MACAU, CHINA. As Duty Free Americas (DFA) CEO Jerome Falic and I chat inside the US travel retailer’s recently extended twin beauty store at Venetian Macao, our attention is constantly diverted by the rush of group tourists from the Mainland China into the area.
While most of the visitors have only one thing on their mind – to get to the Venetian casino as quickly as possible – the sheer volume of footfall means plenty of spin-off trade for DFA’s superbly positioned 11,500sq ft operation, positioned left and right of the heavy traffic flow.
“The Venetian is and always has been the most attractive hotel in Macau,” says Falic. “We’re really fortunate to have this location because the traffic here is constant.
“What’s unique is they’re not allowing people [non-guests] to come in through the front door so 80 to 90% of the traffic comes through here. Whether you’re dropped off by taxi or a group tour bus and whether you are coming from the airport or the port, you get dropped off over here. The first thing you do is come up a small escalator and then the next thing you see is our store on both sides.
“The great thing about having both sides is that when people come here they tend to go to the right. So when they leave you get them on the other side.
“We’re also fortunate that the convention centre is right around the corner from our store. They are already talking about filling up contracts this year much quicker than expected now that the mask mandate is off [from 27 February people in Macau are only required to don masks on public transport and during visits to healthcare facilities and residential care homes -Ed]. They are going to be able to hold the shows and so there will be a lot of evening traffic before and after the shows.”
DFA has been present in Macau since 2007 and despite numerous challenges in the intervening years, particularly during the pandemic, it’s a long-term commitment that the Falic family delighted with. In fact the company stepped up its investment during last year’s crisis, taking more space – opened on 23 December – for the store in the belief that business would rebound strongly once the COVID-related travel constraints were lifted.
The pay-back has been unexpectedly swift. In common with just about everyone in the travel retail community, DFA was surprised by the swift mid-winter reopening of the Mainland and Macau travel markets. “Everybody expected things would open up in the second half of this year. Now, as you go through the day, it just gets busier and busier. It’s great to see. It’s exciting. You would not have expected this even six months ago,” Falic says.
“The Venetian has had days of 100,000 people coming through already [since the full border reopening], which is a surprise to them. So we always have a good crowd and I think it’s only going to get bigger as the Chinese are now able to travel and leave the Mainland.
“I always believed in Macau,” Falic continues. “I kept on expanding. I took the space as it became available and invested when there was nobody here. When we opened on December 23rd, I did not know who would show up. But I knew that it was the right thing to do.”
Today the elegant twin store occupies some 14,200sq ft of space, featuring many of the world’s most renowned beauty brands complemented by an increasing focus on emergent names.
“When we started here we had about 8,500sq feet,” says Falic. “As I say, every time space became available, we took it and we were able to fill it with the right brands.”
A welcome return to beautiful kitsch in Macau
Artificial canals replete with gondolas and a false Venetian sky might not be to everyone’s taste but there is no doubting the allure for countless Chinese consumers, many of whom have never experienced the real thing in Italy.
That confidence in the Special Administrative Region’s future is paying off. According to the local Statistics and Census Service, total visitor arrivals to Macau grew by +101.3% year-on-year in January to 1,397,748 – the first month in which tourism numbers have exceeded one million since the pandemic struck in early 2020.
Visitor numbers from Mainland China, the key source market, increased by +54.5% year-on-year to 991,641. Of that number, 707,360 travelled under the Individual Visit Scheme, an increase of +321.6% over the same period in 2022.
And it’s not just the Mainlanders who are coming. From a near zero base pre-6 February, the month also saw 356,958 visitors from Hong Kong, up by +704.3% year-on-year, while projections for visitor numbers from Taiwan and Japan look promising for coming months. It’s an upside that has Falic excited about prospects for the remainder of the year and beyond. DFA enjoys a long-term contract here and the hard work it has put in to refurbishing and expanding the store and extending the brand line-up is proving time and money well-spent, he says.
Although the group tour component is currently dominated by more mature travellers, Falic says visitations by younger, higher-spending travellers will increase steadily through the year, a consumer dynamic increasingly reflected in the DFA product mix.
Despite the absence of The Estée Lauder Companies brands and Chanel – which opts for its own stand-alone operations in Macau – it’s a strong brand line-up, much enhanced in recent months. DFA enjoys a close relationship with L’Oréal Travel Retail, underlined by the January addition of SkinCeuticals (the brand’s first travel retail door in Asia outside Mainland China), Helena Rubinstein in early 2022 and Maison Margiela fragrances, which are proving popular with Gen Z customers.
Fragrances (niche lines in particular) enjoy a growing presence in the store, underlining the category’s discernible surge in China over recent times. Again, there’s plenty of newness, with brands such as Maison Francis Kurkdjian (pictured below) from LVMH enjoying high visibility and encouraging sales. Gucci Beauty from Coty is another important addition, beautifully presented in the expanded left-hand store 1 as the visitor enters the area.
Average daily footfall into the Venetian is currently running at around 60,000 a day (peaking around 100,000 during Chinese New Year) with rising store penetration. “I assure you, this is non-stop traffic all day and this is only the beginning,” says Falic as we watch another bunch of tourists dutifully follow their flag-carrying leader towards the casino. “I’m very satisfied with our sales. The way that the year started off so far, I know it’s only going to get bigger and better.”
Such optimism is boosted by a rising hotel occupancy rate, an indicator that is held back only by shortage of staff rather than any lack of demand. “They are 100% sold out on whatever their availability of rooms is – about 75-80% – on all their properties. It’s really impressive,” says Falic.
Loyalty repaid with loyalty
Commendably, DFA retained all its 100 or so staff throughout the pandemic, meaning it has avoided the recruitment nightmare faced by many Macau businesses as they sought to ramp up services in line with the travel resurgence.
“We have a great team,” Falic says. “We are fortunate compared to people everywhere around the world struggling to find the right help. Everyone loves to be here and they’re grateful for what we did. We even paid the bonuses that we had offered in other years.”
Due to the pandemic, this is Falic’s first visit to Macau since late 2019, an opportunity he and his team have relished. “Even being on the ferry was exciting for me,” he says. “I said, ‘I’m finally on my way.’ After all that time, the first place I stopped was the office, because the team had been there every single day and making the business happen.
“I gave them a nice greeting and a speech. They’re all appreciative of the positivity over all these years – being able to have their jobs, working hard, and always dedicated. I feel proud that I was able to do that. I went from the office to the warehouse because I didn’t want to miss a single person.
“We’re very family oriented and I want them to feel like that all the time. So then I walked into the store and to see all the same faces was a great feeling. We have a good group of people and that helps our business every day.”
Tea time for DFA
DFA’s twin-store set-up may be exclusively dedicated to beauty but the retailer is poised to add another category to its Macau offer – tea.
Later this year the retailer will open a TWG Tea store and tea room, after striking an agreement with the acclaimed Singaporean luxury teahouse chain and artisanal tea brand. The new business is located directly between the retailer’s right-hand store and newly opened US burger chain Five Guys.
“TWG has a new concept, where they serve cups of tea as well as retail,” says DFA CEO Jerome Falic. “And the takeaway packaging is incredible. So it’s a great adjacency for us now. It’s an additional business and the customer here drinks tea so we are very excited by it.”
The relationship came about after Falic noticed the brand at Singapore Changi Airport and was impressed both by the offer and its obvious popularity.
To incorporate the extension from shop to a store/café concept, DFA had to get a food & beverage licence and other permits, meaning the opening probably won’t happen until September. With business likely to be back in full swing by then, the timing could prove optimum.
Sixteen years into a perhaps unlikely retail venture given the company’s US base and related geographic focus, Falic says the Macau business has proven a highly eventful journey. “I tell you, the start was very rough,” he recalls. “We opened up without knowing the customer and we were a long way from home. Our original footprint was around 8,000 square feet and we were carrying not only beauty but also spirits, tobacco, confectionery, electronics, accessories, all types of stuff.
“For the first two to three years we had a horrible, horrible experience. We discussed closing because it was really a rough time for us. We were far away and we were very busy growing in the Americas. We also had the wrong concepts in here. So I came over here and I said either we’re going to close this or we’re going to make a big investment and make a go for it. And obviously I did the latter.
“After visiting here, I met with several companies, the main one being L’Oréal [Lancôme remains the number one brand today -Ed]. I convinced them to work together on a project and they brought in a lot of their brands and helped me with the layout. I also approached other companies with other concepts. With that big investment we turned the whole operation around from being a major losing business to a very lucrative one. And from there we continuously invested and brought in brands.
“Fortunately, the hotel and the landlord [Sands China] with whom we have a great partnership, were working with us all the time. We have won Retailer of the Year here several times and we implement all their loyalty and redemption programmes. We are the last stop for people to redeem their points.
“As we have grown and as the years went by, we saw several categories not do as well. First we took out tobacco, then we shrunk the liquor department and added more beauty. Then we shrunk the confectionery offer and now there’s nothing else but beauty.
“That’s the business we’re in today and we see several more opportunities within the space that we have. The only different thing we’re going to try is the TWG Tea business [see panel] and I feel very confident that’s going to work well.”
Falic says he is constantly on the lookout for new brands to add to the beauty mix and he has his favourite sources [one unexpectedly close to home -Ed). “My brothers and the rest of my family ask me, ‘How do you know which brands to bring in that are popular in the region?’ I tell them, ‘I always read The Moodie Davitt Report.’ At the same time, I also do extensive market visits when I’m here. When I am in Hong Kong, there’s always a couple of stores I visit to see what the next brand is I should probably bring in.”
That’s precisely what is on Falic’s pre-dinner agenda this evening after taking the ferry back to Hong Kong. Market research of a very hands-on, gut-instinct kind, a formula that has served him and the company well over many years. It may have been a bumpy ride at times but Duty Free Americas is well-set to reap the benefits of a rebounding market and a long-term belief in Macau’s future. ✈