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.
