US. Prominent US travel retailer Duty Free Americas today issued an Open Letter to its brand partners and airport authorities expressing concerns over pricing.
The Open Letter, which takes the form of a paid advertisement in selected industry media, follows the retailer’s grievances over changes to its buy-in price structure from certain brands – changes that remove the traditional pricing advantage over local markets, Duty Free Americas says.
The Open Letter, signed by Duty Free Americas Chairman Simon Falic, reads:
ATTENTION VENDORS AND AIRPORT AUTHORITIES
“Great strides have been made over the past few years to restore confidence in travellers by ensuring that they are no longer being overcharged for food and consumer goods in airports. In fact, it has become common practice for airport authorities to enter into contracts with their concessionaires demanding price parity with downtown or local market prices.
“Unfortunately, consumer goodwill is at risk of being eroded once again. Recently, several of our vendors have announced that they intend to raise prices on a number of their products which we sell in our stores to levels that are essentially equivalent to those found in department stores, discount chains and factory outlets. Their rationale is based on the flawed premise that duty free consumers are ignorant about prices and that they do not comparison shop.
“Duty free stores have historically enjoyed a reputation for offering favourable prices. This is particularly true for international passengers from countries where duties on imported consumer or luxury goods, merchandise taxes, and retail markups are high by world standards. If vendors go forward with their proposed price increases, however, this perception will rapidly change for a variety of reasons.
“First and foremost, duty free operators already face intense competition from traditional brick and mortar retailers. In markets such as the United States, Europe and Asia, where the retail environment is highly competitive, consumers have come to realize that these retailers constantly offer great deals, either in the form of discounts, gift-with-purchase or purchase-with-purchase promotions, or similar recurring sales events.
“The Internet is another reason why duty free stores must not be placed in a position where they have to sell their merchandise at full retail prices in response to vendor price increases.
[The following is in Duty Free Americas’ bold text, not ours -Ed]. “The notion that consumers are either uninformed or do not care about prices when it comes to duty free shopping is naïve and false, if not condescending. Thanks to the Internet, it is now possible for consumers to check which duty free products and prices are available at many airports before a departure date and to compare those prices with the prices at competitive retail stores in downtown or local markets.
“Travel retail today boasts some of the most elite and highly desirable selling space in the retail world. Because airport duty free stores cater to a captive audience of luxury-seeking shoppers, renting space at an airport is extraordinarily expensive. In order to ensure that sales generated in these stores justify this expense, duty free operators and their vendors must share the responsibility of making certain that consumers have a positive experience by offering them the best brands at attractive duty free prices, as opposed to full retail prices.
“The duty free industry has already suffered enough from the advent of the Internet and increased competition from local retailers. Consumers do care about prices, and they now have the tools to compare and the choice of places to shop. [Again the bold emphasis is DFA’s -Ed]. Duty free shops must, therefore, consistently offer better prices than department stores, discount chains and other retail outlets. If vendors are allowed to increase prices to the point where the line between duty free and traditional retail becomes blurred even further, the impact will be felt by duty free operators and airport authorities alike.
“In conclusion, it is imperative for vendors to realize that, in the event they attempt to force these proposed price increases upon duty free retailers such as Duty Free Americas, we will have no choice but to stop carrying their merchandise in our stores [the retailer’s underlining -Ed]. There are plenty of vendors who still understand and appreciate the duty free concept and who wish to work together as partners in a mutually beneficial relationship that places a strong emphasis on the goodwill of consumers.”
Duty Free Americas declined to reveal which vendor or vendors are involved but it is clear that the situation has reached an acute stage with at least one house. The company is still hopeful that the situation can be resolved amicably before products are de-listed and/or other brands become involved. We’ll follow up this important story over coming days and invite comment via The Moodie Forum below.
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MORE STORIES ON DUTY FREE AMERICAS
Duty Free Americas heralds an upscale new era in US airports, Uruguayan border stores – 24/03/08
Falic Group targets World Duty Free; “˜We’re very keen and committed’ – Leon Falic – 10/01/08
