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NORDIC REGION. A record attendance of close to 150 delegates attended the Nordic Travel Retail Seminar on Wednesday. The event took place on the Silja Serenade, which sailed from Stockholm to Helsinki on the 21st, arriving on the 22nd. It attracted guests from across the Nordic region, plus seven states beyond the region.
Underlining the key role of travel retail in the region, Nordic Travel Retail Group Chairman John Baumgartner said: “We are 25-30% of the travel retail market in Europe but only 15% of the population.”
Cloetta CEO Bengt Baron delivered a fine, provocative keynote on how brands and retailers should interact in the channel. He questioned whether the industry really understands the consumer well – where, why and how they purchase.
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John Baumgartner: a region punching above its weight |
“Our research shows that the consumer at an airport takes less than ten seconds to make a decision, and are very decisive, but the ferry market is different, where they take up to five minutes to make a decision. Therefore how does that affect my brand range, and how I encourage them to make a decision in those time frames?
“Do we collaborate well enough? In this market 90% of our time is spent on price and rebates but very little on collaborating on new ideas to grow the business. Why don’t we focus on growing the pie? The last question, not the first, should be about who takes what share of the business.”
Baron also homed in on the role of price in the channel. “Clear price information is more important than low price,” he said. “Consumers don’t know the prices really. They claim they do and say it’s important before they buy but actually what is far more important is clear price information, not necessarily products with the lowest prices.
“Visibility of product in-store and clear messages are key. Some 41% of impulse purchasers are influenced by visibility in-store. Low price is only key for 11% of people.”
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Cloetta CEO Bengt Baron: Challenged both brands and retailers |
In a message to retailers, he concluded: “Do you really know the role of each category and how it works in your concept? Do you work with suppliers to understand the consumer? Do you handle categories and occasions differently? Let’s not compete only on margin. Let’s provide a dynamic assortment that is relevant and interesting, and question it all the time. Make the experience a memorable one.”
Colin Moon, described as a “cross-cultural communicator”, offered a light interlude lampooning the cultural characteristics of the Nordic nations, with an emphasis on business communication.
Inflight Service Europe Sales Director Karin Rynning offered a fascinating insight into the purchasing habits of the various Nordic nationalities.
Danes, she noted, spend as much on fragrances as on alcohol, and are number one in the Nordics for spending on fragrances in travel retail; they also search for strong brands and have a heavy focus on price.
Finns, she said, distribute their spend mainly between alcohol and cosmetics; they are the leading nationality for spend on cosmetics, wine and chocolates – and savings are key for driving their purchases.
Norwegians have an even spend across categories, and are the number one nationality for purchases of accessories, Cognac and tobacco. They also search for exclusive, high-end products such as Champagne.
Swedes spend mostly on alcohol, and mainly whisky, with a focus on prices and savings; they are also loyal to the pre-order concept.
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Karen Rynning: Segmenting the Nordic consumer by nationality |
She noted also the key factors driving spends in the different countries, among them regulatory restrictions, brand-driven marketing in the domestic market, brand loyalty (notably in tobacco) and different taste preferences.
She concluded: “Global markets are coming closer to Nordic markets and competition is no longer the store next door, it’s the store in Asia or the Americas. So we need to be more and more relevant to our Nordic consumers, and who is better equipped than us in this region to be relevant and to understand the consumers best?”
Peter Mohn, well known as Partner at research company m1nd-set, outlined the results of a specially commissioned survey of ferry travellers and shoppers.
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Peter Mohn: Ferry passengers engage heavily with retail in the Nordics but there are untapped opportunities |
Two out of three travellers on ferries said that shopping was a key part of the travel experience; with around half agreeing that prices on ferries are “cheaper than at home”, though a significant proportion (32%) said it was not. Many people also said ferries were “a great place to buy gifts” but again, a large number (26%) disagreed, offering room for opportunity.
Travellers also were broadly satisfied with the shopping experience and with the value for money on offer.
However, Mohn noted, there is much room for improvement. Among the areas that retailers scored poorly on included the availability of local products, the quality of promotions and the ability to test brands in the stores.
Positively, almost 90% of ferry travellers purchase on every trip or every second trip, underlining the key role that retail plays for travellers between the Nordic states.
The key messages, he noted, were to offer more gifting opportunities, possibly reduce the amount of SKUs in stores to improve category management; to have more sales advisors, better gift-led promotions, more inexpensive ranges and more travel retail exclusives.
JTI Worldwide Duty Free Corporate Affairs & Communications Manager Antonio Venceslà also underlined the key role of retail in the ferry business – citing a survey that said ferry traffic in the Nordics would not be sustainable without duty free sales.
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Antonio Venceslà : Tobacco buyers drive the business in other categories too |
Tobacco is around 19% of ferry sales worldwide, he noted, citing Generation 2012 figures, above the average of around 13% across all channels. But the role of tobacco goes well beyond cigarette or cigar sales – it is a vital driver of other categories too. Some 67% of tobacco buyers also purchase another category, he said.
But he warned of the impact on the business of restrictions on tobacco sales. He cited last year’s problems in some Gulf states over the labelling of tobacco, and the damaging effect on other categories from lost tobacco sales.
The main threat to tobacco, he noted, is the enforcement of domestic market rules in the travel retail channel, which should be seen as distinct and different from local retail. The industry should not seek to avoid local laws but should work with authorities to ensure regulatory objectives are met while not damaging the trade, he added. The positive outcomes for tobacco display in the UK, Canada and Hungary are examples of how this has worked well.
The tobacco category will remain a vital one for the business, he noted, even as the regulatory environment changes. But more than this, Venceslà warned that as tobacco is further restricted, other categories are in the sights of organisations such as the WHO – notably alcohol and confectionery. What is key is not to avoid regulation but to help shape the regulations of the future – and for the industry to impress on authorities that travel retail is a singular and distinct market that should be treated differently to domestic.
The final session of the day featured three of the global powerhouse travel retailers: Gebr Heinemann (represented by Executive Director Raoul Spanger), Nuance (General Manager Sweden Joakim Hörnfeldt) and World Duty Free Group (International Operations Director Pedro Castro).
Spanger outlined his company’s values and aspirations, noting its current investment of €150 million in a new logistics centre close to Frankfurt, and its plans for an extended headquarters in Hamburg. He outlined the road map for the future, including the Middle East, Asia and the Americas, where it has opened an office recently. He also noted that 80% of its sales are under concessions that are secure through to 2020.
He also talked about the vital role of the Nordics for Gebr Heinemann, including its largest global market, Norway, with sales last year of €575 million. Its regional turnover (across six airports) is over €700 million a year. Heinemann is also the main supplier to 20 airport customers and seven ferry companies.
Spanger cited a number of ways that the industry needs to add value for customers in the future, through a number of initiatives. Digital commerce is one platform, allied to a growing home delivery business. Home delivery has delivered surging sales compared to the average in Germany – and will be rolled out to new markets in the future, he said.
Other initiatives include the continuing roll-out of Heinemann Duty Free to new markets; the focus on regional products and shop design, plus high-speed retail operations (to avoid queues and serve the consumer faster).
Nuance’s Hörnfeldt profiled the retailer’s Swedish operations, notably its major investment in the Duty Free Store concept at the country’s airports (and Stockholm Arlanda and Gothenburg Landvetter in particular). Sales in 2012 in Sweden were SKR 942,531,000 (US$143 million).
Recently completed refurbishments include the stores at Arlanda terminals 5A, 5B, T2 and T4 (domestic). He also said that the company’s main walk-through store at T5 will undergo some major changes to the look and category layouts, five years after opening.
He also outlined the impact of the surging value of the Swedish Kroner, which has had an effect on the consumer and on the business. “When Swedes have more money, it generates more money for the airport, and they spend more on lifestyle, which is positive. It’s our job to ensure they spend with us rather than at their destination. Alongside that, do we really understand how the consumer thinks and purchases? Swedes are a highly “˜rational’ consumer so building excitement can be a challenge. Solutions range from our introduction of a lifestyle brand such as Lexington and a focus on clear messaging around the offer and promotions.”
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Pedro Castro (WDFG), Raoul Spanger (Gebr Heinemann) and Joakim Hornfeldt (Nuance) took part in an engaging panel session to close the day |
WDFG’s Pedro Castro shone a light on the company’s “challenging opportunity” in Helsinki, Finland, where it has just begun its new operations.
The company took over the business (to be named Helsinki Duty Free) from the airport on 15 March, with 2014 a “transitional year” until the stores are fully operational from January 2015. There will be four main core category stores including two walk-through units covering 1,000sq m, plus seven speciality outlets. In total, WDFG will operate 3,200sq m of space there.
“A key point is that we tailor the choice to the Finnish market, not only Finns but the many Asians too,” said Castro. “Also, what will be different is the walk-through environment, the service levels, the local execution with centralised support, destination targeting, plus a flexible partnership approach.”
The walk-through stores will have wide, open entrances inviting passengers to enter; fixtures will maximise product showcasing, an open plan layout plus the group’s “˜contentainment’ digital media and events platform. There will be a Beauty Lounge offering consultations, a Connoisseur Collection offering vintage and rare liquor ranges. Plus there will be a strong Sense of Place in the design of the environment, noted Castro. “It’s important for people to know exactly where they are, and that’s why we’ll brand it as Helsinki Duty Free.”
Stand-alone stores will include Burberry and Ralph Lauren, while shop-in-shops will include spaces for Montblanc, Bally, Loewe and others; there will also be stand-alone sunglasses, chocolates and beauty stores.
“We will include a lot of personalisation and premiumisation here,” said Castro. “It’s a new venture for us and for the airport, and we’re proud to be in Helsinki with a great partner in Finavia.”
The Nordic event concluded with a cocktail and dinner onboard. The conference was moderated by DFNI Publisher Amanda Felix.
