The eyes of the world have been fixed on Russia during the FIFA World Cup. But for those of us in the global travel retail sector, a much more exciting game is taking place with Russia as its newest player. By Planet CEO Patrick Waldron.
RUSSIA. On 11 April this year, international payment service provider Planet (formerly Premier Tax Free) issued its first electronic tax free refund form in Russia. This historic announcement was incredibly exciting for us, as Planet is one of the main tax refund processors to operate in the country. It opens up a wealth of opportunities for tourists, merchants and partners to explore.
Russia is renowned for lavish goods like fur, caviar and seafood, but equally for high fashion, watches and jewellery. As such, it has the potential to disrupt the status quo of major European shopping destinations that currently dominate the luxury shopping space, such as the UK, France and Italy.
It will be interesting to see how other European shopping destinations rise to this challenge and contend with a new competitor in this space.
In recent years, Planet has charted the rise of the middle classes and free independent travellers, especially in high growth markets like China, India and Brazil. They are more likely to travel further, spend more, and look for products and experiences unique to the country they are visiting.
Therefore, the move into tax free shopping presents a significant opportunity for Russia to market itself to the millions of tourists that travel abroad every year, with shopping high on their agenda.
Not only does Russia’s history, culture and reputation for luxury products make it a compelling destination for tourists with a taste for the finer shopping experience, but the statistics also stack up in its favour. While outbound tourism in Russia is down; inbound tourism is up.
For example, in 2016, Russia saw 18 million tourist arrivals that would have been eligible for tax refunds, and this figure is set to grow. Planet predicts that arrivals to Russia will increase to nearly 19 million people in 2018. This figure represents year-on-year growth of +6.7% and is greater than any other major European shopping destination.
The potential here is clear. Planet has appointed a country manager, Andrey Silantiev, to provide on-the-ground support and establish a presence with retailers, merchants and partners who want to markedly improve the shopping experience they provide to their international customers.
Today, travel and tourism is estimated to represent just under 5% of Russia’s GDP. But Planet predicts this number will grow in the coming years thanks to the new opportunities that tax free shopping will bring.
Tourists from outside the EEU (Eurasian Economic Union) will be more likely to visit now they can receive up to 18% as a tax refund on goods up to 10,000 rubles (€130).
One of the main source markets for all shopping destinations, and increasingly for Russia, is China. Travellers from that nation will be happy to hear this news. While Chinese tourists come third behind Ukraine and Finland in terms of arrivals, they are widely recognised as one of the most important source markets in terms of spending power.
The depreciation of the ruble increases the attractiveness of Russia as a destination to shop and with Chinese tourists’ high propensity to spend, they are welcome visitors to the stores of Moscow and beyond.
One of the benefits Planet provides to partners is expertise on how to cater to international tourists; something Russian retailers will be increasingly focusing on. For example, the UK retail sector is currently facing one of the most challenging climates of recent years with several major high street retailers issuing profit warnings or closing down altogether. While British shoppers are not frequenting the high street as they used to, international visitors are proving to be the knights in shining armour that the retail sector is in dire need of.
Cities across the UK, from the shopping meccas of London and Bicester Village, to other major cities like Manchester, Birmingham and Edinburgh, optimise their marketing campaigns to target high net worth international shoppers during such major holidays as Chinese New Year, Ramadan and Thanksgiving. It means they can be well prepared to welcome these tourists to their stores and formulate highly targeted campaigns to encourage them to spend more.
The FIFA World Cup represented a unique opportunity for retailers in Russia to capitalise on the millions of tourists flocking to the country for the event.
Russia is a significant opportunity for the global travel retail sector – from travel agents to brand marketers. It is a time to assess how to take advantage of this new market, while ensuring that the customer experience is as rich and as rewarding as possible.
Shoppers expect quick, hassle-free refunds that don’t disrupt their enjoyment of the Red Square or The Winter Palace, but instead enhance their experience of visiting the country and, crucially, encourage them to return in the future and spend more.
Patrick Waldron is CEO of Planet (formerly Premier Tax Free), an international payment service provider. Find out more here.