Ivo_favotto_analystThe Moodie Davitt Report introduces the latest feature in our new series, The Analyst, written by The Mercurius Group Founder & President Ivo Favotto*. Here the long-time travel retailer, now Sydney-based consultant, assesses the fallout from the UK’s decision to leave the European Union and explains why the travel retail sector should take a bold approach to plotting future strategy.

The views expressed in this column are not necessarily those of the publisher.

I guess it’s easier to see from afar but the UK, as a nation, is showing classic signs of going through the five stages of grief in the wake of the ‘Brexit’ decision last week.

The model was first postulated by Swiss psychiatrist Elisabeth Kübler-Ross in 1969 in her groundbreaking book On Death and Dying. The five stages are Denial, Anger, Bargaining, Depression and Acceptance. The model was originally developed to help people understand grief and to teach medical professionals how to manage the process of grief when a loss is expected or experienced, such as a terminal illness or the death of a loved one.

Kübler-Ross pointed out that the model did not apply to all people, to all situations or in linear fashion, but it seeks to explain the most common grieving process among a wide range of populations. It is broadly accepted within the psychiatric community (even if, like any idea, there are criticisms and variations on a theme).

While to my (untrained) knowledge Kübler-Ross made no attempt to apply her model at the societal level rather than at the individual level, it does appear to have some relevance to what the UK is currently experiencing.

EU_GBP_tear

So let’s start with the loss. The UK is, without doubt, grieving the recent decision to cut ties from the European Union after 43 years together. The decision will bring fundamental change to many aspects of life as the UK knows it. So how is the UK going through the five stages of grief?

Denial: How else can you describe the national and global shock exhibited over the past few days? Tick.

Anger: According to Kübler-Ross, this phase starts with questions. Why me? It’s not fair? How can this happen? Who is to blame? Why would this happen?  Do these questions sound familiar to anyone? Tick.

Bargaining: The hope that somehow, with some alternative form of action, the grief can be avoided.  How else would you describe a petition with more than three million signatures calling for a do-over from the Remain camp after more than 34 million people have already cast their vote? Tick.

Depression: An overwhelming sense of despair. Sounds to me very much like the consistent ‘the sky is falling’ rhetoric of the Remain camp. The Pound will never recover, stock markets will be in perpetual turmoil, and trade is forever ruined, they say. David Cameron at least has to be depressed. Tick.

Acceptance: This is when you get to the stage of saying “I can’t fight it so I might as well prepare for it/manage it”. I haven’t seen much evidence that the UK has reached this stage of the grieving process following the Brexit decision. No Tick.

So that’s four ticks out of five. And it seems that they are not necessarily occurring in sequence but all at the same time.

I know it’s early days but the sooner the UK travel retail sector – and the European travel retail sector for that matter – gets to the Acceptance stage the better. Yes, it was only an advisory referendum. Yes, there is a long way to go. Yes, there is a lot of uncertainty. Yes, there are a lot of macro-economic and macro-political factors at play. And yes, there is a lot of speculation going on.

So what? Once you get to Acceptance, you can start to try and shape the future as you want it to be.  What does the UK travel retail sector want the future post-EU exit world to look like? Will that align with what the EU travel retail sector wants?  Maybe yes in some aspects and maybe not in others.  The introduction of arrivals duty free into the UK could be a case in point.

Even if you believe Brexit means lower passenger traffic across Europe or even economic ‘Armageddon’, there’s no point crying over spilt milk as the saying goes. As an industry, there’s not much the UK travel retail sector can do about all that. It needs to accept the decision and get on with defining how to make the best of it – how to make allies of UK consumers and how to make allies with the economic bureaucracy and eventually, the new government.

Chanel arrivals Heathrow

The real prize for the UK travel retail sector is Arrivals duty free – which could transform shops such as this World Duty Free Arrivals (duty paid) shop at Heathrow Airport

My message of solidarity to the UK travel retail sector is taken from the words of the character John Keating, played so well by Robin Williams, in the film Dead Poets Society. “Carpe diem. Make your lives extraordinary”.

There is currently a political vacuum in the UK and a real lack of leadership on all sides – neither the UK Government nor the Brexit campaign seem to have prepared for what actually happened and their radio silence since 23 June has been stunning.

But infrastructure involves a long game. Airports (and their duty free and travel retailers) need to think in a timeframe beyond the current political cycle and be ready for when, or if, the UK finally does reach the Acceptance stage. To carry on with the cliché-fest, the early bird really does catch the worm. This seems to be the approach that Nicola Sturgeon, Scotland’s First Minister is taking – showing leadership and envisioning what she would like the future to be for her Scottish constituents.  All in a calm, measured and thoughtful manner that recognises the need to maintain her relationship with England along the way.

The real prize for the UK travel retail sector is Arrivals duty free. It’s a prize of such a scale that it might be worthwhile for the sector to take a bold approach – maybe even break from the past – and fill the vacuum by offering a solution.

Please visit The Mercurius Group website for more information and analysis.

Previous articles by The Analyst:
What does ‘Brexit’ spell for European travel retail?
Australia bucks retailer consolidation trend

*About Ivo Favotto

Ivo Favotto has a long and distinguished record in the airport and travel retail sectors. A trained economist, he entered the airports/infrastructure sector with Australia’s Federal Airports Corporation in 1992 as GM – Planning & Economics.

He later built a highly successful international airports/infrastructure consulting practice, working with three firms – Bach Consulting, Arthur Andersen and URS Corp – and advising many of the world’s leading airports, governments and investors in the areas of retail planning, master planning and privatisation/transaction support.

In 1998 he established the market-leading Airport Retail Study, selling it to Moodie International so he could join The Nuance Group (now owned by Dufry) as Executive Vice President – Strategy & Business Development in Zürich. He later returned to his native Australia as Director – Sydney Airport before being named Executive General Manager of Duty Free & Luxury, Pacific for Lagardère Travel Retail.

The Mercurius group LogoHe has now formed The Mercurius Group, a Sydney-based consultancy focused on industry research, consultancy and benchmarking studies. The company also assumes responsibility for revamping and relaunching The Airport Commercial Revenues Study (ACRS), which Ivo founded (as The Airport Retail Study) and sold to Moodie International in 2007 as part of an informal alliance between Mercurius and The Moodie Davitt Report.

Contact: Tel: +61 423 564 057; E-mail: ifavotto@themercuriusgroup.com; Website: www.themercuriusgroup.com