INTERNATIONAL. Sometimes, not often, industry events come along that not only capture the mood of the business but actually manage to shape its future. The Trinity Forum held in London in June was one of them.
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After almost two years of virtually unrelenting pain in the global travel retail market, it was clear that an overwhelming body of opinion in this business is demanding change.
Simply put, the industry has little left to give, following the sustained round of crises which have exposed the traditional industry model – an artificial one built for glory days long since gone. Worse still, it virtually pits the parties in the industry against one another, rather than fostering any sense of mutual stake holding in the business.
“Long-term vision over short term imperatives” was the theme for Nestlé vice-chairman and ceo Peter Brabeck-Letmathe’s riveting opening address. Talking tough and from an external perspective, the ceo of the world’s biggest foods company – which has a turnover three times the size of the global travel retail industry – laid down a series of challenges and questions for the business, during a performance that was a privilege to attend.
Brabeck-Letmathe said today’s travel retail channel had become “fat and comfortable” after nearly five decades of a privileged and protected existence of selling on price against a backdrop of highly taxed domestic markets and increasing passenger traffic.
“How transparent is the data sharing in this industry?” he asked. “How effectively can an industry go forward when moving in the dark? Where are the market share statistics, the growth trends, and the identification of new opportunities through data analysis?”
There needed to be, he argued, a “fundamental rethink of the relationship between brands, retailers and airport management, balancing investment and return, risk and reward”. He warned: “Failure to do so will mean that travel retail, as a vibrant retail channel, will wither away in the face of growing global retailing giants who will better identify and meet those same shopper needs.”
Leaning on his knowledge of domestic retail, Brabeck-Letmathe said: “Consider what Wal-Mart, Carrefour or Tesco would do with such a captive audience?” He asked, would they have been happy with an industry that had stood still in sales terms since 1995, despite a sharp rise in potential customers?
“There is a great opportunity for all,” he said. “Imagine moving footfall from 30% to 60% and penetration from 15% to 30%. Generation DataBank estimates that the industry in 2002 was worth US$20 billion. Imagine an industry worth US$40 billion.
Did this business really understand its consumer, he asked? “At the root of everything there is the fundamentally poor understanding of the shoppers’ motivations and needs, as well as the end consumer’s requirements,” he added.
He said the industry had been over-influenced by its environment “which by its very nature is somewhat remote from the everyday realities of most people, tucked away in the artificial, extra-territorial world of airports”.
Brabeck-Letmathe concluded: “This “˜splendid isolation’ has made [the industry] blind to the challenges of our time. The industry has to come out of its “˜closed shop’ and learn to turn problems into opportunities. But you can no longer expect your shoppers to make the first step. You have to do it. There is no better time to act than in a time of crisis”.
From Randy Emch’s splendid analysis of the various retail models on the first morning to John Sutcliffe’s impassioned call to convert the trinity into a quadrangle (adding the consumer); from Peter Petersen’s quiet call for the industry to stop “day dreaming” to Gunnar Heinemann’s gospel of the long-term approach; from Brian Collie’s agenda-setting speech for the next decade to a unified call for an industry position paper that would not just sit there gathering dust but be acted upon by the trade’s highest bodies (including a reformed commercial division of Airports Council International) – this was a conference of an industry at work, embracing change and determined to go forward.
Individuals such as Aelia’s Michel Perol; Allied Domecq’s Charles Richardson; Estée Lauder’s Fabrice Weber; Nestlé’s Stewart Dryburgh; Swatch Group’s Frank Furlan; TFWA’s Erik Juul-Mortensen; Eraman’s Syed Ahmad Syed Salim and Dubai Duty Free’s Colm McLoughlin added weight and the wow factor to their contributions.
So did the airport representatives, such as Aeroports de Paris’ Alain Falque and Macquarie Airports’ Marcus Balmforth, who both made it clear that they were looking for long-term relationships with their retailers, not short-term revenue fixes. More of the same, please. And Generation owner Yngve Bia spoke passionately and with clarity about how transparency and the power of data can be transferred into reality.
CONFERENCE SUMMARY
Trevor Lloyd-Jones writes: The Trinity Forum closed with a sense of urgency and a common desire for change not usually associated with industry conferences.
But while delegates were unanimous in their call for change (in a pre-Forum survey some 70% said the traditional model was either “flawed” or “disastrous”), there were plenty of differences in evidence, too.
Keynote speaker Peter Brabeck-Letmathe seemed to strike a chord with delegates when he said it was time to act on the trade’s poor value and poor image. But later, in a show of hands, delegates were split down the middle on whether price was the lever to improved penetration and spend.
Key action points included a call for airports to become more open and more engaged in the process. Airports hold the “golden key” and it is difficult to achieve anything without their commitment to changing the model, said Aer Rianta Middle East (ARI-ME) managing director John Sutcliffe.
ARI-ME is arguably the company with the most experience of different types of airport relationships, ranging from minimum annual guarantee-based concessions to joint ventures consultancies and management contracts. Sutcliffe said the success of airport retail complexes in Bahrain, Dubai, Abu Dhabi and Beirut was not so much a question of model as one of unrelenting consumer focus. The region is an example of different partnership models between retailers and airports, but partnerships nonetheless, he said. There is no “one size fits all” approach.
Several speakers highlighted the industry’s poor track record on consumer analysis. But, time and again, the debate returned to the crude tender model and for a “fair” split of the risks and rewards. “Airports need to bring something more to the party, other than the need for our cash,” said one retailer.
The need to drive up footfall and conversion to spend was a recurrent theme of the two days. “Address the 85% of people who travel but who do not shop; not the 15%,” said Abu Dhabi Duty Free deputy managing director Dan Cappell, who made a manful job of presenting “My Ideal Tender” based on a hypothetical Asian airport.
Supplier voices, led by TFWA president Erik Juul-Mortensen, said brands cannot and will not continue to support futile bidding wars, when they are being crushed by the process. Presentations from Nestlé and Estée Lauder, in particular, showed how their respective categories can be harnessed to drive revenue and add excitement through proper category management, product launches and a generally imaginative, partnership-orientated approach.
“The beauty industry can make the shopping experience,” said Estée Lauder vice-president and general manager travel retailing worldwide Fabrice Weber. “We can do this today. We do not need meetings about it.”
In a call for quick, effective action at the conclusion of the Forum, the meeting resolved that a set of urgent issues be taken forward to the recently re-formed Commercial Committee of Airports Council International and the new Global Travel Retail Council with “one voice”.
“We need to persuade landlords that change doesn’t necessarily mean more cost,” said John Sutcliffe. “We have got to take this forward.”
It was agreed that an informal committee representing the Trinity would include Aer Rianta International-Middle East’s John Sutcliffe (retailers), BAA’s Brian Collie (airports) and Brown-Forman’s Patrick Moran (suppliers).
The Moodie Report, in turn, will publish a detailed record of the inaugural Trinity Forum and produce a “policy paper” and action plan that will be circulated to the appointees of the “Trinity” with appropriate steps for further action.
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