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Zara’s gray market: how “parallel imports” reassure Russian consumers | Russia

ALeksandr Gorbunov, a property investor from the Siberian city of Krasnoyarsk, had an easy solution when Spanish clothing giant Zara closed its stores in Russia following the invasion of Ukraine: import it himself .

“The idea to start selling Zara came from my wife, who said she really wanted the clothes to come back,” said Gorbunov, who said he was opening a store called Panic (panic) Friday which deals exclusively with Zara and Zara Home products.

Gorbunov said he quickly found a seller in Kazakhstan who was selling Zara clothes, then imported a batch of clothes for 1.5-2 million rubles (about £23,000). He claims his markup will only be 200-300 rubles (about £3).

A closed Zara store in a shopping center in Moscow, Russia, May 2022. Photography: Yuri Kochetkov/EPA

“It’s all official parallel importing,” he said, as Russia now allows almost anyone to resell goods purchased abroad. “We don’t just buy everything… We have a designer who chooses what he buys from the latest collections – we don’t just want to fill our store with Zara clothes.”

Western companies are leaving Russia to protest the war and to avoid a potential backlash on making profits in Russia. But the exit of Western brands also has an outsized political significance, reminding ordinary Russians of their isolation more viscerally than sanctions against Kremlin officials or central bank reserves.

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Map

So Russia reacted by releasing a long list of products from foreign automakers, tech companies and consumer brands that fall under the so-called parallel import mechanismwhich allows Russian companies to buy goods from any company outside of Russia, without the approval of brand owners, opening the floodgates to gray imports and other schemes to keep store shelves full.

The products that now arrive in Russia are often originally intended for export to countries that are part of the Eurasian Economic Union (EAEU) led by Moscow and with which Moscow shares a customs union: Armenia, Belarus , Kazakhstan and Kyrgyzstan. The products are then shipped to Russia and sold on the market, with Western brands losing all control over their distribution and sale.

Discussing the policy in late May, Vladimir Putin said it would allow Russians to continue importing products of the “lyuksus class”, an accidental portmanteau of Russian luxury and the Lexus car brand.

“It will just be a little more expensive,” he said.

The re:store, which billed itself as the largest reseller of Apple products in Russia, was at an impasse when Apple officially announced its exit in early March, cutting off the supply of high-end iPhones and laptops.

The latest iPhone models are seen at the re:Store in Moscow
The latest iPhone models are presented at the re:Store in Moscow. Photography: Sefa Karacan/Anadolu Agency/Getty Images

But their store on Tverskaya Street in Moscow is stocked with iPhone 13 Pro and Pro Max in Alpine Green, a color that was only released after Apple pulled out due to the invasion. Staff said they expect there will be a slight delay in getting stock of the iPhone 14 if it comes out in September. “It will take about a month, so October,” said a sales associate. “But we will get it.”

Although the company did not respond to questions about how it imports new Apple products, the answer is clear: parallel import. “Russian instructions for the phone can be downloaded from the site,” the store says, indicating that its phones are not intended for the Russian market. And in a extremely vague statement last month, the company announced that it would “change”, stressing that it would continue to sell “original products…made under the control of the manufacturer”.

“We are continuing our work so you can be sure there is a place where everyone is welcome and waiting for you,” he said.

An Apple store in Bishkek, Kyrgyzstan
An Apple store in Bishkek, Kyrgyzstan. Photograph: Alan Sau/Alamy

Grigory Yudin, a sociologist, said the Kremlin was keen to retain a “sense of normality in [Russians’] daily life” to encourage the escapism that many Russians have embraced since the start of the war.

“This sense of normalcy also means that Russians still have access to all the products they’ve grown accustomed to,” he said. “Parallel import therefore plays its part in ensuring that life is not disrupted by war. Putin does not want Russians to change their ways because of the war but to continue to live as they have lived. Western consumer products that may seem insignificant can be of great value to the average Russian. »

Vladislav Surkov, an aide to Vladimir Putin, once boasted that he was unaffected by the sanctions because he could still access the works of rapper Tupac Shakur and writer Allen Ginsberg. Very wealthy Russians could now say the same of their Mercedes and BMWs, all available to those willing to pay the price.

Ararat Mardoyan, owner of Moscow-based Auto Dealer University, has imported dozens of luxury cars to Russia since the war began. They are ordered from Dubai, India, China or South America, he said, and then shipped to Russia via countries like Armenia or from the Iranian port of Anzali. It is better to avoid “hostile” countries like the Baltics or Georgia, he added.

A parking lot for new cars near the Kuntsevo Technical Center in Moscow, Russia, June 9, 2022.
A parking lot for new cars near the Kuntsevo Technical Center in Moscow, Russia, June 9, 2022. Photography: Yuri Kochetkov/EPA

“The demand for Western cars is there. It’s huge,” he said. And resellers are now the only game in town. the only one left.”

Customers directly arrange the import of cars such as Mercedes, BMW and Range Rover, he said. “The demand for luxury cars is especially high, cars that cost more than $100,000,” he said. “We are selling the cars for around 20% more than before now.”

The new policy is transforming the Russian market, presenting risks for companies that have not even left the country. Nikita, who previously worked for a major online retailer, started importing Korean cosmetics such as face masks and creams which are still sold at major outlets.

“If it weren’t for the parallel import situation, our sale of these products wouldn’t be entirely legal,” he said of their inventory, which includes Dr.Jart+. “But we see a big opportunity because these companies have an incredible profit margin.”

People walk past closed Adidas, Reebok and other stores in a St Petersburg mall
People walk past Adidas, Reebok and other closed stores in a shopping mall in St. Petersburg. Photography: AP

He had arranged imports through Kyrgyzstan, which allows goods to enter the Russian-led customs union, before they are shipped by truck from Bishkek to Moscow, a journey that takes six days.

Nikita said Russian e-commerce platforms such as Ozon and Wildberries were also creating similar supply lines on a much larger scale and easing restrictions on sellers to try to meet demand in Russia for western products.

A cottage industry has also emerged on messengers such as Telegram, where sellers offer to import luxury goods and electronics or even handle complicated financial transactions, for example transferring money between Russia and the United States for a 5% commission.

Nurbek from Kyrgyzstan has transported hundreds of Apple products to Russia, many of which are then sold on Telegram.

“I’ve bought around 300 iPhones and 100 MacBooks so far,” he said, saying they were bought in Bishkek and then sent to Moscow by courier or post. “I know friends who do it in Kazakhstan, Uzbekistan and other post-Soviet countries. I take about 5% off the sale so I really make a lot of money. It’s better than working in construction or as a taxi driver.

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