The Moodie Davitt Report presents the latest edition of regular column The Digital Conversation, in association with Shiseido Travel Retail.

Digital Conversation 300How does the travel retail channel respond to a world increasingly dominated by cross-border e-commerce shopping, a competitive threat that simply didn’t exist during the first half-century of our industry’s existence?

That is, The Moodie Davitt Report believes, the seminal issue facing our industry, and one we will focus on relentlessly across our media platforms and our key event, The Trinity Forum (12-14 September), this year.

There is no time to waste. We live in the ‘Triple A’ age – of Amazon (turnover US$107 billion), Alibaba (US$485 billion) and Apple (US$234 billion), the three great online retailers of our age with combined sales of US$826 billion dollars between them. In the first two cases their entire revenue is generated online, not with a single brick, not an ounce of mortar.

And if those statistics don’t make every travel retailer sit up and take notice, this one might. Alibaba’s turnover last year was +42% higher than the entire US e-commerce marketplace.

Chinese consumers can order just about anything they desire from Alibaba platforms such as Taobao Marketplace and T-Mall.com (both owned by Alibaba Group Holdings) and have the goods delivered straight to their homes. They have steadily improving confidence in the authenticity of the product, especially as more premium and luxury brands are opting to have a direct relationship with Alibaba. And the prices are ultra-keen.

As duty free and travel retail’s greatest historical advantage – preferential pricing – is eroded and even scoffed at (see this recent article in UK tabloid newspaper The Sun), the channel simply must find other ways to convince the travelling public to shop. Not easy, given that shopping is hardly the primary purpose of any airport user.

Sun_Headline

UK tabloid newspaper The Sun let’s rip at World Duty Free. Is travel retail fighting a losing battle on the pricing front?

If it’s not price, what can the channel offer that its new-generation retail rivals cannot?  Let’s examine some of the channel’s assets:

  • Touch – in a store, you can feel fabric, handle a bottle, try out a fashion or accessory item for size or suitability, look and feel; test a child’s toy for colour or durability
  • Taste – sip a sample of the latest single malt whisky, try the latest chocolate brand
  • Smell – even Alibaba hasn’t (yet) invented a way to nose, say, the new L’Envol de Cartier male fragrance. You can if you’re shopping in Dubai Duty Free
  • Confidence – you know what you’re buying in duty free is genuine. With, say, alcohol or cosmetics* that matters
  • Exclusivity – if a line is only available in duty free, then there’s nothing Alibaba or Amazon can do about it. But has the concept of channel-exclusive product really been properly developed? And communicated? Does the most commonly used term, ‘travel retail exclusives’, mean anything to most travelling consumers? Who outside the retail industry even uses the word ‘retail’? You mean ‘shopping’, right? Do we need to reinvent industry parlance?
  • Experience – this is what Cartier Managing Director Travel Retail Asia Michael Guenoun was talking about when he recently called for a total rethink of how luxury is sold in travel retail. “A cheaper price is no longer enough to attract global shoppers; the major focus must be to create a differentiation, an emotion, a real experience – something that neither digital nor traditional channels can provide.” Those are seminal words. At Heathrow Airport the Jo Malone boutiques offers hand and arm massages; while the consumer is basking in the treatment she can take in the heady aromas of the Jo Malone fragrances and candles, and be entranced by the beautiful in-store merchandising. Even the best e-Commerce site will be unable to match that experience.
  • Service – in a ‘face-to-mobile device’ era how joyous it can be to have a face-to-face experience. Think of the old-fashion civility you receive at World Duty Free’s ‘World of Whiskies’ store; or of the profound product knowledge you encounter at Le Clos at Dubai International. All done with courtesy, speed and maybe even some gift-wrapping thrown in.
  • Spontaneity – according to a recent survey**, 40% of shopper spend more than they had planned to while shopping in stores, while only 25% of shoppers do online. Engaging storefronts, shop windows*** and point-of-purchase displays can make a huge difference.

*In June, London police seized a large shipment of fake make-up, leading brand protection company NetNames to warn of the dangers of purchasing cosmetics online.

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These are some of the key weapons in the armoury of travel retail 21st style.

At The Trinity Forum last year, I quoted the words of Netflix Chief Content Officer Ted Sarandos, who said: “The goal is to become HBO faster than HBO can become us”. Maybe travel retail has to become Amazon faster than Amazon becomes travel retail?

I’ll close with the wise words of another wise man, Gebr Heinemann Co-Owner Gunnar Heinemann, who said recently,Creativity, individualisation and multiple services that are comprehensive and personal are the attributes that customers will demand of us. Only companies which respond to that need will be successful in this market in the long term.”

Gebr Heinemann knows about the long term, of course. And it knows all about the need for constant reinvention. You wouldn’t still be in business 137 years after your foundation otherwise. But the German travel retailer, like most of its peers, is now placing acute emphasis on how it adapts a traditional retail approach to a consumer wave that is anything but traditional.

Note: We welcome your feedback on this article (if you would like to contribute to The Digital Conversation please e-mail me on Martin@MoodieDavittReport.com)

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