INTERNATIONAL. Chief Executives from five of the world’s leading travel retailers today outlined their views about a series of issues from digitalisation to sustainability to the new consumer offer, in a powerful panel session at the TFWA Asia Pacific Hainan Special Edition virtual event.
China Duty Free Group President Charles Chen, DFS Group Chairman & CEO Benjamin Vuchot, Dufry Group CEO Julián Díaz, Gebr Heinemann CEO Max Heinemann and Lagardère Travel Retail Chairman and CEO Dag Rasmussen assessed the recovery and future of the channel, the consumer mindset and the need for more meaningful partnership across the industry Trinity, among other topics. The session was moderated by TFWA Managing Director John Rimmer.
Landmark day for DFS
With the inauguration and opening tomorrow of Samaritaine Paris Pont-Neuf by DFS – a moment of great significance for the retailer and for the wider industry in a turbulent period – Benjamin Vuchot fittingly addressed the retailer’s ‘destination within a destination’ concept in Paris.
Spanning over 20,000sq m across seven levels and multiple buildings, Samaritaine Paris Pont-Neuf by DFS features over 600 brands, 12 restaurants, a boutique spa, an artistic collective, a lifestyle boutique dedicated to locally made and exclusive products, and the largest beauty hall in Europe.
Vuchot said: “It’s an historic opening. La Samaritaine is a unique place, and what DFS has done is revitalise it and bring it into the 21st century. It echoes the passion DFS has had over the years for destinations within destinations, and created a retail experience that goes beyond the availability of product, the price and the transaction element. What is really exciting is the assortment – supported by our brand partners – and the creativity of our teams to develop these unique spaces. La Samaritaine will be an example of what we want to do at DFS in leading the luxury element of travel retail, as we expand our footprint in Europe.
“On top of the physical experiences, we’ve listened to how consumers have evolved in the pandemic. We have seen the customer mature, their taste for experience, for specific products, and this opportunity has given us the courage to go above and beyond and [create] a new concept with La Samaritaine, alongside our new website, just launched.”
Seizing the moment in Hainan
Addressing the opportunity of domestic travel retail shopping in China and offshore duty free in Hainan, Charles Chen said that the potential for the business remained vast. Reflecting on the past year, he said: “The pandemic has hit our industry a lot but the government controlled it well. We know that the potential for Chinese consumers is still there. We need to look to the long term, building our relationship with the brands, keeping close communication, ensuring mutual support.”
Chen said that new consumers, raised using digital channels, have high expectations of the offer in terms of how it is differentiated and how they are engaged by brands.
“We must bring digitalisation in our industry to a new reality. We must talk to the people during their travel, but through pre-order too. They have different shopping behaviour, ordering via digital, with QR codes in hotels or restaurants, and we must adapt. We need new ideas in a changed world and industry.”
On the future in Hainan, Chen added: “We are very fortunate to have the preferential policies for Hainan Island. We hope we can create the Hainan market together. The whole province is a Free Trade Port, which is not seen elsewhere. The government wants to take consumption back to China and it plans to build Hainan as a place where people enjoy shopping.
“And I’m happy to see the changing infrastructure, and many more tourists coming; last year 60 million, 80 million this year, and 100 million next year. Hainan is the place many Chinese want to spend holidays with their families. So we can be confident about the future for Hainan.”
Speaking the language of the new consumer
On how travel retail can target the next generation of consumers more broadly, Vuchot added: “Amending the offer is one thing, but also amending the way we welcome customers and the way they want to shop is another. What we also see – and this is a very important new segment for DFS – is how many of those new customers are with their families. We have multiple generations travelling together and young couples with children.
“There is an amazing opportunity not only to cater to those customers with the right offer, whether it is kids’ clothes, toys, or other goods. It’s also creating space and experiences where families are welcome and comfortable spending time with us.
“Travel retail is about making a memorable journey, having customers come back and that sense of a customer journey from A to Z. We have to adapt the way we retail and the way we welcome customers and bring them more options. That is all very exciting for the future.” [Click here for our recent in-depth, exclusive interview with Benjamin Vuchot.]
On the shape of recovery, speakers noted that uncertainty about government rules about travel remains a key short-term concern. Dag Rasmussen said that China has seen strong sustained growth, while US domestic traffic was returning to 2019 levels, but that in Europe “things will take a bit longer” to recover. He said: “With our three diversified business lines, ultimately we are optimistic for how things will restart and are restarting.”
Julián Díaz said candidly that much uncertainty remains, with the outcome for travel retail and for aviation as yet unclear. He highlighted the acceleration of trends such as the digitalisation of the company through the pandemic.
“We need to move fast to be relevant for all customers with new technology,” he said.
Max Heinemann added: “We have seen digital accelerate but there is so much room for new connected business models in our industry. The pandemic helped ground us and enable us to focus on new touchpoints with the traveller. Our core customer is mature, but we are not grabbing the digital native in the way we need to, not yet at least.
“We have to see the environment more holistically, as a marketplace, and talk to the customer in the way they want to be talked to, with a customised physical and digital journey. And we are only at the beginning of this process.”
Changing the model
On the business model, Heinemann said: “When it comes to a crisis of this magnitude, the business model is at times not fit for situations like this and it needs to be adjusted. I think we have all learned, and I am pretty sure that that our industry and partners and peers see it the same way, that if you want to tap the potential that is surely out there, then you need to adjust some things.”
Dag Rasmussen said that partial change had already taken place. “We have negotiated some great deals around profit share, which is the best deal, removing some constraints. We have had more success recently in promoting a new model, but not in all recent tenders. Some landlords believe that they need more, not less, security, and that carries with it huge risk.
“If pandemics are excluded [from contracts] in future, the retailer carries more responsibility. Also, there is the question of flexibility. We like long contracts but if we sign a long-term contract now, will the consumer be the same in 2030? Probably not. What is today a restaurant could be a duty free store or travel essentials outlet tomorrow. How can we reinvent to capture the consumer as they are?”
Julián Díaz added: “Travel retail requires a significant change. The customer has changed and the value proposition must be adapted. We need flexibility – with contracts adapted to the current reality – and financial sustainability. We cannot create value if the lease is not the right one, and I think most landlords understood that during this past year. So too did suppliers, who also supported us through the pandemic.”
On the product offer today and tomorrow, Max Heinemann said that range rationalisation was a natural by-product of the crisis in the short term. “For the future it’s about entertainment, it’s really more about exclusives and true limited editions. But you also need room for trial and error, where travellers respect that you have tried to be different. And that needs to be part of our contracts. You cannot plan for or guarantee innovation, and this is part of our motivation, to collaborate to move forward.”
Julián Díaz said: “Convenience has been very relevant in this period. For the future, we see more local products, as we see demand; we will have more sustainable products and third, novelties and exclusives will be important.”
Max Heinemann concluded with a final message on the future: “We need an entrepreneurial spirit in the industry and to put the human, the customer, at the centre of what we do. If we do that and throw well-managed data into the mix, we have all the answers, and it’s up to us to decide how we want to collaborate.”