P&O fashions a fresh strategy in a brave new world - 06/03/08 : Moodie Davitt Report

On the same wavelength: P&O Ferries Head of Buying Neil Towns (pictured right) catches up with Martyn Westbury of Mars at the P&O trade show, held last weekUK. Not many ferry operators can boast a £1 million-plus (US$2 million) turnover in handbags alone within 12 months of creating this new category from nothing. But that’s exactly what Head of Buying Neil Towns and his dedicated team at P&O Ferries have achieved in the past year.

On a recent trip round the UK-based operator’s flagship ferry and its bi-annual trade show – yes, it even runs its own show – The Moodie Report uncovered a diamond in the rough seas that suppliers are now beginning to discover. And boy, are they impressed with the sparkle on this retail gem.

To say the ferry operator has a diverse passenger profile is an understatement. It caters to the daytripper hell-bent on bringing back trolley-loads of liquor thanks to £1 newspaper travel promotions on the one hand, and the UK’s wealthiest residents on the other. The latter are the inhabitants of Richistan, those boasting second or third homes across the Channel in La Belle France.

From Fords to Ferraris, from Minis to 4x4s – all manner of vehicles line up at the port of Dover destined for France. These passengers are a captive market onboard for one-and-a-half hours – and don’t forget the freight lorries whose drivers like a drink and a smoke, or the French contingent, who make up 20% of the total. P&O also also operates a service to Bilbao over two nights. Thanks to the low cigarette prices in Spain, tobacco suppliers really hit the big time on this route.

Many airport retailers can only dream of exploiting this dwell-time opportunity. And exploiting it, Neil Towns and his team are. Towns, a former buyer at UK airport operator Alpha, has helped bring to life P&O’s transformation from old-style ferry operator pre intra-EU duty free abolition to ocean-going department store-style swan with a vision that has even old industry pros impressed.

Such is the upscale ambience inside the shops on the flagship Pride of Dover, you feel you could be walking round Selfridges or Harrods, were it not for the giveaway low ceilings, the effect of which are minimised by clever lighting and a very open layout. The visual merchandising in categories such as handbags and liquor could come straight out of a retail experts’ handbook, and the products do indeed come straight out of the pages of the world’s glossiest magazines.

The beauty category is a particularly good example of the ferry firm’s new luxury tack. Brand names include the world’s finest: Chanel (the number one seller onboard), Dior, YSL, Prada, Estée Lauder, as well as fragrances and cosmetics from Coty Prestige, BPI and other top suppliers. Narciso Rodriguez selected P&O as its first-ever ferry stockist.

It’s not just a case of water, water everywhere on the Pride of Dover. Everywhere you look there are brands, brands, brands. In liquor there’s Champagne clad in the most inviting presentations, premium Scotch whisky in luxury coffrets to die for, and the most mind-boggling selection of vodkas, all lined up in Russian military fashion in their shiny glass one-litre bottles. Want a bottle of spirits to take home or give as a gift? You’re in the right place.

Don’t get me started on the leathergoods, sunglasses and watches. Lack of space and time means I can only say they are merchandised extremely well. Sekonda – a long-time supplier to P&O – offers a huge selection of accessibly-priced watches in a freestanding self-service unit aimed at the impulse purchase market. Among Sekonda’s top-selling watches onboard are its chunky, outdoorsy Xpose model, targeted squarely at the feelgood holiday “we’re-going-on-an-adventure” mood.

And expect the gift selection to go into the stratosphere following the recent appointment of Suzy Kirkwood as Category Manager for confectionery, travel essentials and souvenirs. This ex-fashion executive tells The Moodie Report she is “not risk-averse” and has her finger held firmly on the lifestyle pulse, so expect some retail fireworks in these categories. [We have insider knowledge on what she’s going to do, but it’s a trade secret. Watch this space –Ed.]

Ferry nice: The beauty category leads the charge in the brave new world of P&O luxury retailing, where the top international prestige brands are represented, including Estée Lauder, Dior, Chanel, YSL, Gucci (see onboard promotion, above left), Prada and, for the first time, Narciso Rodriguez. L’Oréal Paris is among the best-selling cosmetics linesFace to face with P&O Ferries Head of Buying Neil Towns

Judging by the slick and besuited appearance of Neil Towns, you’d probably guess he was a buyer in luxury goods such as watches, and you’d be correct. As a former buying executive at UK airport operator Alpha, he’s exactly the right sort of person to be running a ferry operation whose direction is being steered firmly in the direction of Planet Luxury, catering to the new “mass affluent” generation.

Talking exclusively to The Moodie Report during the company’s trade show, staged last week and organised by the tireless Head of Retail Operations Tim Stewart, Towns reveals how P&O has invested £3 million over the past two-and-a-half years in its retail business. Following the abolition of intra-EU duty free in 1999 and its subsequent squeeze on margins, the company decided to reshape its strategy in 2003 and rebuild its relationships with suppliers. Since then, powerful companies such as Diageo and Swatch have all jumped onboard to get a slice of the £85 million in retail sales generated annually. That’s just the ship shop operations – including F&B, that figure nearly doubles to £150 million. Spend per passenger fluctuates from £11 to £80 depending on the time of year and the route.

This turnover is all the more admirable when you consider how hard the company was hit by the reality of life after intra-EU duty free abolition, as Towns recalls wistfully: “We closed our Portsmouth routes and suffered hard times, but we came out of it fitter and leaner, with a smaller base.”

He soon perks up, though, when he starts explaining why the P&O has been dealt such a good hand when it comes to retail opportunities. “We own the ships [unlike airport retailers who have to pay their landlords – Ed] and our customers are ours from the minute they travel. Even before they travel we communicate with them; we use e-mail, ads in the press and traditional direct mail, and we’re trialling text messaging now. It’s very important that we communicate with them before they travel. We promote the F&B, foreign exchange and retail and the added value [of travelling with P&O, where the retail prices are tax-free onboard].”

Popular promotional tools that have been deployed include cheap day trips to France costing £20 for a car and up to nine people (yes, nine!) and buy-one-get-one-free meals. In a new promotion for February, not a peak month for travel, customers could pick up a voucher offering a free six-bottle case of Gallo wine, worth £26. Let me repeat that: a case of wine from a best-selling brand, completely free of charge.

Champagne lifestyle: The liquor category is visually impressive. Veuve Clicquot Champagne and Johnnie Walker Blue Label Scotch whisky are among the top-end products, while wine boxes and beer brands sell well to daytrippers. Sekonda, the UK’s biggest selling watch brand, and Swatch are among the key clients onboardFocus on beauty

Towns is bringing his airport shop experience to bear on the new-look P&O with a fresh focus on the beauty sector, more than ably driven by Category Manager Jo Heasman.

While beauty – all personalised and seductively branded, just like a department store – takes up an increasing portion of the retail space onboard the ships, Towns has latched on to the importance of carrying fashion accessories, watches, jewellery and sunglasses. These are all categories that the old-world P&O used to shun in favour of high-margin, till-ringing liquor and tobacco.

Says Towns: “We put handbags on last year and we’ve already done over £1 million in business – just on handbags.” He points to the lure of tax-free prices as a contributory factor in this impressive revenue figure. But it’s also down to the brand selection of Category Manager Angela Homer, who has concentrated on Fiorelli, Guess, Tula and Radley, all best-sellers in the UK market.

In sunglasses, Homer has just lured Oakley onboard for the first time, a seriously heavy-hitting brand. The eyewear assortment also boasts Prada, Ray-Ban, Gucci, Police and Polaroid. The sunglasses are not locked up, meaning potential purchasers can try them on freely, which Towns believes boosts sales.

Turning to watches, Towns – himself an avid watch-spotter – enthuses about Britain’s number one selling watch brand: “Sekonda are fantastic for us and [Sales Director] Trevor James is fantastic at servicing our business.”

As for jewellery, Adrian Buckley (formerly known as Pavé) is P&O’s best-selling classic brand, while the same supplier’s newly launched Buckley Moda collection promises to cater to a more fashion-forward clientele.

Towns foresees further expansion in the jewellery category, where self-service units merchandising are paramount onboard, due in part to the ever-present peril of shrinkage.

While the “new-economy” lifestyle products are coming to the fore, and additional categories are being examined, Towns says he has no intention of “casting aside” liquor and tobacco, which together make up the bulk of turnover in the ship shops. Liquor still accounts for more than 50% of sales.

Towns puts it succinctly: “We respect the volume market but we want to bring in quality and glitz and glamour, in beauty with Chanel, etc, as well as with brands like Absolut. We’re seeking gift packs for a qualitative and quantitative offer, and we want to do malt whisky tastings.”

To elevate the liquor offer, and that of other categories onboard, Towns and his team are considering carrying the űber-luxurious Louis XIII Cognac. “Louis XIII would lend an authoritative feel to our other products in terms of branding and we’d get a name for ourselves if we listed it. We can see second home owners wanting to save money on a bottle of Louis XIII.”

Towns appears to have understood the so-called “hi-lo” approach to consumption that mass affluent British consumers are adopting, in which people buy either cheaply or stratospherically expensively, squeezing the middle market.

Tellingly, he adds: “We want to access travel retail offers so we can differentiate ourselves from the big high street supermarkets.”

When the British supermarket giants are selling 75cl bottles of spirits for under £10 (US$20) like everyday commodities, this is surely the right strategy – and one that will be music to the ears of all travel retail suppliers.

Fashion focus: Handbags have generated over £1 million in sales since they were first listed on P&O Ferries last yearIN PICTURES: THE P&O FERRIES TRADE SHOW

P&O hosts a trade show every two years which aims to teach ferry crew about the amazing brands on offer in the ship shops. This year the three-day event was very well supported, with 56 suppliers from the world of retail and F&B exhibiting their wares.

This year’s exhibitors included the major beauty houses Chanel, Dior, Estée Lauder, YSL and Coty Prestige; liquor groups Diageo, Maxxium, In-Bev, Gallo wine and Codorníu; confectioners Mars, Toblerone, Ferrero and Guylian; and food & beverage specialists such as Coca-Cola, Twinings and Heinz.

The format of the trade show – where the exhibition stands look like a microcosm of TFWA World Exhibition – means crew can ask questions face-to-face with suppliers about the products on offer. They even get to see products before they hit the UK domestic market stores, such as Absolut Mango vodka and The Black Grouse Scotch whisky.

Beauty stands out: Stunning advertising visuals greet visitors at the entrance to the P&O trade show. Clockwise from top left: Dior’s sultry stand; Estée Lauder treats crew to a makeover; A Chloé fragrance promotion showcases the delights that await passengers at the upcoming launch; Jennifer Lopez, pictured in a promotion for Deseo, is just one of the celebrities selling fragrance lines onboardClockwise from top left: Diageo’s Simon Desmet smiles for the camera; Maxxium’s impressive booth features red-hot products such as Absolut Mango – brand new to the world’s consumers – as well as The Black Grouse; Guylian Export Manager Eugène Van Herrewege, exhibiting at the P&O trade show for the third time, shows off his famous seashell confectionery; and a representative from Ferrero with her best-selling gold-wrapped Ferrero Rocher chocolatesMORE STORIES ON P&O FERRIES