In days of yore three words were synonymous with international travel. Duty free shopping! The cash register in your head would be ticking over as you raced to the airport early to complete check in procedures, which would allow more time in the duty free shops. Today , more people than ever travel internationally but media reports suggest what those in the business already know: duty free shopping is losing its appeal and sales per passenger are falling as well as the numbers on converting travellers into shoppers Why?
Sameness = Sterility
One reason is sameness. Duty free shops at worldwide international airports have in the main become sterile environments – devoid of personality, imagination and all offering the same goods. If you took a group of travellers, blindfolded them and dropped them into a duty free shop , they would likely have no idea of which airport they were in because ninety percent of the products are the same – regardless of airport or country. There are exemptions based on the size of the airport or regional demands – for example, space given to watches in the Middle East, liquor in India, or fashion in UK airports. But sameness dominates.
Lack of imagination in reinvigorating duty free sales has been aided and abetted by some countries introducing GS T ( or VAT), which saw the removal of import duties and taxes. Suddenly duty free shopping was not the bargain it once was. Then along came the Internet, which opened up a Pandora’s Box of shopping – shopping which could be done in your own home and delivered to your door. The big retail companies responded by offering enticements to customers. For example, many Australian friends no longer buy duty free alcohol. Why? It’s not because they had an epiphany and became teetotallers. It was because they could buy their alcohol cheaper at liquor retail outlets, such as Dan Murphy. Recently when shopping in Marks and Spencer in London (which is not a discount retailer) I bought a fashionable premium gin. I made a point of checking the price of this product at the duty free shop at Heathrow. The price difference was only a few quid. So much for duty free pricing!
More Pain, Less Gain
While on the subject of alcohol, buying duty free alcohol can be a pain as terrorism has led to the limitation by some airline s and airports not allowing alcohol to be taken on board, especially when transiting . There is nothing more distressing than seeing that bottle of single malt you purchased at duty free before boarding the next flight being binned. The industry is now seeing the next phase of frustration e . g PCs in the cabin being banned .
Volatility of currencies and exchange rates also add to the misery of the duty free shopper. And let’s not forget, the increase in travellers has resulted in longer check in, immigration and security queues, all of which cut into valuable time that could be spent duty free shopping. These queues also have the potential to increase frustration levels to a point where you say “stuff the duty free” and head to the nearest bar for some fortification before having to queue to board the flight. Flying into many large airports you end up being dropped on the tarmac and being bussed to the terminal building, then standing over an hour for immigration . Arrival duty free still awaits you – if you still have any real desire to buy.
Companies invest heavily in duty free retail and are expected to pay more and more for their space – leading to bigger financial risks .
Suppliers are then expected to respond with investment, whilst the airports rely more on retail and less on airlines for their much-needed return on investment. So who is subsidi s ing whom? Are the airlines the beneficiary or is it the traveller? Or neither?
Despite heavy investment, duty free retail is just not exciting the traveller. Airport shopping is no longer a priority. Market penetration, for example, buyers as a percentage of travellers can be as low as ten per cent in some airport s . A nd in cases where it’s around twenty five percent, buying is driven by the high duties on liquor and tobacco at home destinations.
The Current Business Model Simply Doesn’t Work
In the current retailer/airport/supplier business model, focus on the consumer seems to have been lost and the will for the industry to respond also seems to have been lost. If a business model isn’t fully working, resting on our laurels is not going to make it work. We need to be proactive. It is time for duty free retailers to ’ sex up ’ the industry and fight back. Make travel retail a destination , not something you walk through on your way to somewhere else.
Two Steps That Will Make A Change
Transforming a business model is not easy but as Lao Tzy told us, “a journey of a thousand miles begins with a single step.” I have two suggested steps to begin the big fight back by travel retail.
One, lets rewrite the retailer/airport/supplier business model and put consumer back in there. Write a customer oriented marketing plan, which eliminates sterile conservatism and focuses on entertaining and enthralling our customers from arrival to departure. There are lots of great ideas out there. Mumbai airport has over a kilometer of Indian art and history for passengers to peruse. At Bandaranaike Airport D uty F ree in Sri Lanka, female staffs wear saris and they welcome all customers at the front of the shop. Finding the seamless experiences , however , have eluded me on my seventy flights a year . Staff/space ratio is important. On a recent trip in Europe I noticed during a busy period in a large duty free shop the ratio of staff to space was 1 per 100 square meters in the fashion area . Bad, really bad!
Secondly, get rid of the sameness. Same, same, same equals boring. Expand the space for and the presence of local products and/or regional strengths. Create realistic rent structures to do this. In my experience in the many airports I’ve worked , this category always grows exponentially given more space. Recently flying through Athens international airport – which was not impressive – I was, however, very encouraged with over 50 linear meters of local food, gourmet food, local chocolate and wellness , with a further area given over to local wine.
At last year’s Trinity Forum Conference , the core subject was the threat of technology on travel retail. A video was played of the launch of a Bollywood movie in Mumbai’s duty free shopping area. After the movie there was a show of hands on who was optimistic about the growth in the business we were all in – travel retail. I t was hearten ing to see that most hands in the room went up. Thank God, some of us still have faith in the future. But we need to do something meaningful about it, not just play with words or scratch the surface.
By: The Whinging Pome