In an exclusive Moodie Davitt Report feature, Martin Moodie examines the impressive growth story and international ambitions of Sunrise Duty Free, a likely bidder in the Hong Kong International Airport core category tenders, which close next month.
CHINA. Sunrise Duty Free’s recently announced strategic partnership with Chinese Internet services company Tencent marks the beginning of an ambitious growth programme for the travel retailer.
As reported, Sunrise and Tencent have entered into a long-term alliance designed to take advantage of the fast-growing but equally fast-changing airport consumer market. The goal, says Sunrise, is to use social media platforms to excel as an online to offline (O2O) shopping provider. It aims to embrace and blend the best of the e-commerce channel with the attractions pure travel retail offers.
Sunrise, which operates at Beijing Capital International Airport and Shanghai Pudong and Hongqiao International Airports, generated impressive compound average sales growth of over +45% between 2006 and 2016 to rank as the industry’s tenth-biggest player in The Moodie Davitt Report’s annual Top 25 Travel Retailers League last year (see chart below). It has built a strong reputation for its value offer to consumers and enjoys particularly good relationships with some of the leading beauty houses to support that strategy.
The company’s board combines the entrepreneurial skills and experience of the much-respected founders (Madam Zhang and Fred Kiang) with the resources and connections of private equity giant Boyu Capital, a powerful Greater China-focused investment firm that took a significant stake in Sunrise in 2011.
As one of the few duty free retailers with its core shareholding base in Hong Kong, it has demonstrated its aspiration to expand its business to its home base
Besides its Sunrise investment, Boyu has holdings in a glittering portfolio of companies in the Consumer and Retail, Financial Services, Healthcare, and Media and Technology worlds – including Chinese e-commerce giant Alibaba; China’s largest private express delivery player SF Express; China’s largest online bank in WeBank (a venture with Tencent); and China’s leading online travel agency 17u.cn.
Boyu Capital has also developed a close partnership with Ctrip.com, the powerful travel booking provider, listed in Nasdaq and with more than 250 million active members in Asia. Ctrip has in turn just acquired global transportation provider TangRen World (which has over 3,000 Chinese-speaking drivers on its books across 100 countries) and travel-related global metasearch engine Skyscanner.
Sunrise has repeatedly signalled its international growth ambitions in recent years. In particular, as one of the few duty free retailers with its core shareholding base in Hong Kong, it has demonstrated its aspiration to expand its business to its home base.
In 2012 it bid for all three core category concessions at Hong Kong International Airport (ultimately all secured by DFS Group). It is likely to be a bidder for at least one of the two core contracts currently being tendered by Airport Authority Hong Kong, where it would be confident of running a high-class but value-driven offer that would appeal to the airport’s diverse consumer base.
As first revealed by The Moodie Davitt Report, in 2015 Sunrise presented a financially strong, well-articulated offer for World Duty Free Group (though finally, the seller – Benetton family-controlled group Edizione – opted for the Dufry proposal).
Sunrise is also embarking on a major expansion of its Arrivals duty free shops at Shanghai Pudong Airport, adding 500sq m in Terminal 1, 800sq m in Terminal 2 and a new 500sq m store in the baggage collection area
“INTERNET PLUS DUTY FREE”
As reported, WeChat Pay, a mobile payment and digital wallet service from Tencent (the social media giant with more than 700 million users and 200 million users linked to a credit card) was adopted across Sunrise Duty Free stores at the beginning of December. Payments can be made at contactless points of sale and shoppers are prompted to become members of the Sunrise WeChat official account.
“It is a powerful tool to direct traffic from offline to online (O2O) and further enhance the membership database,” said Sunrise. By leveraging the connectivity of its Wechat official account and data analysis through Wechat, Sunrise says it can “implement precision marketing, merchandising strategies and even financial services”.
Sunrise’s WeChat membership is being integrated into the company’s own well-established membership and CRM system. As well as the convenience offered by WeChat Pay, consumers can enjoy price discounts when shopping with Sunrise Duty Free. Tencent will also fund marketing campaigns to promote WeChat Pay in-store.
On top of the strategic partnership with e-commerce giants such as Tencent, Sunrise has also been aggressively developing some key O2O integration initiatives in-house.
Following the reveal of the phase two preview of the ‘O’ World Virtual Mall, an online shopping platform dubbed ‘a fusion of virtual and realistic three-dimensional shopping space’, in Shanghai last October, consumers will soon have the option to shop online in this choreographed virtual environment featuring stunning artistic imagery and 3-D space.
Building on the differentiation offered by the easy and swift customer experience provided by Tencent’s technological innovations, the ‘O’ World Virtual Mall has been designed as a state-of-the-art online offer that satisfies a market craving newness and an immersive shopping experience.
Sunrise commented: “With the scale of Sunrise’s duty free business and Internet connectivity, the reach of social media platforms and other leading innovations spearheaded by Tencent, the partnership will achieve the ‘internet plus duty free’ O2O goal.
“Sunrise is dedicated to grow into an omnichannel travel retailer, which brings unique products and customer experiences at very competitive prices.”
