Interview: Changi Airport Group’s Jeffrey Loke on an evolving retail and consumer landscape

My little boat is made of ebony;
My flute stops are pure gold.
Water loosens stains from silk;
Wine loosens sadness from the heart.
With good wine, a graceful boat,
And a sweet girl’s love,
Why be jealous of mere gods? – Li Bai

Prologue: It’s late Saturday morning in Singapore and Changi Airport Group (CAG) Senior Vice President, Pricing & Commercial Strategy Jeffrey Loke is in relaxed mood as he chats to media in advance of the World of Wines & Spirits (WOWS) Signature Event to be held at National Gallery Singapore that evening

It’s a big occasion for CAG, its partnership with Lotte Duty Free intended as a vibrant showcasing of the airport’s luxury retail credentials and the ability to procure some of the world’s rarest wines & spirits.

Appropriately then, the interview is being held in the hallowed setting of Forest of Li Bai, the elegantly expansive upstairs tasting lounge at Lotte Duty Free’s Terminal 2 duplex store named after the famed 8th-century Chinese poet renowned for his celebration of the joys of drinking.

[Note: This interview is non-exclusive and draws on responses to questions from not only The Moodie Davitt Report but also from DFNI Editor Kapila Ireland and Global Travel Retail Magazine Correspondent Karuna Tuli]

Loke is a near 16-year veteran of CAG. That experience has given him an acute understanding not only of the company’s retail activities but of how they need to evolve in line with – and hopefully ahead of – widespread changes in consumer behaviour and competition for the traveller spend.

I kick off the discussion by asking him whether outside the Chinese spend – historically so crucial to CAG but subject over recent times to a widespread softening globally – CAG is seeing other nationalities emerging as brighter lights.

The answer, as always, lies partly in traffic numbers. Changi Airport’s top five markets by passenger volume for the second quarter of 2024 were Indonesia, China, Malaysia, Australia and India. Encouragingly, China saw the highest growth among the quintet, with traffic doubling year-on-year and surpassing pre-COVID levels.

“We have seen the Indians rising. In fact, they are now our third-largest group by total [retail] sales,” Loke explains. “They are a large segment of ours in terms of pax, and then in terms of spend we see them buying more than pre-COVID. They’re spending more, even on a per-pax basis, and that’s important.

“We are also flying into more Indian cities through airlines such as Vistara and Indigo. A lot of them are expanding to connect second and even third-tier Indian cities. So it’s like China was six or seven years ago after we started expanding from the likes of Shanghai and Beijing to second- and third-tier cities.

“We are excited that the network to India has grown. Both the low-cost carriers such as Indigo and also the full-service airlines like Air India are getting stronger, as is Singapore Airlines into India.” This dynamic is particularly benefitting the liquor, food & confectionery and consumer technology categories, Loke observes.

Changi Airport has always prided itself on its keen pricing, traditionally demanding of its anchor beauty and liquor retailers that they price below a sizable number of overseas airports – now 18 for liquor; 11 for beauty – not just in Asia Pacific but beyond.

Not surprisingly, this approach is less appreciated by Changi’s retailers and their brand partners than the airport’s consumers. The combination of onerous concession terms and a flood of cheap external competition across duty-free, local and ecommerce markets has conspired to put extreme pressure on the sector ecosystem. Would CAG consider a change to the policy, I ask?

“We do try to compromise a bit now,” Loke responds. “We realise that right now the pricing is harder and harder to monitor. In the past it was just [comparing with] a few airports… but now we have the secondary channels… and then the parallel imports, both for liquor and for beauty. And the online. Just coming to terms with the pricing is tough.

“So our strategy right now is that we look at what we call the mainstream channels, not the parallel imports, and then we look at promotions as well. So we look at two levels of pricing – the listed price and the promotion – that’s completely changed how we monitor.

“CAG now adopts a reasonably pragmatic approach and allows for some flexibility to not price to the lowest airport.” But what, I continue, does the group do when certain offshore airport retailers cut prices to the bone, putting massive pressure – by dint of the Singapore pricing policy – on The Shilla Duty Free (beauty) and Lotte Duty Free (wines & spirits)?

Again, Loke replies that CAG takes a more nuanced view than in the past, reviewing how exposed the Changi passenger is to a particular overseas location.

For example, I suggest, if a European airport is slashing prices on a key Chinese product such as Kweichow Moutai, such a comparison might be largely irrelevant to the Changi traveller. “Yes, correct,” he replies. “So we take a more pragmatic approach on that… we look at whether the key nationalities [at Changi] are going there.”

Middle Eastern airports such as Hamad International, Dubai International and Zayed International are prime competitors for the transit business that is so key to Changi. Does CAG see a similar retail situation to Dubai Duty Free where passenger spending on retail growth is failing to keep up with traffic growth?

“There’s still a gap between pre-COVID sales and now for the China reasons [i.e. softening spend],” Loke replies. “So we are not back to where we were. Even though our pax will be back to pre-COVID, our sales are not.

“Are we satisfied? No… because now we’re serving that amount of pax but our revenue is down. That means financially we are worse off, because the cost to maintain and serve this amount of passengers unfortunately has gone even higher than pre-COVID as salaries, supply chain costs etc have increased.”

In pre-COVID 2019, Changi Airport served 68.3 million passengers (see table below), a figure it is well on the way back to achieving, having reached 44.4 million for the first eight months of 2024. But if non-aeronautical revenues are falling short of expectations, that gap has somehow to be made up, Loke emphasises, a situation CAG is addressing rigorously.

“Hence, the challenge for us is to find new categories for growth, working the brands and retailers to excite passengers. In ecommerce, for example, we are finding some areas of growth through our iShopChangi operation.”

However, ecommerce still accounts for just a single-digit share of CAG’s retail business. “It’s growing, but not as fast as we want to,” Loke observes. “I think travel retail is innately a very physical experience.”

Features of Changi Rewards revamp • Free parking at Changi Airport and Jewel with no minimum spend for Gold and Platinum members. All members are entitled to additional free parking hours with minimum spends at Changi’s terminals and Jewel. • Birthday vouchers for use at Changi and Jewel of S$20 and S$40, respectively, for Gold and Platinum members. Regular members continue to enjoy double points for the first transaction of at least S$10 on their birthday month (capped at S$1,000/US$760). • A 12-month rolling expiry, where points are now valid for 12 months from the point of earning them, giving members more time and flexibility to redeem their points. • Introduction of the Monarch VVIP tier (see next sidebar). • Upcoming: In future, members will be able to directly offset payments at Changi Airport’s terminals, Jewel and iShopChangi with Changi Rewards points.

To boost its in-store business, CAG team is studying a wide range of promising sectors, including niche fragrances and independent Korean and Chinese beauty brands that are growing strongly in their respective local markets. Has the company considered the Pre-loved concept? Loke acknowledges the sector’s growth but says CAG would have to find a reputable retailer before making any such a move.

Kid’s items and gold care are other growth categories, he says, the latter no doubt boosted by its traditional ‘safe haven’ status in troubled times. Whisky, particularly single malt, continues to grow and interestingly Lotte Duty Free has now introduced a range of Indian whiskies [from Paul John, as reported], underlining their fast-rising global reputation. Conversely, Cognacs in general and high-end expressions in particular, are being hit by the soft Chinese spending.

Is Changi the world’s most user-friendly airport? Changi offers a quality that is almost a contradiction of terms with most world airports. Serenity. Read more about Martin Moodie’s Changi experience in The Moodie Blog

CAG is working relentlessly to incentivise travellers to spend and reward them when they do. The recent revamp of customer loyalty programme Changi Rewards is a prime example, notably the introduction of the Monarch VVIP tier (see sidebar below), created to nurture the airport’s most esteemed customers. Not only is the new tier a way to recognise the unwavering loyalty of discerning members but also a reaffirmation of Changi’s status as a premier destination for travel, shopping and dining, Loke says.

The Monarch tier takes its inspiration from the butterfly of the same name, a symbol closely associated with Changi Airport and featured in the Changi Rewards logo. CAG describes Monarch as the king of butterflies and a symbol of grandeur and transformation, underlining the high-end consumer focus.

CAG aims to expand the range of benefits and privileges available to Monarch members, in an effort to keep pace with evolving consumer behaviour related to luxury travel. It also plans to foster a vibrant community of Monarch members through exclusive events, networking opportunities and personalised services.

“Furthermore, we envision Monarch as a platform for innovation, where we can pilot new concepts and technologies aimed at further elevating the VIP treatment our members receive,” the group says. “Ultimately, our goal is to solidify Monarch’s reputation as the pinnacle of luxury and exclusivity when it comes to premium loyalty tiers.”

Reference to Monarch and the high-end consumer brings the conversation back around to WOWS, an event one year in the planning. While Lotte Duty Free does the product sourcing, CAG works closely with its retail partner to promote sales through pre-order, the Changi Shopping Concierge concept and broader marketing.

“We have a greater line-up this year with more brands, so I think we are gaining momentum,” Loke says. The event’s encouraging development has seen it outgrow its 2022 and 2023 homes at Jewel Changi Airport and Capitol Theatre, doubling in duration to two nights and landing at the prestigious National Gallery Singapore.

CAG says its key consideration in selecting venues is aligning them with the event’s theme and concept. “This year’s venue complements our theme of ‘Artistic Alchemy of Wines & Spirits’. The gallery’s artistic ambiance creates a perfect backdrop for celebrating the craftsmanship behind the world’s finest liquors,” the group comments.

Loke echoes that message. “We had previous experience with DFS [Lotte Duty Free’s predecessor] when they had the Masters of Wines & Spirits, so we know what it takes to run this programme. This is why we are co-investing in this event. We are trying to use WOWS as a marketing event to maintain our position in premium liquor.”

That’s the kind of sentiment guaranteed to appeal to Changi Airport’s legion of shoppers. And no doubt, if he was still alive, to Li Bai himself. ✈

Changi Shopping Concierge A complimentary 24/7 service available to all Changi passengers. Passengers can contact the Shopping Concierge via Whatsapp. The service can offer the following: • Assist passengers to check on stock availability and price before their flight (shoppers can also compare with downtown prices and make the best-informed decisions). • Take photos and videos of products for passengers. • Make personalised recommendations based on individual requirements. • Assist in making reservations, if possible. • Assist in liaising with tenant on payment and transaction (for tenants with online payment modes e.g. QR code type of payments such as ChangiPay, GrabPay, Alipay or online payment links). • Deliver the item to passengers at a pre-arranged convenient location within the transit area, before passengers board their flights. • Assist to bring passengers to the store, if preferred. • Cross-terminal shopping: This is especially important for T4, which has fewer luxury retail brands. Shopping Concierge can either accompany passengers from T4 to the other terminals to shop, or work with retail tenants to have the items delivered to the shopper in T4. • After-hours shopping: Passengers departing between 12am and 6am may not have the chance to shop if the stores are closed. Shopping Concierge can assist with payments and transactions beforehand when the store is still open, keep the item for the passenger and pass it to them when they enter transit for their flight.