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China-friendly Goods Niche Emerges in Russia's Duty-Free Sector

Soaring mainland visitor numbers sees new sales opportunities in duty-free outlets across the Russian Federation.

Photo: Runway success: Mainland buyers look to land a bargain in Russia’s duty free sector.
Runway success: Mainland buyers look to land a bargain in Russia's duty free sector.
Photo: Runway success: Mainland buyers look to land a bargain in Russia’s duty free sector.
Runway success: Mainland buyers look to land a bargain in Russia's duty free sector.

Not long ago, the notion of Russian retailers targetting Chinese consumers would have seemed perverse, if not laughable. Post-2014, however, with Russia and China's closer political and economic alignment – a development formalised by the signing of an enhanced Strategic Partnership in May of that year – a very different reality has emerged. This has seen the rising number of mainland arrivals actively wooed in outlets across the country, not least in the retail sector that has emerged as the front line in trade with these high-spending visitors – the country's duty-free shops.

Last year, Moscow's Sheremetievo International Airport welcomed some 1.55 million passengers heading either to or from China. This included some 591,000 transit passengers, who were either bound for Western Europe or returning home to China via Moscow after stays in London, Paris or one of the continent's other popular holiday/business destinations. This volume of transit passengers has seen Moscow overtake both Frankfurt and Amsterdam to become the leading Europe-to-China hub, with the two other airports handling some 534,000 and 451,000 passengers, respectively.

As any regular patron of Sheremetievo will testify, many of these mainland passengers are only too keen to avail themselves of the airport's duty-free services. As well as buying the staple offerings of such outlets – cosmetics, alcohol and chocolate – mainland fliers also spend heavily on branded and premium goods, most notably jewellery, fine watches, designer fashion items and accessories. While a wide range of brands and models are available, there is, however, still a notable lack of tailoring to the specific preferences of mainland buyers, even though much of the promotional material at such outlets is already produced in Mandarin variants.

A clear consequence of this more active pursuit of the RMB has seen the existing China Friendly Programme – an initiative aimed at making mainland visitors more welcome and providing Chinese speakers in local shops and hospitality providers – move up several gears. While the Russian Tourism Authority-backed programme has been widely supported by many hotels, retailers and restaurants, Sheremetievo is the first Russian airport to have fully implemented its protocols. This is seen as a logical move for the terminal given its high volume of mainland passengers and its gateway status.

Indeed, Aeroflot, Russia's flag-carrier, now offers 10 flights a day from the airport to destinations across China, with a number of Chinese airlines – including Hainan Airlines, China Southern, China Eastern and Air China – also offering daily departures. As a consequence, and in line with the requirements of the China Friendly Programme, all of the airport's signs and directories feature Chinese translations, while announcements related to China-bound flights are repeated in Mandarin.

Additionally, China UnionPay cards are accepted throughout the airport, while all restaurant menus are available in Chinese versions, as are Sheremetievo's website and mobile app. The airport has even looked to exceed the programme's stipulations by guaranteeing the presence of at least one Chinese-speaker in every retail and dining outlet, while introducing restaurants offering authentic Chinese cuisine in the transfer and arrival area of Terminal F, the spur serving the majority of in- and out-bound China flights.

For those Hong Kong businesses looking to supply Russia's duty-free operators – with the provision of mainland-favoured goods representing a particular opportunity – it is worth bearing in mind the diversified nature of the sector. With sites ranging from Kaliningrad to Vladivostok and from the Archangel City to Sochi, there are currently a number of both domestic and overseas companies active in the sector.

In terms of a central contact, there's a Moscow-based Duty Free Trade Association, which was founded in the mid-1990s. In terms of procurement, many of the Russian-based players of the sector frequently partner with their counterparts throughout the Eurasian Economic Union in order to secure preferential terms and prices.

In total, Russia has nine international airports, while additional flights to China are offered from two sites in Kazakhstan and one in Belarus. The majority of mainland passenger traffic, however, is via Moscow.

Leonid Orlov, Moscow Consultant

Content provided by Picture: HKTDC Research
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