RUSSIA. Imperial Duty Free, the joint venture between Sheremetyevo Airport and Gebr Heinemann, today inaugurated an impressive walk-through store alongside a new fashion accessories, watches & jewellery concept at Moscow Sheremetyevo Airport Terminal E.
The partners also revealed a series of new stores in the recently opened domestic Terminal B.
“I would say it’s the best shop I have ever seen in travel retail.” – Claus Heinemann
Imperial Duty Free said it aimed to set a new standard for travel retailing in Russia, with Gebr. Heinemann Co-Owner Claus Heinemann even claiming that Terminal E “is the best store I have seen in travel retail.”
With these projects, Imperial Duty Free has built on its strong position at Moscow’s largest airport, expanding its retail space from around 6,700sq m to 10,700sq m, with further development to follow and with arrivals duty free (now approved in Russia) likely to begin trading in the first quarter of 2019. 
Claus Heinemann said: “Imperial Duty Free JSC has established itself as a reliable and competent duty free operator at Moscow Sheremetyevo Airport since 2014, and we are very proud of our long- term, fair partnership with the airport.
“For us, the expansion of our joint travel retail operations represents a great confirmation of our entrepreneurial commitment in Russia, which we will continue to develop in future.”
He added: “We have invested heavily but it is justified by the sales we have made from international as well as Russian passengers.”
Sheremetyevo International Airport Chairman Alexander Ponomarenko hailed the collaboration with Heinemann since 2013, noting its “great experience in the market”. He said: “The result of our joint project is a world-class duty free area that consistently exceeds general expectations of a conventional duty free store.
“We hope that the new duty free shopping area will be positively perceived by the passengers, making our partnership with Heinemann a role model for international duty free ventures. And right now we start designing of a duty free area in the new Terminal C, which will be commissioned [opened] in December 2019.”
In Terminal E, all four existing shops (the main duty free store, the fashion accessories & watches/jewellery boutique, plus a Swarovski boutique and a kids’ shop) were fully redesigned in four stages while operations continued.
With the integration of additional space in the terminal, the retailer has expanded its floor area by around +80%. Imperial Duty Free said the store had already driven greater passenger interest and a rise in turnover. The company said it expects to deliver double-digit sales growth over time, driven by increased average spend.
The extended space has benefited P&C in particular, which accounts for around 50% of the business (spirits & wines are around 30%, with luxury and other categories at 20%). Beauty now occupies space to the left on the walk-through journey. Fragrances are the big driver of the category, followed by skincare (which is growing fast) and make-up.
Among the highlights are stunning Chanel and Dior installations towards the front, impressive back wall displays from Estée Lauder, Lancôme, YSL, Clarins, Shiseido, Guerlain and others, plus a large area dedicated to niche luxury fragrances, which are immensely popular among Russian shoppers.
Key brands here include Kilian, Atelier Cologne, Memo, Moresque, Byredo and Clive Christian. An important feature is that many brands have introduced their full high-end and exclusive ranges to meet the demand among Russian travellers. Duty free prices are around -15-20% below the Russian domestic market in fragrances, offering a strong hook for local travellers.
Alongside P&C, highlights include an impressive vodka collection led by premium brands such as Beluga, Baikal and Koskenkorva, with a growing single malts offer central to a well-ranged whisky and Cognac selection. A broad wine offer sourced by Heinemann includes Russian and international brands. Caviar is well situated between luxury spirits and Champagnes, with impulse ranges from tech to travel accessories to confectionery and destination goods close to the tills.
Crucially, the high ceilings, wide aisles, use of suspended lights and uniformly low fixture heights mean there is excellent visibility throughout, and easy navigation.
Beyond the main walk-through, the stand-out feature is the redeveloped multibrand concept for fashion & accessories and watches & jewellery, across 760sq m, with an additional 70sq m for sunglasses (soon to be expanded). Major brands here include Cartier, Coach, Furla, MCM, Ferragamo, Tumi, Bulgari, Montblanc, Etro and Pinko in the accessories zone.
Hublot, IWC, JaegerLeCoultre as well as luxury jewellery brands are represented in a dedicated shop embedded in the luxury area. The design (led by Plajer + Franz) aims to evoke a department store look, with three wall boutiques and a see-through environment.
A diamond pattern concept resembles the structure of the precious stone, with materials such as brass, oiled white oak and Italian terrazzo stone giving a luxury finish. The concept offers brands the opportunity for personalised furniture on the sales floor. In the central area, flexibility is also key, enabling new themes or styles to be curated at short intervals.
The fashion & accessories/watches & jewellery concept will be rolled out to other Heinemann locations internationally, starting in the coming months.
Of the Terminal E store, Heinemann Executive Director Purchasing & Logistics Kay Spanger said: “It is a brilliant concept with a very good mix. The advantage is that it appears as one shop, like a single shopping world, rather than separate areas, and it’s impressively done for that size. P&C carries a strong emphasis on niche luxury perfumes, which are keeping that category’s momentum growing – although these brands are not really niche in Russia.
“In spirits we see a good performance from vodka, and we see a trend towards luxury whisky, including malts, in the past 18 months. “The growth will come from fashion & accessories here, helped by the nice design and some new thinking about how to treat these categories.”
He added: “We didn’t get all brands in, but we’re happy with those we have. Normally we have brands that demand a 100sq m space to come in but we didn’t have that to offer. So we developed a concept that works with a nice atmosphere, a good level of personalisation, and it’s in many ways more pleasant than other boutique environments you see in airports that can be intimidating for the traveller.”
Director Purchase Watches & Jewellery Olaf Benjamin and Director Purchase Fashion Accessories Jan Richter explained the thinking behind the new design. He said: “The idea was to create a Sheremetyevo-Heinemann frame and not just have brand after brand personalised, one next to the other. We wanted a different atmosphere and experience for the customer. There is an opportunity with the wall boutiques for those brands, and in the centre we have good exposure for brands, but the opportunity to change them if we need because the space is flexible.”
“We wanted to create a department store feel. We visited the biggest and best to seek inspiration” – Jan Richter
Benjamin said: “We will roll this design out globally but this one is very much focused on Russia market, It is a very light look, with a high level of luxury and use of local materials.” Reducing the intense focus on personalisation brought its own challenges.
Richter said: “Some brands were unsure about it up front, though they are now convinced. It was not easy as some wanted more personalisation, especially in the wall stores. What we decided was that they could not personalise the facades. We said this is our façade and our store so they would have to stand out in other ways. And their branding and offer has done this.”
Sunglasses features as a stand-alone space, with easy access and eye-catching wood fixturing. Richter noted: “We wanted to create a department store feel. We visited the biggest and best to seek inspiration and said ‘let’s bring that experience to the airport. Previously, although sunglasses performed well here, they did so in small space. Now there is 70sq m and we will extend that further and that should increase turnover.”
Adding to the theme, Spanger said: “You can play the categories in different ways in this space. Sunglasses is commercial but has a classy look. It’s not distant, it invites you to try them on, but it’s a different sell to most other shops.”
New Terminal B, new retail look
In Terminal B, opened in May for domestic flights by Aeroflot, among others, the joint venture has opened ten new shops. These include a vast core category tax-paid store that leans heavily on P&C (it cannot sell liquor or tobacco), a large multi-brand fashion boutique, stand-alone boutiques for Max Mara, Hugo Boss, Paul & Shark and CK Underwear, a Traveller concept, a children’s store plus a gate shop and arrivals shop.
Terminal B is unlike most other domestic terminals. It features a stripped back look with utilities exposed on the roof, and a flexible design that is not over-populated with retail or services, allowing the airport flexibility to alter the offer fast if needed.
What stands out though is the premium look and feel, from the P&C and luxury stores either side of the entrance walkway, to the stunning digital installations (including a two-storey, four-sided screen that greets departing travellers into the environment) to the classy, inviting F&B options and the stellar lounge facilities. The facility was built to handle 20 million passengers a year (Terminal E will handle around 6 million, all international).
Claus Heinemann said: “I’ve never seen a domestic terminal with so many international brands. It shows the real potential of domestic flights from Sheremetyevo, and its wonderful shopping environment. We also offer prices lower than those on domestic markets, although it is duty paid, and that adds value for the shopper.”
Kay Spanger said later: “You cannot compare this to other domestic terminals. It’s like an international airside environment, and offers potential for other such terminals. Let’s not forget that domestic is also travel retail, and you can capture the traveller by offering them tasteful design with a great offer and prices.” He noted that some brands were sceptical about the opportunity at first.
“Many said that they would not appear in a domestic terminal but once some of the big brands came, more followed. Look around: it’s better than many downtown environments. We have found the right mix we feel.”
The stores have already delivered unexpectedly strong spends, said Heinemann. Commenting on the Russian traveller, the company noted in its press release to accompany the openings: “The currency turbulence in recent years has affected the purchasing behaviour of Russian passengers who are essentially happy to spend money and who have a taste for luxury. They have become more demanding and price-focused, and they compare prices with those of the domestic market.
“The new concept in Terminal B has shown that domestic travellers are also willing to make purchases before they fly – if the offer and atmosphere are attractive enough. The new brands in the fashion & accessories area have been particularly well received and make up for the ban on the sale of alcohol and tobacco for domestic flights.”
“It’s a great example of Russian-German collaboration and of what we can achieve” – Claus Heinemann
The Chinese are another key demographic at Sheremetyevo, accounting for the highest average spends. Heinemann noted: “In Aeroflot’s business strategy, Sheremetyevo is seen as an important hub between Europe and Asia. For that reason, alongside Russian passengers, Asians are also among the main target group. Their willingness to spend above average make them shoppers with particularly high potential. At the same time, Asian customers are very focused on price and compare the prices in duty free shops with alternative offers online, which is why attractive prices need to be the focus.”
Alongside other initiatives to boost spend, Imperial Duty Free at Moscow Sheremetyevo will join the loyalty programme Heinemann & Me from October.
The role of duty free
During a tour of the stores, Ponomarenko told The Moodie Davitt Report that duty free was a vital driver of revenues. He said: “The share of duty free within our consolidated revenues is around 27%. But most important for us is to ensure the comfort of the passengers. We do it for their pleasure. One of the goals was to create a unique atmosphere so people don’t think they are in an airport.”
The next phase of development, as noted above, is the planned opening of a new Terminal C by December 2019, with capacity for 20 million passengers. This will include over 2,500sq m of retail space, with around 400sq m allocated to arrivals duty free. Beyond that will come Terminal C2 by around 2022, and a further terminal later.
The airport company said it expects traffic to double to around 80 million within the next decade. Last year Sheremetyevo handled 40 million, a surge of +17.8% year-on-year, buoyed by the expansion and fleet investment of core user Aeroflot.
Imperial Duty Free management was upbeat about the outlook for the business. Director Sales Eastern Europe & Central Asia Bernard Schlafstein said that arrivals duty free was expected to be up and running early in 2019, though the timeframe is not fixed. This follows legislation passed earlier this year to introduce the channel.
Imperial Duty Free management estimated that arrivals could add around +15% to revenues. Claus Heinemann said: “I’m very proud and overwhelmed with what we have achieved here. It’s a great honour for me to be here to open this wonderful shopping environment. It is at a high international standard for shopping. Not only that: I would say it’s the best shop I have ever seen and that is why I’m extremely proud.
“To have so many international brands is testament to the great success of our partnership here. We have achieved strong growth in turnover but also in developing new shops. It’s a great example of Russian-German collaboration and of what we can achieve.
“There are ups and downs in this market. It is changing all the time so you have to be flexible but having the right partner helps. We expect a strong uplift in the business. Even at times when the Rouble not strong, Russians still spend a lot.”
He concluded: “This is only the beginning. We have great projects planned together and believe in the long-term future of Sheremetyevo as a strong international hub. The outlook here is very positive.”
