UAE. “Opportunities and missed opportunities with inflight duty free shopping” was the stimulating theme of a landmark speech by Emirates Airline’s Senior Vice President Service Delivery Terry Daly at the Middle East Duty Free Conference on Saturday.
Despite having a highly-rated duty free programme that features significant retail theatre, Emirates plans to “elevate that to a different level” over the next two years, Daly said.
Citing fuel burn costs in the wake of the current sharp rise in oil costs, Daly warned that the duty free offering stands to be considered in isolation as a contributor to the weight carried. “It would not surprise me that when fully costed – in terms of weight and fuel burn for carts, product, brochures etc – some routes on an airline’s network will be marginal to say the least.”
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Terry Daly: “Too many airlines use the brochure as a revenue channel by charging excessive listing fees and producing a brochure at the lowest possible cost” |
Innovation and greater consumer interactivity were needed in response he said. Calling for new thinking towards the traditional stand-alone duty free airline operation that has remained unchanged for many years, he said: “The time has come to consider blurring the edges of the inflight airline experience.
“In line with the development of aircraft interiors we can see some fabulous opportunities to inform, entertain and realise additional revenue from our passengers by harnessing the power of our Inflight Entertainment (IFE) systems.”
Noting the power of Emirates’ IFE offer, Daly noted: “As a customer, you can choose from over 1,000 audio and visual channels, 100 interactive games, 300 albums and every UK number one hit from the early 1950s. Not forgetting – in the event that you can’t find anything to watch or listen to – you also have the capacity to send and receive e-mail and SMS messages.”
He linked the breadth of that offer to the boom in Internet shopping and asked what airlines were doing to tap that opportunity. “If someone had suggested even as little as ten years ago that there would be billions of dollars transacted on the web by 2007, they would probably have been laughed at. Don’t you think that it is time to take notice and consider our own position?”
Over the next 18 months Emirates plans a range of developments and experiments including a new dedicated duty free website which will be featured on the IFE system. “It will display the full range of duty free product, will be fully interactive and be presented in a clear and attractive way making it as easy for our passengers to browse product on the web as if they were flipping through the brochure,” Daly said.
“Passengers will be able to order from the site and have the product delivered to their seats. To enable us to drive traffic to the website we will also produce a short commercial to promote the duty free offer that will play during the regular TV programmes and this will direct people to the website.”
Passengers entering the website will be able to view fragrance advertisements that they would normally watch on regular TV. Daly commented: “These adverts will drive sales in a way that the magazine cannot, as they are more visual than a printed advert.”
Another possibility is an audio channel dedicated to duty free products and, similarly, an onboard television channel.
Daly concluded: “I can see in the not too distant future a time when aircraft will be permanently broadband connected 24/7. Credit card checks – easy, no different to a shopping mall. Someone wishing to purchase but a lack of stock? [Instead] it will be named and ready at door side on arrival.
“By leveraging the potential that lies within the next generation IFE system we will be able to enhance the passengers overall inflight experience and increase our onboard revenue.”
THE ROLE OF THE BROCHURE AND OF LISTING FEES
Daly criticised the execution and role of many duty free brochures. “I believe that too many airlines use the brochure as a revenue channel by charging excessive listing fees and producing a brochure at the lowest possible cost,” he said.
“Sure you may make a nice tidy profit on your brochure, but the only way to have a sustainable relationship with your supply chain is to increase onboard revenue and sales volumes. Quite frankly you cannot do this if you compromise your brochure design. At Emirates we only have a maximum of two products on a page. We don’t use cut and paste photography and we endeavour to have good clear product shots.”
On listing fees he noted: “Three or four years ago [Vice-President Duty Free Services] John Sime made a presentation to this very conference with the request that listing fees be abolished and that we looked at incremental margins [instead]. The response from you, our suppliers, was totally underwhelming.”
He continued: “Our position today remains the same. We would like to see our margins increase as we grow our business and, as unit sales increase, we will all be more profitable. Yes I would like to see you taking a smaller piece of a bigger cake year-on-year, because in this way we will all be making more profit. This isn’t revolutionary – it’s standard practice in many other industries. It will be a business model that we will be focusing on in the future.”
FOOTNOTE: The Middle East Duty Free conference, hosted by The Middle East Duty Free Association (MEDFA) from 30 November to 1 December and organised by TFWA, attracted around 390 delegates. It was co-moderated by The Moodie Report Founder and Publisher Martin Moodie and Travel Retail Business Deputy Editor Anouska Forte.
Delegate reaction immediately after the event suggested it was one of the better conferences of recent times. Besides Daly’s speech the stand-out moments included a superb 90-minute presentation by customer experience expert Shaun Smith, a keynote address by Etihad Airways CEO James Hogan, and an information-packed panel session on Arrivals shopping featuring Alpha Asia Managing Director Paul Topping, Regent Asia Group Managing Director Chim Esteban and Abu Dhabi Duty Free General Manager Dan Cappell.
In a well-crafted speech, Diageo Global Travel & Middle East Corporate Relations Director Tim Rycroft reminded delegates of their obligations to retail responsibly in an age where categories such as liquor and tobacco are under intense regulatory scrutiny.
Panel discussions on issues facing the region and on the aviation security crisis rounded out a consistently solid and at times excellent conference. Next year’s event will move to Abu Dhabi.
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FROM THE PUBLISHER: The Moodie Report has just published the annual Middle East Duty Free Association Guide in our new Digital Print format. Click on the icon to download.
MORE STORIES ON MEDFA
Egyptair Duty Free Shops closes in on US$100 million sales landmark – 03/12/07
Middle East Duty Free Association: Official Guide 2007 – 30/11/07
Middle East Exclusive exhibition promises to be the biggest and best yet – 08/11/07
