Russia and China favor duty free stores most

Buyers from Russia, China and Brazil purchase more items of luxury brands in the Duty Free stores of largest airports of the world than buyers from other countries. The outbreak of consumer interest has spurred sales, and traders expect a growth of demand in the next two years. In Russia, the number of duty-free shops will increase, but they will be Duty Free shops at train stations.

The success of the representatives of the BRIC countries in the field of duty-free money spending was reported by The Guardian, citing a study by the Swedish company Generation Research. It estimated that sales of perfumes, cosmetics and luxury goods in Duty Free shops in the past three years have increased by 28 percent. Analysts expect sales growth by 25 percent over the next two years, and the total turnover of these stores could reach $44.5 billion dollar.

The study highlighted that the number of stores of luxury brands in the air harbors of the world is increasing. Plans for expansion of airport networks were announced by Tiffany & Co, Estée Lauder and Louis Vuitton.

Stores in the airports where passengers often have a considerable amount of time for shopping bring the largest revenues to the operators of Duty Free. In addition, airports traditionally have good sales of alcohol for flights.

Skytrax called London's Heathrow Airport the largest and most successful duty-free shopping area. On the territory of 48,000 square meters in five airport terminals some 80 international and British brands are housed and visited by millions of passengers. Heathrow has 67 million travelers a year. Last year alone, the turnover of the retailers in the airport amounted to 1.7 billion pounds, or $2.6 billion. This year the number will be even higher, as London will host the Summer Olympics. According to some projections, sales at Heathrow will rise two-fold.

Primarily, major airports sell alcohol, various accessories, perfumes, cosmetics, clothing and footwear. The major buyers of "deluxe" goods are different categories of Chinese consumers.

Personal income growth in China has led to the fact that the urban population in terms of this indicator is approaching the inhabitants of the country's richest metropolis - Shanghai.

China is considered the fastest growing market of luxury goods in the world by brokerage firm CLSA and the auditing firm PricewaterhouseCoopers (PwC).

However, prospective evaluations of the experts differ. CLSA predicts that China will become the world's largest luxury market in 2020, and PwC expects it to happen by 2015. On average, according to a number of brands, China already consumes nearly 40 percent of the manufactured luxury products.

According to the Association of Duty Free Trade, in Russia at the end of 2011 there were over 150 Duty Free shops managed by over 25 major Duty Free operators. By some estimates, their combined annual turnover is around one billion euros.

The number of Duty Free shops in Russia will increase dramatically in the near future. Earlier it was allowed to create such shops within the automotive, aviation, and marine and river crossing points across the Russian border.   

However, in April of this year, Russian Prime Minister signed a decree that allows the "Russian Railways" (RZD) to open Duty Free stores at railway stations.

Duty Free will open at Russian railway stations operating international trains. According to the chief directorate of railway stations Sergei Abramov, over 30 duty free zones can be created that will be funded by private investors. The first such store can be opened at the Finland Train Station in Saint Petersburg.

The rate of return at these stores may be lower on average than in airports. This is due to the peculiarities of the organization of passenger traffic. Passengers spend less time at a train station than in an airport. Moreover, these stores will sell much less alcohol, as there is no ban on bringing alcohol into train cars.

Anatoly Miranovsky


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Author`s name Dmitry Sudakov