Baku Shopping Festival: 30-day boost for economy and tourism

The first-ever Baku Shopping Festival has set a momentum for economic, tourism and business growth for the capital city of Azerbaijan.

The 30-day shopping extravaganza offered its participants a whole lot of options: shopping, entertainment, food and street performances during the city’s busiest time of the year. Many city malls offered special discounts, Tax Free, and temporary pop-up shops presented a broad range of Azerbaijani and foreign brands.

The next edition of the Baku Shopping Festival scheduled for October promises all this and more.

The first shopping festival has played a very important role in raising the profile of Baku as a premium shopping and tourist destination, say the organizers.

The festival brought revenues worth 5.6 million manats ($3.3 million) to the state budget, Culture and Tourism Minister Abulfas Garayev said at a press conference in Baku May 24.

The minister added that the revenues surpassed the volume of funds spent for organization of the shop fest.

“We expected the state budget revenues from organization of two shopping festivals by late 2017 would be around 40-50 million manats ($23-29 million). Moreover, we expected certain expenses for organizational work and advertising,” the minister said, adding that however the real figures were different.

“A short period and a sufficiently tight budget gave us other figures in another recalculation. So, only 700,000 manats ($413,000) was spent from the state budget for holding of the shopping festival, while total expenses did not exceed 1 million manats (about $591,000), which means that the revenues exceeded the expenses by almost six times."

Garayev noted that this indicator is quite successful, since such an event is being held in Azerbaijan for the first time. "We also have carried out a customer satisfaction survey. The survey revealed that 98 percent of the participants appreciated this festival,” added the minister.

During the festival period about 260,000 tourists visited Azerbaijan, Garayev stressed.

"As many as 187,577 tourists arrived in the country in April. Compared to the same period of the previous year, the growth was 23 percent from 15 target- countries,” the minister said. “Moreover, on the first 10 days of May some 70, 776 people visited Azerbaijan, and this means an increase of 32 percent.”

The minister went on to say that the number of participant stores is planned to be brought to 500 during the next edition of the festival.

“The stores were offering various discounts within 30-70 percent,” the minister noted. “According to the information received from the festival participants, the volume of sales in stores of premium clothes and accessories increased by 15 percent, in stores of mass-market brand clothes - by 46 percent, and in stores of consumer electronics and household appliances – by three times compared to figures of April 2016.”

Garayev mentioned that 1.8 million manats ($1.06 million) of VAT were refunded to customers at the Baku Shopping Festival held from April 10 to May 10.

“As many as 205 stores joined the first Baku Shopping Festival, and 172 of them took part in the VAT refund program,” Garayev said. “Thanks to the Tax Free system, buyers received 23,242 invoices, the total turnover of which amounted to about 18.17 million manats ($10.7 million).”

The VAT rate in Azerbaijan is 18 percent. During the festival, a buyer [Azerbaijani citizens or foreigners] had the VAT refunded at the banks in case the amount of the purchased goods exceeds 100 manats ($59) [including VAT]. For VAT refund services a commission of 20 percent of the refund amount was charged.

The rules for VAT refund within the framework of the next shopping festival in Azerbaijan may be changed, according to Garayev.

He said that the changes will mainly concern the period of VAT refund and the promotion of non-cash settlements.

Deputy Taxes Minister Sahib Alakbarov, in turn, said that the VAT refund during the second Baku Shopping Festival will be carried out not only through branches of banks.

“Despite a sufficient number of branches of banks involved in the VAT refund process, there were queues during the last days of the festival,” he said. “To solve this issue, we are developing a system that will allow the VAT refund through ATMs. When registering an invoice, the buyer will receive a special code through which he/she can receive his funds through any ATM of authorized banks.”

The deputy minister added that work is underway to create the appropriate software. "This will avoid queues and greatly facilitate the process for buyers," he said.

The Shopping Festivals are being promoted as tourism products worldwide, thus attracting large number of tourists to the country. Recent years have seen the shopping gaining greater significance in tourism, given its contribution to the retail and tourism sectors of a destination.