Gebr. Heinemann’s 120sq m arrivals shop at Koltsovo International Airport.

The Eurasian Duty Free Association (EADF) has told TRBusiness that Russian travel retailers have ‘positive expectations’ about the future of the arrivals duty free business in the country.

Early last year, retail operators in the country finally received the green light to begin operating the shops in the country based on an order from the Russian government issued on 12 December 2018, as first reported by TRBusiness.

As a result, arrivals duty free stores have opened in 11 airports including Koltsovo, Pulkovo, Platov and most recently Moscow Domodedovo. Most stores are operated by EADF members except at Kazan and Perm Airports. Further openings are expected in 2020 following the ‘positive effect’ of the shops.

Fatima Dzoblaeva, Eurasian Association of Duty Free (EADF) Executive Director told TRBusiness: “Retailers’ expectations remain positive as they know customers will learn more about arrival duty free opportunities in time and that sales will grow.

“Most EADF members report improved sales over the 2019 period for the arrival shops. They are also applying mobile apps and sales platforms to serve their customers by adding different purchasing options and possibilities in arrivals and departures.”

Fatima Dzoblaeva, Executive Director, Eurasian Duty Free Association (second left) and Dufry’s David Grady (third left) at the Nuance Pulkovo St Petersburg Airport arrivals shop.

ADDED VALUE

She continued: “With the threshold for tax free cross-border online orders lowered to €200 ($223) from this month, this will work as an added value to arrivals duty free.”

With arrivals duty free in Russia limited to airports, seaports and river ports — arrivals duty free is allowed at automobile and railway crossing points in other Eurasian Economic Union (EAEU) countries — could the Russian government eventually permit further arrival stores at other check-points?

Dzoblaeva noted: “According to the State Customs Regulator in Russia, current conditions at the land crossing points do not technically allow arrival duty free.

“Automobile crossing points will need a serious reconstruction to gain a required area for arrival duty free shops.”

Assuming all goes well with the arrival duty free stores at the various check-points in other EAEU countries, Dzoblaeva believes the Russian government could follow their example and allow arrival border shops in the country.

“Arrival duty free is allowed at border crossing points in other EAEU countries as there is only one airport in Belarus, Kyrgyzstan and Armenia, while Kazakhstan has two airports,” she said.

“Russia has 22 international airports with departure duty free shops. Last year, 15 arrival duty free stores also opened in 11 airports, of which three have more than one arrival duty free store.

“This means half of Russia’s international airports managed to open arrival stores thanks to a joint effort with duty free retailers.”

Meanwhile, the EADF, which is at the forefront of legislative initiatives in Russia and EAEU legislation — mainly in terms of amendments to Customs regulation, alcohol and tobacco regulation — has plenty to focus on in 2020.

“We still face pending threats of new legislative initiatives that do not take into account the specifics of duty free retailing. This applies to tobacco and alcohol sales that can negatively affect the recovering Russian travel retail industry.”

AMENDMENTS REQUIRED

Though significantly improved, customs regulation, for example still, requires additional amendments. Dzoblaeva explained: “The Customs procedure for the conveyance of supplies, for example, needs to allow time and resource saving for the delivery of goods to airline sky shops.

“There must also be an amendment which allows returned goods from customers to be placed again under duty free and other customs procedures.”

Securing the required approvals is easier said than done, emphasised Dzoblaeva. “This is due to the number of EAEU country members which must agree changes simultaneously. The upside, however, is that the changes benefit the entire economic area at the same time.”

RegStaer has told TRBusiness it plans to open as many arrivals duty free shops in Russia as possible. Pictured here is its walkthrough at Vnukovo International Airport Terminal A.

Dzoblaeva believes the Russian duty free industry must make more effort to attract ‘elite international shoppers’.

“This is also a challenge for the EADF in terms of collaboration with the Russian Tourist Agency (RTA) and further developments relating to the continued increase of Russian inbound tourism,” she commented.

“The RTA manages a federal programme for inbound and domestic tourism development up to the year 2025, within which new tourist facilities and tourist routes will be developed. These will support regional airports with duty free shops.”

One positive is the passing of legislation allowing the implementation of airside smoking lounges in domestic areas at Russian airports during the course of 2020.

Currently, liquor and tobacco is unavailable at shops in domestic flight areas. The EADF is also working on enabling liquor to be sold in domestic airside stores, which Dzoblaeva describes as ‘another big challenge.’

Additionally, luggage restrictions imposed by low-cost carriers effecting duty free purchases is another problem the EADF is trying to solve.

BELARUSIAN BORDER CHECKPOINT STORES

She concluded: “Needless to say, all these issues have an adverse impact on the non-aeronautical income of airports. A lot is being done and we as an association, in partnership with our members, are striving for improved standards and norms to enable further development in Russian DF&TR  and in duty free and travel retail across the EEAU.”

In other regional news, duty free stores are set to open at several checkpoints on the Belarusian border, following the passing of a decree. The decree will allow four arrival duty free border shops to begin trading at four checkpoints following the completion of a review period, according to Dzoblaeva.

The shops will be operated by MarketLiga Duty Free and be located at Kotlovka (at the border with Lithuania), Novaya Rudnya and Mokrany (at the border with Ukraine) and Kozlovichi (at the border with Poland).

More outlets could follow at other checkpoints should developments prove to be economically effective.