No winter can’t be passed
No spring will not come
– The poignant, powerful message from DFS Group to customers after the initial reopening of its stores in Macau in February 2020 following their temporary closure due to the COVID-19 pandemic.
Introduction: After a three-month transitionary stint working alongside his predecessor Ed Brennan in late 2020, Benjamin Vuchot officially took the reins as CEO & Chairman of the LVMH/Robert Miller-owned DFS Group on 1 January. And while assuming a leadership role for the world’s leading luxury travel retailer in the midst of a global pandemic has brought plenty of commercial, corporate and strategic challenges, Vuchot is upbeat about DFS’ prospects and its sense of purpose.
The company is particularly buoyed by several major recent and planned developments in locations as diverse as Brisbane, Hainan, Paris and Queenstown together with a resurgent Macau business, he told Martin Moodie in an interview at DFS headquarters in Tsim Sha Tsui East, Hong Kong.
“Despite the crisis, I’m still incredibly positive and optimistic about what we do,” says Benjamin Vuchot, speaking to The Moodie Davitt Report at his eighth floor office above T Galleria by DFS, Hong Kong. “With the last 18 months of restricted travel, the urge of people to get back on a plane, to visit destinations, to reunite with businesses and families, and to explore the world is very much there.
“Combine that with the fact that DFS is headquartered in Hong Kong, which gives us incredible insights and access to a unique customer, the Chinese consumer. You can see during this pandemic how much China has developed and I see nothing stopping this acceleration and maturing of a consumer market.”
Add in what Vuchot describes as DFS’ unique positioning in serving the luxury traveller and the reason for his optimism becomes clearer. “We create destinations within destinations by focusing on our choice of brand houses and partnerships to ensure that we are the luxury player in travel retail. I think that’s what defines us,” he comments.
The convergence of the world wanting to travel again; the Chinese consumer becoming more sophisticated and wanting to visit and explore; and DFS’ carefully curated introduction to the world of luxury and luxury destinations mean DFS is emerging from the greatest crisis it has faced with a real sense of opportunity and purpose, Vuchot says.
But he doesn’t play down just how tough the pandemic has been, particularly for the DFS team. “How do we make sure that we have the best teams and that we keep them?” he asks. “We’re lucky to have pockets of normality of business and life in our headquarters in Hong Kong, and with all the great work that the teams are doing in mainland China and North America. But we also have quite a number of our team members who are quite isolated given the low level of activity.
“I think it’s important to remember our 60 years of legacy and the fact that this company was built on passionate people. Our founders [Robert Miller, who still remains a significant shareholder, and Chuck Feeney -Ed] were examples of that and I want to ensure that we remind ourselves of the power of our people and how we keep them going during these times. That way, as things go back to the real normal, we will be here to win again.”
How difficult is such motivation and team building when, in common with all DFS Group’s peers worldwide, the company has had to undergo some painful downsizing? “It’s difficult but it’s also what comes with leadership,” Vuchot replies. “We’ve clarified our priorities and being DFS and maintaining the values that it carries has been number-one priority.
“Thanks to technology and good internal communications, we’ve organised round tables and regular catch-ups to really keep the spirit of what it is being DFS. There is an immense pride of belonging to this company, one that has been celebrated over 60 years, and this is something that we absolutely must retain. It will continue to be the foundation of our future success.”
Vuchot is well imbued in the DFS culture. He first joined the company in November 2011 as Region President Asia North, staying until April 2017 when he assumed the role of President Asia for fellow LVMH Selective Retailing arm Sephora. While relishing those intervening years, he recalls his feelings about taking on the leadership challenge at his former company, “The link created with DFS when I first joined in 2011 was never interrupted.
“Also, I think the experience I gained in my three and a half years with Sephora was incredibly valuable for what we want to do with DFS today, particularly in two areas. I spent a lot of time in China and witnessing from a consumer perspective the revolution that is going on. That was incredibly insightful.
“The second thing was this passion for digital innovation and a lot of it being driven by Chinese tech, which was an immense discovery personally for me. I had the realisation that whatever business you are in – and particularly after COVID, which has accelerated those trends – there is a lot more to do in those digital areas than whatever we were doing before.
“So I don’t think I’ve ever left DFS! You know, it’s such a passionate company and it has so much life. It’s a unique business and something that I’m very attached to. I was very lucky and privileged to be welcomed back and so warmly.
“There are few global companies that are headquartered in Asia that have this ability – particularly in these times – of not only being able to witness the amazing potential of China but also continue to take part in great developments in the rest of the world. That is what makes it an incredibly interesting challenge.”
As the pandemic struck China in early 2020, DFS found itself in the front line of the crisis. On 25 January, Hong Kong, home to four DFS stores, declared a State of Emergency. Guam and Saipan, both key DFS locations, banned visitors from China for 30 days.
That was just the beginning. As the Hong Kong and Macau Special Administrative Regions experienced imported cases brought in by residents returning home from overseas, Macau shut its borders to gamers and other mainland visitors and Hong Kong imposed strict restraints on incoming visitors. The seven Macau stores, so crucial to DFS, were closed for 15 days in February in line with the casino closures while Hong Kong largely sealed itself off from the rest of the world
Roll forward 15 months though and the situation in Macau, DFS’ modern-day commercial heartland, looks very different. The Mainland-wide resumption of Macau’s Individual Visit Scheme (IVS) last September, suspended in late January as the COVID-19 outbreak escalated in China, was a breakthrough moment and since then, things have improved steadily.
Macau visitor overnight stay arrivals this April rose +11.3% to 450,579 (total visitors reached 794,819). Of the overnight stays, 300,467 entered from the Mainland via the IVS visa, a peak for IVS-enabled arrivals since the scheme was reintroduced but still way short of pre-pandemic levels. However, spending levels have been outstanding, and Vuchot is noticeably upbeat about prospects.“The recovery in Macau has not been overnight. Visits into Macau are still down 75 percent on average, versus the peak,” he says. “So, it’s not just because the ease of crossing the borders is increasing, that the arrivals are the same. However, we have a great team in Macau with a passion for the customer experience, so we’re able to really convert, in a much more efficient and very delightful way for our customers.
“The recent ease of travel into Macau for our customers without too many constraints has been very good for us. And while the tourist numbers are still very low versus 2019, we’ve seen a great customer returning to Macau. What we have managed to do there over the years is this focus on creating an experience – taking the best of our brand partners but layering this with the DFS magic touch which is creating a sense of belonging and creating a comprehensive and seamless experience for consumers.
“Macau is an area of great pride for DFS,” Vuchot observes. “If you think of the history and the legacy of DFS, there’s always been this pioneering spirit. When we first went into Macau in a significant way, what we refer to now as the Cotai Strip was pretty much marshland. You really have to have a vision to think that this would be a significant part of the future of DFS. What is great about what we have built over the years in Macau is the way we’ve really developed this concept of creating a destination for shopping for travellers.
“Today, we have a unique position where we combine some of our best Galleria executions with fashion, watches, jewellery, beauty, wines & spirits experiences. Our approach to serving clientele, especially within our lounges has become even more important now that technology makes this interaction with the customer seamless and continuous. What’s also been very exciting in Macau is our ability to bring what we think is the best of beauty across the whole territory, something which we initiated with the first T Galleria Beauty store in Galaxy Macau.“This was really about saying how do we bring the best of the brands? How do we retain what DFS is famous for, which is this experience, this attention to service, this seamless shopping experience?”
DFS has answered those questions in Macau via four standalone beauty stores plus the three Gallerias at the Shoppes at Four Seasons, City of Dreams and Studio City. Vuchot describes the Gallerias as “unique landmarks of luxury shopping”, stores that possess an art of combining different categories with making consumers at ease in discovering outstanding products. “So Macau is a place that we are very proud of because it has been reshaping a lot of what DFS stood for over the years. And it invites us to replicate that model very much in the future.
“With Macau, we are not content simply with what we have. It’s such an important place for us and we will continue investing and improving all the properties that we have,” adds Vuchot. “If there are opportunities to further expand, we’ll consider that. What we’re now bringing to Macau is a lifting of the borders between digital and physical and making our store experience far more digital than it was ever before.”
Given how well Macau has done for the company in recent years is it a matter of if the SAR turns the corner, DFS turns the corner? “If you look at the landscape of travel retailers, having a global presence sometimes comes at a price but also at an advantage,” Vuchot replies. “The fact that we’ve had this very valuable business in Macau is certainly helping us weather the storms that are happening in other places where we’re less fortunate with air traffic. So, definitely, Macau is a great beacon of what recovery looks like.
“So, spending has been stronger, and the time spent and the number of visits into the properties during the stays of the customer has increased. So, it’s a good reminder of what happens when business resumes at full capacity. It has taken time since the easing of border restrictions until now. We had a very strong Golden Week in 2021, where we had very positive successes, but as I say it didn’t come overnight.
“So we are also being cautious when we look at our overall recovery. The big declarations that, say, borders are reopening doesn’t mean an instant recovery of the business. We have to keep working diligently in making sure that we’re ready to welcome our customers gradually into the properties.”
Ultimately, if there are fewer people in store, the onus is to encourage them to spend more, a real test of retailer ability, I suggest. “Yes, to spend more but also to rekindle the relationship, and to make sure that it’s based on a passion for long-term relationships over a quick buck,” Vuchot replies.
Taking the high ground in Hainan
From one comparatively hotspot to a blazing furnace – Hainan. On 31 January DFS and partner (and licence holder) Shenzhen Duty Free Group celebrated the inauguration of phase one of their new duty free retail complex set in the upscale Mission Hills Haikou Resort. The razzle dazzle of that day was followed up on 21 May when the partners revealed the second phase of what DFS has dubbed its “experiential store”.
The store, themed ‘The World in a Day’, is designed to demonstrate DFS Group’s leadership in global luxury, delivering on that premise through a series of interactive displays and attractions while showcasing a range of high-end fashion, beauty, watches and jewellery.
“The vision that we have for our presence in Hainan going forward is very much inspired by what we have achieved in Macau,” says Vuchot. “It’s about creating a sense of destination within the destination and bringing the best of the brands and the best of services that we can create there.”
In some quarters, Hainan is viewed as some kind of 21st century travel retail El Dorado but Vuchot is having nothing of any gold rush approach. “Even if it is at the expense of volume, we are ready to focus on that quality experience over purely generating volume at any cost. And that’s I think what has differentiated us over the years and what will continue to differentiate us in the future. The legacy that we now have with our Macau footprint is a testament to what we can do in other places and Hainan will very much be part of that future.”
“One could have gone into this property and just put products on shelves and waited for the customers to come in and buy,” says Vuchot of the concept. “We had this idea of creating an experience – we have called it an experiential store, one that is very much animated by a digital solution. This is a big transformation that DFS is driving where you can shop on your device while having the experience of travelling the world.
“If you can’t go to the world, we’ll bring the world to you and we’ll bring the world of DFS because we have been in those destinations successfully and have created a sense of belonging there.
“So, whether you’re on a sailboat in Sydney or on the Piazza San Marco (St Mark’s Square) in Venice or visiting Macau, I think it is incredibly important to go beyond purely the transactional nature of our business as a retailer. We want to really become much more of a stage for an experience through experiential retail with a digital solution.”
In Hainan, DFS and Shenzhen have an “incredible vision” for the upscale Mission Hills property, Vuchot says. The next phase, due to open by the end of September, will be a defining moment, he pledges.
“Our mission in Hainan is to create what luxury retail will stand for on the island. And it’s something that we will take pride in collaborating and shaping and that will be from bringing the best brands but also showcasing those brands in the best way so that the customers really enjoy and spend as much time as possible on the property. This is a big challenge because we’re not alone [competitively] on the island. But it’s the point of differentiation that we want to have.”
Although DFS’s current presence is Hainan is recent, its experience on the island and of the offshore duty free concept actually dates back several years, Vuchot points out. “DFS was a pioneer of the offshore duty free concept when we created that with Okinawa in Japan [in 2005]. And that actually triggered the interest of the Hainan government at the time who reached out to DFS to say, ‘Let’s do this together.’ This is why we operated Sanya and Haikou airports initially in duty paid and then we also had the opportunity to collaborate with the Hainan government in a supply management contract in Haikou [with Hainan Duty Free Company Ltd, which is now controlled by China Duty Free Group -Ed].
“We’ve had executives on the island and connected to doing business in Hainan for many years. So when the opportunity came up at the end of Q4 last year to return with a more significant presence through a partnership with Shenzhen Duty Free, mobilising our troops quickly and getting more feet on the ground, we were not completely taken by surprise.
“Hainan is always a place where we knew we had to continue telling the story. And then we had to move fast. The timeline wasn’t long and it wasn’t easy. And it won’t get easier because everybody realises the amazing potential of Hainan going forward and everyone wants to showcase their best game. But that’s a challenge that we’re ready to take and something we’re excited about.”
What does Vuchot think will happen once the Chinese are able to travel freely abroad again? How will Hainan’s future as a shopping destination sit within the context of a return to some form of travel normality for the Chinese?
“There are a lot of studies that are circulating on where the Chinese consumer will shop in the future,” he responds. “Obviously, there’s been a huge repatriation of shopping domestically in China. And that has benefitted a lot of our industry brand partners.
“It has also contributed to the explosion of Hainan because of the lack of choice of destination. I think the gradual reopening of international routes will of course re-engage the customers to going to places outside of China. But the growth of the China market and the appetite of that consumer and the fact that only around 14 percent of Chinese are holding a passport means that China will continue to be a leading mature market for the luxury industry domestically.”
Heavy investment from both government and from retailers, allied to the various partnerships that are happening on the island, means that Hainan is evolving into a new destination for shopping and for holidays that will be complementary to the recovery of international shopping destinations, Vuchot says. “I just think that the cake is getting bigger and it’s our duty now to continue making this cake tasty, appetizing and exciting.”
Whether it’s Hainan, Macau or any global location, Vuchot insists DFS will stick to its game plan and principles. “Of course we want volume, but we want the right volume in the right way,” he says. “As I said, we aspire to creating destinations within destinations, to being the companion for the luxury traveller wherever they want to go, however they want to go. We want to create a long-lasting relationship with them – this is our sweet spot. This is what we’re recognised for. And as retailers, whether it is bricks and mortar or airport or downtown or digital, we also take pride in building a relationship with our brand partners.”
Having also held senior roles with luxury brands Cartier and Van Cleef & Arpels earlier in his career, Vuchot understands the critical role that travel retail plays in recruiting customers for brands and introducing them to the world of luxury shopping. “It has also been a great stage for brand partners to display what their maison stands for and build up brand equity. And of course, there is a business [sales] aspect to it which has been a very, very good business for us.”
Due to the pandemic, however, he believes that travel retail channel is at a “tipping point”, noting, “We need to make sure that we continue engaging our brand partners where they want to go and that our vision is aligned with them.”
‘C’est pas trop tôt’ – La Samaritaine opening nears
In the run-up to the long-awaited reopening of La Samaritaine department store in Paris on 23 June, LVMH launched a quirky advertising campaign that embraces rather than apologises for the long delay caused by the pandemic. ‘C’est pas trop tôt’, says the message imposed over a beautifully plumed peacock – a delightfully ironic French idiom that translates as “It’s not too soon” but really means “You are late” (Tu es en retard).
And although Vuchot prefers to save his remarks until the big day [look out for our special report on the opening and further interview with the DFS boss], he cannot hide his anticipation.
That’s hardly surprising, as the hugely ambitious renovation of the 70,000sq m historic building is anchored by a magnificently designed and merchandised T Galleria by DFS called Samaritaine Paris Pont-Neuf, offering what the travel retailer describes as “exceptional” curated collections from Parisian, French and international brands and artisans, complemented by restaurants, bars and cafes to enrich the consumer experience.
“It’s incredibly exciting, because there are some items that will really exemplify this idea of bringing a sense of destination to a traveller who already has an emotional excitement of being in the city of Paris,” says Vuchot, who will be flying into Paris in advance of the big day. “They will also be given access to a world of luxury, with a very strong sense of destination.
“It’s really been a culmination of so many ideas. There’s been so much passion in the making of this project, of making it unique, and of celebrating all the legacy knowledge of being a retailer.
“There is, of course, an incredible amount of attention, because a lot of our brand partners are headquartered in Paris, which means also that they’re putting forward their best game in creating that experience. I think La Samaritaine will be one of the most celebrated retail spaces in the world.”
While China and the Chinese consumer dominate industry thinking, Vuchot emphasises that other nationalities and locations continue to play an integral role to DFS. “I talked about pioneering offshore duty free in Japan and our presence in Okinawa is still very exciting. That is particularly so as the recovery of appetite for travel from the Japanese customer may be slightly different from other nationalities as there’s a tradition to be quite cautious after crisis.”
That caution with regard to international trips will benefit domestic travel, Vuchot remarks. “So having the option to rediscover the Okinawa landscape and the DFS brand, which is so trusted amongst the Japanese customers, also offers us a very interesting opportunity to continue doing what we are good at and bring excitement to those locations.”
Vuchot believes that DFS is well placed, both geographically and in terms of its retail philosophy, as the world emerges from the COVID crisis. “How fortunate we are to be so close to the Chinese consumer and having a historical presence in Macau as well as across the rest of our business. We will continue to pioneer new geographies and following the success of T Fondaco dei Tedeschi by DFS in Venice, strengthening our presence in Europe with such a statement as the opening of La Samaritaine is also a big vote of confidence that we see this travel retail market recovering in the short-term. And it doesn’t compromise the way we want to do things at DFS.”
The grand notion of taking culturally and historically important buildings and overlaying them with the DFS approach to luxury will be a cornerstone of the DFS approach going forward, Vuchot confirms. A good example is Brisbane in Australia, where DFS will open a new T Galleria store in phases from 2022 onwards at Queen’s Wharf Brisbane, a landmark development on the Brisbane River. The three-level emporium will be housed in the historic Printery Building on George Street, boasting a glittering line-up of 16 free-standing luxury stores and destination retail products.
“Again, it is about creating a destination within a destination. That comes at times with architecture and at times with a unique location. With our Brisbane location, we are not only taking over the historic printery but also being associated with this state of the art new development with the Rosewood Hotel, the casino, and being the exclusive retailer for that redevelopment of the Queen’s Wharf. This is an example of combining a landmark and saying, ‘Let’s make this landmark alive again, with the modernity that is relevant to today, and then creating it.”
[Discover the ‘Birth of an icon’ in this stunning video that affirms DFS’ luxury credentials worldwide and offers a tantalising preview of the Queen’s Wharf project]
[Click on the icon to hear Benjamin Vuchot talk about the Brisbane project]
Another exciting project, albeit with a variation on the destination theme, is being created in Queenstown, deep in the South Island of neighbouring New Zealand. There, DFS is developing the first of what it calls a ‘Resort Galleria’ concept inside O’Connells, one of Queenstown’s most popular retail and dining complexes currently being renovated by owners Skyline Enterprises.
“The whole ethos of the property will be that this is where you want to go when you’ve finished your day of activities [Queenstown is known as New Zealand’s ‘Adventure Capital’ -Ed]. You’ll stop at the T Galleria in Queenstown to get a sense of what’s going on in the area and reconnect with it.
“We’ll have an experiential manager who organises talks and organises visits to places. You will be exposed to a great curation of products that are relevant to your time in Queenstown. And we will also be creating opportunities to bring back a piece of that memory by buying, say, a watch or a piece of clothing that you’ll always associate with your time in Queenstown, which is a fabulous place.
“So although the location itself has maybe less historical value than the Printery in Brisbane, or La Samaritaine in Paris, the location and the fact that there are fewer shopping opportunities around it will become a magnet for the tourist.
“We’ll have great experiences, for example with local food and wine. There are so many reasons to travel to New Zealand, and once more we want to bring that into what we do and create this destination within a destination.”
In a post-COVID age, Vuchot believes that markets such as Australia and New Zealand will surge in allure for their multiple qualities, including safety, space, food, diversity of attractions and quality of environment. “I think that when business and leisure travel recover, people will choose locations where they can spend a bit more time, when they travel next. So, that will also give us a great opportunity to have different touchpoints in Australia, whether we’re in Sydney, in Brisbane, or in Cairns; or whether we’re in New Zealand with Auckland and Queenstown to interact with our loyal customers.”
Hawaii and airport retail remain relevant
In late May DFS issued a terse rebuttal to an article in Hawaiian media title Pacific Business News implying that DFS was “departing” its long-time Hawaiian downtown presence – along with Hong Kong one of the travel retailer’s two original platforms from the early 1960s.
Drawn on the subject, Vuchot is equally adamant that the company remains committed to the USA’s 50th state. “We regularly take the opportunity to reassess our footprints to ensure we are being pragmatic and relevant to the market,” he comments. “I have no doubt that Hawaii will continue to be an amazing destination for tourists, but at the moment, it’s only an incredible destination for American tourists, who have less impact to our business because they don’t shop duty free.“But, going forward, Hawaii will be back, and reopening its borders to international travellers. The recovery will take a while, however, and to be sitting on such a big property, which is in dire need of renovation, I think makes it the right thing to do to right-size and be prepared for when we reopen. But our relationship with Hawaii has never been at risk. It’s so much part of who we are.”
All the major upcoming DFS projects focus on exciting downtown developments but Vuchot insists that there is a role for on-airport retail but only when the contract terms make sense. “We are in partnership with many airports around the world. The work that the team is doing in North America is exceptional. We are trying to push the boundaries in also bringing an element of digital into the experiences we have. We’ve just completed the last tranche of San Francisco Airport, we now just need a more solid pattern of business.
“We have our presence in airports in Japan, we’re in Vietnam, so while they may sometimes be less visible, we are definitely in the airport ecosystem. But there needs to be a post-COVID reevaluation of how the Trinity, which started as a concept, between brands, airports and operators, is reevaluated. I think that for the world of very high, very committing concessions, the party’s over. There’s a need for reinvention of that partnership.
“I love the connection with the airport. It’s incredibly important to what DFS is and what we stand for. I was very fortunate in my previous work at DFS to be celebrating the birth of the three Hong Kong International Airport licences [DFS was famously awarded the liquor & tobacco, perfumes & cosmetics and airside general merchandise retail contracts in 2012] and having to open that in such record time.
“I love airports but it’s just a matter of how we work with the airports, going forward. I think we bring a lot of value to the airports by the way we operate, and we’ve been recognised as such over the years. So, we’ll have to reshape that. But we’re not moving away from airports.”
Does Vuchot have a message for the industry, a single take-out from this, his first major industry interview since he assumed the role? “Our best achievement is to insert ourselves as a companion to the international traveller, looking for an experience – a memorable luxurious experience of travel, whether it’s business travel or leisure travel,” he responds.
“COVID has reminded us of a lot of the dependencies that our industry has but has also given DFS the impetus to look for what is the next phase of this industry. We’ve pioneered a lot of what travel retail is today, and we definitely want to continue contributing and paving the way in terms of its future. And I think we have a good story to tell.
“We’re a solid company and we’re in a good place to make the right choices for the future. That’s exciting,” he says. “What’s top of mind at the moment is Macau, Hainan and La Samaritaine. This is what’s keeping us incredibly upbeat and active. Also, preparing our future with Oceania and the reopening of international borders, is important. Every success needs to be celebrated. That’s been a big motto of the team here.”
The winter appears to be passing for DFS and almost everywhere there are signs of spring.