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ATU DUTY FREE MOVE INTO THE CRUISE MARKET AT GALATAPORT ISTANBUL

Introduction: By Peter Marshall

ATU Duty Free is a well-known and highly regarded global airport travel retailer. This brand new store serving cruise line passengers at the equally new Galataport development in Istanbul, is an exciting departure for the company. It’s still very early days, of course, as the store only opened in April. And there are many new learnings as ATU manages a very different type of customer – both in profile and in shopping preferences. I caught up with Ahmet Kötehne, ATU’s Chief Strategy Office, to find out more.

Peter Marshall (PM):  Ahmet, ATU Duty Free operates the exclusive 750 sq m  Duty Free store at Istanbul’s recently opened Galataport. Can you briefly describe the store layout?

Ahmet Kötehne (AK): ATU’s Galataport operation is a %100 walkthrough concept shop. We have a Turkish local products area which is specially designed to match our Old Bazaar concept at Istanbul Airport. We also have our classic duty free offer with a maritime architectural design.

Interestingly, our store is technically 4 meters below the sea level (below the Bosporus), uniting Asia and Europe. Passengers embarking the ships go through security and passport control and pass through our shop just before using the gates to board the cruise liner.

PM: This store is very much a departure for ATU as an airport operator. What are the key operational differences and what have been your major challenges?

AK: Our managing partner Unifree had some experience in operating the duty free stores at Galataport in the past -before the port was re-constructed. In addition, Gebr. Heinemann’s cruise line supply channel has been active for many years, so we were able to benefit from their combined experience and know-how within the group companies.

From our point of view, the first challenge was cruise liners being much bigger than an average airplane which means, at a given time, there can be 15-20 times more passengers in the store compared to an airport store. Managing human resources for the same service quality while maintaining profitability is a big challenge, but we have learned to adapt to these situations in our seasonal operations, namely Bodrum and Gazipaşa. Also, our Istanbul Airport operation serves as a back-up for staff. When bigger ships are in the port, we serve with more sales staff on the shop-floor to ensure excellent sales service quality and optimal waiting times at the cash desks.

Secondly, there are different kinds of policies by cruise companies limiting sales. Duty free spirits consumption on board is often not allowed, therefore sales potential is not realized as much as we want. In certain instances we observe that the crew does not disembark and go on land.  However they are still counted as passengers and this reduces the overall penetration and sales figures.

PM:  Picking up on what you said earlier, the category mix is different. Turkish products, for example, appear to represent some 50% of the space. How do the sales by category actually break down?

AK: Close to 40% of our sales are generated by Turkish products, followed by tobacco, fragrances and spirits. While making the business plan, we also expected that the Turkish products would be the leading sales category. There have been some cruises since October 2021 but continuous traffic effectively only started in April 2022, so we are still observing the share distributions between categories.

PM:  So who are your principal customers? It’s a walk-through store. Every cruise passenger has to go through it to return to their ship. I noticed when filming that they were mostly American and over 60 years old. But are they spending and what is the average spend per head? And if they are not spending, who are?

AK: The regular cruises are still at an early stage to make a thorough analysis for spend per passenger, and we observe rapid shifts in historic data mainly because of the COVID recovery. But true, as you mentioned, the average age of customers are much higher than the averages at airports.

Currently we use several segmentation models: passenger type, nationality and cruise-liner company.

Both passengers and crew are allowed to shop from duty free and they seem to have different shopping habits.

Passengers are generating over 80% of sales so far and it’s true that more than half of our passenger customers are Americans, followed by British and Germans. SPP by nationality data is not available yet, but we can comfortably say that Europeans who are more accustomed to duty free shopping are better spenders than Americans.

On the other hand, crew have a different category preference: fragrances, Turkish local products and sweets are the preferred categories for them. 

We are also working on segmenting customers by cruise-liner company.  SPP levels do vary between cruise companies, indicating different spending behaviors based on the customers each company caters to.

PM:  Major brands for liquor, tobacco, fragrances and cosmetics and confectionery are well represented. You are obviously on a learning curve with the store. Retail has to be agile. What changes do you expect to make? Would a selection of more high end leather goods be on the table for consideration, for example?

AK: The Turkish local category is proving its promising stance already, but we are also aware of the competition with the domestic market. We believe that the spending power of certain customer segments are evident and would like to extend our product offer to them with higher-end sub-categories and more variety – namely leather goods, rugs, carpets and souvenirs. 

We already have a humidor but due to limited global supply in cigars, this category could perform much better in the future when logistics and production problems are resolved. 

Lastly, affordable luxury accessories such as watches and bags are in scope of our improvement plan along with travel accessories for suitcases. 

PM:  What can you do to build awareness of the shop to visiting passengers to buy – especially given that there are competing duty free shops on board as well as the other port shops the ships dock at? Does the fact that the ships berthing at Galataport are only at the midway point of their cruise and therefore that the passenger inclination to buy is not a major priority?

AK: Due to the layout of the terminal, the majority of passengers see our shop when they disembark at Galataport so they are already aware of the duty free offer being present at the terminal on their way back. We also cooperate with Galataport, using various communication channels jointly to increase awareness. 

We are also working on special promotions for staff as they will be our frequent and regular customers.

PM:  Thank you, Ahmet. Very interesting and look forward to monitoring ATU’s progress here. Finally, if there are three things you would like to communicate to our readership, what would they be?

AK: The main message is that we are happy to be getting over the COVID crisis. It has been a very difficult several years and we can clearly see on the faces of the passengers that they are happy to be traveling again. The second point is that it is a pleasure to be talking with you again and opening up our communication channels and interacting face to face. A final note would be  that COVID was a great learning experience where we had a chance to re-evaluate our risks, truly appreciate our values, and invest in what is important for our customers.