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| Benno Leeser: “Really disappointed” at the Changi Airport tender loss |
NETHERLANDS/SINGAPORE. Gassan Diamonds Chairman & Managing Director Benno Leeser has expressed his dissatisfaction with the recent tender decision for the Singapore Changi Airport terminal two watches concession, revealed last week on The Moodie Report.com.
He claimed it put too much emphasis on the monetary offer and not enough on retailing quality.
The Civil Aviation Authority of Singapore (CAAS) announced last Friday that DFS Group had won both concessions at the terminal following an open tender, retaining its own store and ousting the incumbent, Dutch company Gassan Diamonds, from the second position.
Leeser said the loss of the contract was “really disappointing” in terms of the investment and innovation that the company had brought to the business over the past five years.
Gassan originally won the contract for a three-year period in 1999, which was subsequently extended for a further two years.
“We have had fantastic comments from our suppliers regarding the great service we offered,” said Leeser.
“We brought in four new boutiques from Breitling, Chopard, Jaeger-LeCoultre and Corum and we had excellent performances from all the leading brands. Everything was built around quality.
“It just appears that the authority was only interested in the money [DFS offered a higher basic minimum guarantee, see figures below – Ed] but actually the numbers were close and if business was good, we would be paying more.”
The bids were as follows:
DFS Venture Singapore: 10% of total monthly gross sales OR MMG of S$284,888 per month; PLUS 20% of gross monthly sales exceeding S$1,300,000 per month, whichever is higher.
Gassan Diamonds: 10% of total monthly gross sales OR MMG of S$256,000 per month; PLUS 30% of incremental sales from S$950,001 per month to S$1,200,000 per month PLUS 31.5% of incremental sales above S$1,200,000 per month.
The Moodie Report has calculated the return to the CAAS based on five hypothetical monthly turnover figures of S$1.0 million; S$1.1 million; S$1.2 million; S$1.4 million and S$1.6 million respectively.
This is how the DFS and Gassan bids compared (there was a third, lower bidder, Sincere Watch Duty Free).
Monthly turnover of S$1.0 million: DFS = S$284,888; Gassan = S$270,999;
Monthly turnover of S$1.1 million: DFS = S$284,888; Gassan = S$300,999
Monthly turnover of S$1.2 million: DFS = S$284,888; Gassan = S$330,999;
Monthly turnover of S$1.4 million: DFS = S$304,888; Gassan = S$397,749;
Monthly turnover of S$1.6 million: DFS= S$344,888; Gassan = S$456,999;
At current levels of business – undisclosed but The Moodie Report estimates in the region of S$900.000-1 million a month, the DFS bid offers the better return. But as sales rise to S$1.1 million and to S$1.2 million, a range which Gassan described as “a realistic possibility”, the Dutch company’s offer becomes the more attractive – in isolated financial terms at least. The higher numbers from S$1.4 million up are considered unrealistic in the near future.
The CAAS, which often likes to split multi-concessions between rivals, would have made its calculations based on estimating the likely growth in the business and its resultant returns to the authority. That decision ultimately favoured DFS.
COMMENT: Gassan’s disappointment is understandable. Since it made its Changi debut in 1999, the company has invested heavily in a retail location a long way away from home and delivered some impressive results.
It was also responsible for a great deal of innovation, introducing the mini-boutique concept for the first time in watches at Changi. In short, it has done little wrong and much right. But in the tough, sometimes brutal world of tendering, that is not always enough – and DFS has certainly had its fair share of tough decisions.
Supplier reaction to the results has been mixed. As always, their sentiment depends to a great degree upon their relationship with the retailer concerned. Most felt that the bid levels – impressively transparent from the CAAS, left the decision too close to call. Inevitably, the CAAS could not please everyone. And to be fair to the authority, it has highly-intelligent management who do care deeply about the airport’s retail reputation.
Common conscensus is that DFS will focus on giving more space to a smaller number of brands. It is also likely to introduce Bvlgari, a big brand not stocked in the Gassan outlet. Gassan tends to offer a much wider range of brands.
“There’s not much difference in the money and I’m sure all the retailers would have submitted an original concept,” said one supplier. “Because the money level was not so far apart, the quality side must have been factored in.”
The Moodie Report understands that the S$900,000 turnover level relates to an average of the first four months sales in 2004. Travel – and spend – has picked up since then and most suppliers concur that turnover will rise accordingly in the space occupied by Gassan when the new contract begins in October. The question is by how much. And – the great unknown – the results of both parties would not necessarily have been similar.
Gassan occupies around 180sq m of space, much more than in the store currently held by DFS in the other T2 location (to which an additional 35sq m stand-alone area is being added). But it is in a much less advantageous location.
Some suppliers contacted by The Moodie Report were critical of the delay in announcing the decision rather than the result itself. The award was made on 21 August yet the contract begins on 12 October – leaving precious little time for the expensive refittings certain to be required, plus the likelihood of the shops being closed for days or even weeks.
Note: If you have any reaction to this story, please send it to the editor at martin@moodie-international.com. Names can be withheld from publication upon request but must be supplied.
