How will the Long-Haul, Low-Cost Revolution Impact Duty Free?
For years, the mantra at duty free shows, workshops and conferences has been one of almost relentless premiumisation. The idea is simple enough – the industry should focus its efforts on targeting the growing number of high net worth individuals flying abroad, while persuading less well-heeled travellers to trade up to higher-priced goods. Follow this strategy, so the theory goes, and the value pool of this high-cost trade will grow for all stakeholders.
At the recent TFWA World Exhibition, a very different idea was doing the rounds. Some commentators are referring to it as ‘mainstreamisation’. In a fascinating press briefing during the show, Vincent Boinay, Managing Director of L’Oreal Travel Retail, a company synonymous with high-end beauty brands such as Lancome, Yves St Laurent and Giorgio Armani, summed up this new thinking well.
He highlighted the growth of low-cost travel in Europe and the region’s flat-lining travel retail performance He stressed the growing need for L’Oreal to balance its offer of luxury brands with accessible products for a growing band of ”low-cost, democratised passengers”.
Boinay´s comments were timely. They come at a time when the wider industry is grappling with the conundrum of rising passenger numbers and falling spends per head. This issue is a complex one, of course. But one of the key reasons for declining basket sizes is the growth of low-cost travel, which is now entering a new era as the long-haul, low-cost (LHLC) business sector rapidly expands.
The low-cost airline model, pioneered by Southwest over 40 years ago, based on principles such as efficient working practices, the unbundling of air fares, point-to-point services and quick turnaround times, has grown to take a substantial 30% share of the global aviation industry. And it continues to grow in every region. Now the saturation of short-haul LCC markets, untapped demand for cheaper, long-haul travel and the development of fuel-efficient planes such as the Boeing 787 and Airbus 350, have seen carriers such as Norwegian, French Bee, Eurowings, Jetstar and Air Asia X all begin popular long-haul services.
