Parallel Imports To Russia Could Reach US$16 Billion By Year End

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Companies that exited Russia have also lost control of part of their global distribution networks

Denis Manturov, Russia’s Industry and Trade Minister, has stated that shipments of goods to Russia through parallel imports have reached almost US$6.5 billion since they were launched in early May, and they could total $16 billion by the end of the year, according to the Ministry estimates.

“Almost US$6.5 billion worth of products have been imported in the period that the mechanism has been in effect. It is difficult to make exact forecasts on the amounts of parallel imports, but based on statistics for the past 2.5 months, the anticipated amount of product imports to the end of the year could total about US$16 billion” Manturov said, adding that the forecast is based on an estimate that monthly parallel imports average US$2 billion – US$2.5 billion.

Russia legalized parallel imports in May, allowing secondary parties external from Russia who are free from sanctions, the ability to resell them onto the Russian market. This affects the products of companies who exited the Russian market. A typical mark-up is about 5 – 10% more than had the product entered Russia in the conventional way before the brand left the Russian market. It means that such brands have now lost control of their Russian distribution. It is common for secondary operators in China, India, Iran, and Turkey among others to purchase goods and subsequently resell them onto the Russian market, and the practice is growing.

The legalization of parallel imports does not affect importers’ obligation to mark products upon import into Russia, Manturov said. “On the contrary, marking is now virtually the only instrument of control that, amid the easing of regulations and moratorium on conducting inspections, helps to prevent illegal products from getting on the market. There are no difficulties within Russia when marking parallel import goods.”

The Industry and Trade Ministry will adhere to a balanced approach when compiling the list of goods eligible for parallel imports, extending this mechanism only to certain groups of products, he said. The Federal Antimonopoly Service, for one, has called for extending this mechanism across the board for companies that exited Russia. Those that have stayed will be able to continue as before without facing parallel import competition.

“The approach to allowing parallel imports must be balanced so as not to harm national companies. I stress again that this is why we worked out and fine-tuned the corresponding list of goods for a fairly long time, with virtually surgical precision, so that it works like it’s supposed to, ensuring access to the goods we need but not hurting Russian and localized foreign businesses who continue to work on the Russian market or ship to Russia,” Manturov said.

This means that consumers in Russia who want goods from brands such as Apple, Gucci, Zara, Bentley, Mercedes and so on, who exited the Russian market, may still continue to purchase them from resellers at a slight mark-up. Russian customers made up 2 to 3% of the global luxury market in 2021, according to management consultancy firm Bain, with sales to Russian nationals inside and outside Russia worth about US$7.4 billion in a market estimated at that time to grow at about 9.7% per annum.

A useful recent demographic report into the make-up of Russia’s luxury consumers by McKinsey can be downloaded here.

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