Tax-free spending by Russians drops again in UK, Europe
today Feb 22, 2019
One group of high-spending tourists that UK upscale stores used to be able to rely on were those coming from Russia. But with Russians’ purchasing power squeezed as a combination of sanctions and lower oil revenue have hampered the domestic economy, spending abroad during January’s Orthodox Christmas holiday was crimped.
Tax-free payments specialist Planet said that UK tax-free sales to Russian shoppers fell by 37% last month after a 22% plunge the year before.
Orthodox Christmas, which falls in January, is a major event in the Russian calendar and is typically marked by travel and spending abroad with affluent Russian consumers who travel at this time of year being big buyers of furs, high-end fashion, watches and jewellery.
In January, as well as overall sales falling, Planet said average transaction values were down as well for Russian shoppers, dropping more than 9% to €312. The UK seems to have suffered disproportionately from Russians scaling back their spending with other European destinations seeing a smaller, but still substantial, decline of closer to 20%.
And while the reduced spending in January would have been a blow to retailers, there are hopes that Russia’s love of International Women’s Day next month could spark an uplift in sales.
International visitors generally are crucial to UK retailers, particularly in places that are tourist magnets such as central London. Non-EU tourists in Europe and the UK spend on average 3.7 times more than local shoppers.
But, as mentioned, low oil prices and five years of economic sanctions have not only reduce the income of affluent Russians in the domestic market, but have cut their spending power abroad. Since sanctions were imposed in March 2014, Russia’s currency has fallen in value by 34% against the euro and 30% against the pound, even though the pound itself has been weak due to the UK's decision to leave the EU.
“Russians have historically been one of the biggest-spending visitor nations for retailers in the UK and mainland Europe, so a reduction in purchasing activity among this key group is felt acutely by merchants,” said David Perrotta, UK Country Manager at Planet. “These figures are illustrative of the economic pressures that Russians are facing, and for the retail sector it’s crucial that they put effort into attracting a wide mix of international shoppers to mitigate this.
“We know that the average spend of a non-EU shopper in Europe is 3.7 times that of a domestic consumer. This is a huge opportunity for retailers that put measures in place to capture their share of this vast international spend. We’ve found that providing cultural training to retail staff in store can lead to an average 10% to 20% increase in conversion of sales leads to actual sales made to international shoppers in stores. At a time when domestic retail markets are slowing, it is imperative that merchants and brands focus on attracting the international shoppers who are playing an increasingly significant role in the sector’s performance.”
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