Russian spending abroad slips as sanctions bite


Russian shoppers travelling to Europe are spending less, as geopolitical tensions and rouble weakness curb their shopping sprees, analysts warned.

Tourists from Russia usually account for around 20 percent of all tax-free shopping worldwide, according to tourism shopping tax refund company Global Blue, but retailers in Europe are feeling the squeeze as Russians adopt a more cautious approach to spending.

Overall sales to Russians worldwide fell over 20 percent in April and May and 19 percent in June, the data showed. In London, an international hub for shoppers, Russians dropped out of the top six spending nations all together in April and June.

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United Kingdom, London, Knightsbridge District, Harrods department store on Brompton Road
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Luxury was one sector that would likely be hit, Rahul Sharma, managing director at Neev Capital, told CNBC.

"After the Chinese, Russians are number two in terms of luxury shoppers. Something like 10 percent of luxury sales come from Russia globally," Sharma said.

"The sanctions, coupled with constant negativity coming out about Russia is not going to make (Russian) people feel very welcome. If (Russian) visitors don't feel welcome, then that is not going to boost retail and spending abroad."

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Sharma said the figures would likely level out, but the lost business over the peak tourist travel season would not be recouped.

"If you have something like 10 percent of the market feeling very cautious, then (retailers) are going to feel it," he said.

Sanctions weigh

Following months of unrest between Ukraine and Russia, the West imposed further sanctions on Russia at the end of last month. These targeted a number of sectors, including the defense industry and banking sector. Both the EU and U.S. have also targeted a number of individuals in President Putin's inner circle, as well as some major companies.

In retaliation, Russia has embargoed imports of Western food, which is said to be hitting food prices in Moscow shops.

U.K. country manager of Global Blue, Gordon Clarke, said the sanctions, plus ongoing political unrest and a weakened home currency were the key factors hitting Russian spending in the U.K. and Europe. Over the year to date, the dollar has gained around 10 percent against the Russian rouble.

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For Vadim Khetsuriani, director of retail insights for Russia, Central Europe and Middle East at Kantar Retail, the rouble's weakness was the main reason behind the slowdown in international spending by Russians.

"There has been no direct effect on salaries and on how much people get paid… (but) it means everything is a lot more expensive," he told CNBC from Moscow.

He added that a couple of major tour operators in Russia have also gone bankrupt, which could also have hit international travel, but insisted that economic sanctions had not prevented Russians from taking trips abroad.

"I find it hard to believe that Russians would not want to take a holiday because of sanctions and the political situation. They would not avoid going to Europe on holiday and I don't think they would feel unwelcome," Khetsuriani added.

By CNBC's Jenny Cosgrave: Follow her on Twitter @jenny_cosgrave