The decline in Russian travelers has been cited as one of the major problems for the travel-retail beauty industry, and the situation is not looking to get better any time soon. According to market-research firm Euromonitor International, Russian travel saw a 15% contraction in 2014.
“This downward trend is expected to continue as the Russian economy contracted in the first quarter of the 2015. Consumer confidence fell to its lowest level in six years as a result of the conflict in Ukraine and ensuing international sanctions, compounded by falling oil revenues,” explained Euromonitor International head of travel, Caroline Bremner. “Falling outbound Russian demand had a knock-on effect on destinations far and wide, including Turkey, Greece, Switzerland and Thailand,” she added.
A sharp fall in the Russian ruble added to the woes, causing shopping by Russian consumers to plummet over the past year. M1ndset owner and CEO, Peter Mohn, remarked: “The ruble was freefalling in 2014. By the beginning of 2015, it was worth a third less against the dollar than six months previously. This alone explains why products priced in US dollars became unaffordable to Russians. The main reason for the decline of duty-free purchases has been the decrease of the ruble versus the dollar and the euro. This has significantly raised the price of airport products compared to downtown.” He continued: “Additionally, the crisis has made Russians more price sensitive. Many who didn’t compare prices before are doing so today. Nowadays duty-free prices are considered relatively unattractive, and many Russians either do not purchase at airports anymore or just buy what is really necessary.”
For beauty house Guerlain, the dip in Russian travelers impacted the company on all levels as the brand is strong in Russia in the three categories of fragrance, skin care and make-up. But Guerlain Managing Director Travel Retail Worldwide, Philippe Guitelmann, emphasized that while the decline in Russian spending is definitely hitting the business heavily, it is not easy to assess precisely the level of impact outside Russia. “It is even more difficult to predict what the second half [of the year] will be like considering the fact that one euro is now worth 55 Russian rubles, when it was above 70 in early 2015,” he explained. “Our estimate is that this could cost the global travel-retail market as much as two points of growth this year.”
To read BW Confidential’s full report on Russian travelers please click here.