MOSCOW (Reuters) – As Washington intensifies efforts to swiftly end the conflict in Ukraine, speculation is growing that Western brands might reconsider their exit from Russia. Yet, the market they once dominated now presents a very different picture—one that is more competitive and has undergone a remarkable transformation over the past three years.
Recent comments from U.S. officials suggest that the conflict could conclude within weeks, a development that might prompt foreign companies to revisit the Russian market. However, any widespread return by Western brands hinges on the softening of sanctions that currently complicate cross-border transactions and trade flows. Even if these barriers were eased, companies would face a landscape largely controlled by domestic brands and, in the automotive sector, by Chinese competitors.
The departure of many Western retailers initially created a vacuum that domestic firms have since exploited. For instance, Henderson, a men’s clothing chain that recently listed on the Moscow Exchange, reported a significant boost in its business after gaining access to prime retail locations previously occupied by foreign flagship stores. This newfound opportunity has allowed Henderson to grow its sales at a rate three times higher than the overall annual growth in the menswear market. Despite the exit of many Western brands, industry estimates suggest that 60-80% of global manufacturers continue to operate in Russia, albeit through transformed sales channels such as local multi-brand stores or via rebranded outlets.
Adding another twist to the story, Moscow authorities have legalized “grey imports” through third countries, enabling retailers to sell foreign goods without needing permission from the trademark owners. This regulatory adjustment ensures that consumers continue to have access to international products, even as direct operations by Western brands remain limited.
However, the competitive dynamics have shifted. Prime retail spaces in shopping centers, once the exclusive domain of Western brands, are now locked in by Russian competitors under long-term contracts. Pavel Lyulin, vice president of the Shopping Centres Association for Russia, Belarus, and Kazakhstan, warned that these coveted locations are fiercely contested, making re-entry into the market a formidable challenge for returning brands.
Furthermore, President Vladimir Putin has indicated that any return of Western companies should come with preferential treatment for Russian manufacturers. This policy stance adds an additional layer of complexity for foreign firms considering a comeback. With the market now both transformed and fiercely competitive, Western brands must weigh the risks and rewards carefully before making a decision to re-enter Russia.
