Indigo Duty Free. The Last Dream of Sergey Vykhodtsev
This case was supposed to appear a year and a half ago, but it did not appear, because a few months after its launch, owing to the political crisis, the project had lost investment and ceased to exist. In summer 2016, its creator and chief ideologist, Sergey Vykhodtsev, died. In memory of the famous Russian entrepreneur and our long-time partner, we have decided to tell about the most ambitious and, probably, the most inspiring project in his career – Indigo Duty Free.
The Beginning
In 2012, when it was just the initial stage of the Indigo project, Sergey was already known as an entrepreneur-innovator – it was he who invented a soluble drink Invite, fast-food porridges Bystrov, and oatmeal product Velle. As with all Sergey’s projects, Indigo Duty Free was expected for at least to become a new product niche, at the outside – a new look at business in Russia.
“For the first time, Sergey Vykhodtsev started to talk about the idea of establishing the Indigo project in 2012, shortly after he began to actively engage in the duty free business in Russia. There was a great number of rational business prerequisites to this, but, as in all Sergey’s projects, the main driving factor was his tireless desire to radically change the market we worked on,” recalls Yulia Meshcheryakova, Indigo Duty Free project manager.
The Mildberry Agency, a long-term business partner of Vykhodtsev, became a general contractor, which had consolidated the development at all stages – from establishing a business model and developing a brand to implementing the project and carrying-out communication programs.
Idea Birth
Go shopping duty free before going abroad is sacred. Everyone knows this circle of honour among the shelves with elite alcohol, clothes, perfume, and accessories. However, as statistics shows, only one in five air travellers makes a real purchase in duty free shops. People basically buy alcohol, cigarettes, and at most something not very cumbersome from cosmetics and perfumes.
Meanwhile, luxury brands of clothing and accessories stand idle, since Russian duty free zones are rather showrooms for them, which can hardly provide huge sales. It is clear that a person flying abroad will rather choose to buy a thing there or, in extreme cases, at a foreign airport when returning home. By the way, travellers returning home are the main target audience of all clothing stores in duty free zones.
What was it that attracted Vykhodtsev, known for his national scale projects, to such a limited market of the Russian duty free?
The businessman was convinced that the travel retail market contained a huge potential in case of going beyond the existing duty-free space and selling duty-free goods at duty-free prices not only at airports, but also online. This was the Indigo business idea, the only thing remained was to go beyond the existing space of duty-free trade.
“Five years ago, the idea had been provoking questions and confusion, especially among partners from the duty free industry. It has to be said that at that time none of the Russian duty free operators could boast with a normal business card site, while the sale through the Internet caused a storm of scepticism and was actually impossible, primarily because of the legal restrictions,” continues Julia. “Nevertheless, everyone had an understanding that it was impossible to keep on working as before, so the idea had been ultimately given a green light.”
For Mildberry, as always in the work with Sergey Vykhodtsev, the project did not start with the usual brief for the agencies, but with the business idea, which still needed to be formalised in the business model: to understand what to sell and how, to build customer scenarios, to plan and to organise the space, to develop a brand, designs, communications, to set standards of service and so on.
The Business Model
As a result, the Indigo business model turned out to be unique: this had neither been practiced in Russia nor in the world. Indigo had turned upside-down the format of the traditional duty free – the airport ceased to be the main sales channel, it became the centre of the formation of consumer experience and the place for recruiting the audience. While the online means had become the main channel of sales.
Each passenger flying abroad, having registered in the Indigo Duty Free, could not only buy something in the zone of the duty-free trade, but also received a unique opportunity to purchase online duty free goods for a certain amount of money during a certain period of time and with a service of home delivery.
We had placed stake on luxury brands of clothes and accessories, as well as on perfumes and cosmetics. It was planned to build five Indigo stores, the first appeared at the Sheremetyevo Airport, terminal E.
The Indigo model included several integrated components: identification of the audience from the beginning of the trip planning, escorting it to the airport, attracting to the stores, and creating services that involve the audience in interaction offline and online.
Indigo also expanded the possibilities of the buyer in the usual duty free space. For example, there was a pre-order system, as well as a service that gave recommendations about places for shopping at the point of destination of the traveller with an approximate order of prices for various goods, which, among other things, were sold in Indigo.
It is important that for the passengers who visited our stores at the airports, the choice was not limited to goods that were available in the store. Spaces at airports simply do not allow fitting everything, but the consumer received an expanded assortment due to the possibility of online shopping. It was a full-fledged omnichannel model, integrating online and offline and creating a continuous experience of consumer interaction with the brand. We had designed several detailed O2O customer journeys for different types of customers in order to customise offers and make shopping at Indigo as convenient and exciting as possible.
We had a unique opportunity to work with a consumer who had free time and was inclined to communication and potential purchases. Such a consumer is ready to reward himself or herself for overcoming the stress caused by packing goods for travelling, rushing, passing registration and customs procedures. We just needed to cleverly take advantage of this opportunity.
A Proposal Impossible to Refuse
From the very beginning, we perfectly understood that the implementation of such a complex project would not only require serious efforts in overcoming the administrative barriers implied by a zone of duty-free trade at airports, but also the need for special arrangements with the owners of brands, because the idea conceived destroyed the usual course of things, going beyond the existing format of travel retail.
The main challenge associated with attracting brands to the project was that the world market of premium brands, as well as the duty free market, has always been and remains extremely conservative. Brands do not conclude even the most profitable commercial contracts without the established trust to the partner, but to do this often takes years. In our case, we had only 6 months to attract for at least 50 premium brands to the project. How did we manage to do this?
“We were able to competently play with modern trends that could not be ignored, working even in the most conservative markets,” Yulia Meshcheryakova said. “It used to be that the experience that the consumer receives from direct visits to the Valentinio or Versace store can not be substituted, because this is part of the brand code and actually the essence of a luxury purchase. But the world has changed a great deal. Fashion lovers still want Louis Vuitton and Burberry, but will gladly make a purchase not in the physical store of the brand, but in an equally attractive online boutique, and at that, it will be faster, more convenient, and, most importantly, cheaper.”
In 2012, some successful projects had already been present on the market, among them, there were net-a-porter online store and Yoox, to where all brands wanted to get into, while Burberry, for instance, had independently launched its online boutique, which to this day is considered one of the most modern in the world. We decided to follow the same path.
On the one hand, we offered the brand a presence on one of the traditional markets most attractive for the brand — the travel retail market, providing access to the most solvent and interesting audience for the given brand. Vykhodtsev called it brick-and-mortar, the term literally denoting the presence of a physical point of sale. In addition, we managed to get one of the best sites in Russia – the Sheremetyevo International Airport. On the other hand, we allowed brands to use Indigo as a test platform and a platform for a trouble- and risk-free online experience. And the approach worked. With each brand, it was necessary to meet and “sell” the concept of Indigo. They were delighted with the project!
Among the brands that joined the project in the early stages were Alexander McQueen, Blumarine, Armani, Versace, Chloe, Moschino, Diana von Furstenberg, Valentino, and DKNY.
“It is difficult to say that the negotiations were easy, but over half a year, we had managed to attract more than 50 premium brands to the project. At the same time, we had very soon realised that we could get any brand – it was just a matter of time,” Yulia recalled.
It was both a retail project and a marketing technology platform allowing to identify the customer, interact with him or her, accumulate and analyse the history of search and purchases, and give a unique opportunity for brands to interact with audiences, staying within the common framework of the Indigo infrastructure. In fact, Indigo was in charge for infrastructure and services, sharing the function of communication with consumers with brands. It was the possibility of close contact with passengers of international flights all the way from preparation to travel up to the trip itself and after it had become the decisive point for the brands in their decision to take part in the project.
Indigo's Unique Consumer Experience
Just imagine, you are our client, you enter the Indigo Duty Free zone at the airport, and the system recognises you and starts tracking your movement and your actions. Each brand represented in Indigo had its mini-space and interactive display with an identification system integrated into a single digital platform. Each interactive display was a multifunctional portal, an entrance into the space of Indigo’s opportunities and into the world of the brand. We called these displays gates. Each brand had its own gate. Each gate recognised you, it knew what you just did at the neighbouring gate and customised the offer for you on the basis of this information. Primary identification was carried out in accordance with the boarding pass, then, with the map of the store, or by the Indigo mobile application.
In a few clicks you could put the goods you liked in the electronic basket, buy them, and order delivery to the house upon your return, not to carry them with you during your trip. Additionally, you could register and get access to the same duty free store for a couple of weeks, so that you could make online shopping more thoughtfully at home with a chance to buy the same high-quality branded goods, but at duty free prices and with home delivery.
The goal was to transfer the traditionally impersonal format of travel retail to a new, emotionally deep level and form the so-called “seamless” experience of interaction with a brand. This was a real challenge, especially for the luxury segment, which even now can not boast of an effective experience of interacting with audiences both offline and online at the same time.
Store of the Future
The solutions developed for this project are unique and innovative, each in its field. The project was technologically complex and involved several stages of its implementation, including testing of solutions and their further finalisation.
At the same time, not only technologies were innovative: we devoted a lot of attention to the unique design of the store space. For each brand, its own space was developed with showcasing key products and interactive displays leading to a full catalogue, an online store, and a personal cabinet. Arched spaces of brands, the so-called brand gates, had become the style-forming elements of the store area, dedicated to clothing and accessories. They made space more comfortable and boutique-like, building a store on the basis of the typical format of duty free.
The Future that Failed to Come
It took almost two years for the development and construction of the first Indigo object. In the autumn of 2014, the store opened at the Sheremetyevo Airport, terminal E. Shortly before the launch, foreign investors had withdrawn from the project because of the political crisis that followed the accession of the Crimea. For some time, Indigo had been existing in the form of a traditional duty free shop, but later completely ceased to exist.
“Now, in 2017, I am convinced that five years ago the idea of the Indigo Duty Free had not only been progressive, revolutionary, and promising, but had literally embodied a combination of global long-term trends in several key industries and business areas. We have already become accustomed to viewing and buying goods on large screens when going to Marks & Spenser or McDonald’s, browsing the goods in a regular offline store, and then getting an unobtrusive offer on Facebook to purchase it, but already with a discount. We are used to the fact that Facebook and Google know us and our needs better than our nearest people do, and sometimes, it seems that they even read our thoughts. Hybrid retail, omni-channel, and big data – this is our current reality and the reality of the near future. I am convinced: the rise of the Indigo model is still to come,” concludes Yulia Meshcheryakova.