over the alleged use of Uyghur forced labor in cotton production , is “a brand that is from China and for China”.

At the same time, while the likes of H&M, adidas and co. experienced what the Washington Post called “a nationalistic backlash that has led Chinese consumers to call for boycotts and to achieve brand loyalty and market share to a degree from which these companies may never return,” the giant Japanese clothing company Uniqlo opted for a neutral stance, and was rewarded accordingly. “I want to be neutral between the United States and China,” Tadashi Yanai, owner of Uniqlo’s parent company, Fast Retailing, told Nikkei Asia in December 2021. While his “more outspoken peers have seen their revenues in the greater China region to fall sharply,” Bloomberg has since reported that “Uniqlo went in the opposite direction, with revenue up 17% in the year ended August 2021.”

The publication notes that it’s not just its apparel offerings that set Uniqlo apart from rivals in the “lucrative but delicate Chinese apparel market”, stating that “there is also the Japanese brand’s approach to controversial political issues. In particular, the predominantly Muslim region of Xinjiang in northwest China.

Regarding the robust luxury-centric sanctions that have been imposed on Russia by the US, UK and EU, among others, if other brands and retailers follow Chanel’s lead and Harrods, it remains silent, presumably lest earnings-impacting backlash is sure to follow.