Tax Free World Association (TFWA) held its inaugural Fashion in Travel Retail webinar today with the theme ‘The Future for Luxury in Travel Retail’.
The first webinar featured Dubai Duty Free Vice-President Purchasing Sharon Beecham, Heathrow Airport Retail & Property Director Fraser Brown, Starboard Cruise Services Chief Merchandising Officer Lisa Baldzicki and Business of Fashion Journalist and Asia Correspondent Casey Hall.
The session was moderated by TFWA Conference Manager Michele Miranda and TR Business Editorial Director Charlotte Turner. It was hosted on the TFWA365 platform. A second session will be held on 23 February featuring speakers from Gebr. Heinemann, Pi Insights and MSC Cruises.
Luxury, a growing category at DXB
Dubai Duty Free Vice-President Purchasing Sharon Beecham gave an overview of the changing luxury landscape at Dubai International Airport (DXB). She outlined the major changes that have happened in Concourses A, B, C and D, which each welcomed a new roster of luxury boutiques, including a first Louis Vuitton boutique recently, as reported.
According to Beecham, passenger figures at DXB are expected to reach 56.9 million in 2022, which is 64.6% of the airport’s 2019 figures. She noted that perfumes and cosmetics was the highest performing sector by sales for Dubai Duty Free, contributing US$540 million or 26.63% of turnover in 2019. This was followed by wines and spirits at US$302 million (14.99%) in that pre-COVID year.
She continued by outlining the incremental growth of Dubai Duty Free’s luxury sales over the years, which increased from 4.28% of total sales in 2019 to a predicted share of 10.02% in 2022.
“Fashion boutiques have been increasing and now contribute around 10% of total sales,” Beecham said. “However, perfumes and cosmetics (23.45%) and spirits and tobacco (26.58%) are still our main priorities. Fashion has moved up in priority to now occupy 1,701sq m of retail space, which is 4% of our 40,000sq m retail space in DXB.”
Beecham continued by illustrating how Dubai Duty Free’s consumer base evolved due to the pandemic. She also elaborated on the initial problems that Dubai Duty Free faced when onboarding new, niche luxury brands and how the retailer is innovating to meet new consumer demands in the COVID era.
A premium shopping destination
Heathrow Airport Retail & Property Director Fraser Brown gave an overview of the airport’s performance in recent years. Heathrow Airport welcomed 80 million passengers in 2019.
“We have been recognised by Skytrax as the best airport for shopping for 12 years. This is because we are attractive to airlines, ensure that we have great facilities and curate our offer in the right way,” Brown said.
According to Brown, key drivers to this success are high sales densities driven by increasing passenger numbers, a strong passenger mix with high yield routes in China and the Middle East and high-quality terminal fit-out standards and specifications.
Brown forecasted that the airport would see 45 million passengers in 2022, which represents 55% of 2019 levels. This number is expected to rise to 60 million in 2023 and then 70 million in 2024.
Heathrow Airport currently offers 272 retail stores across 40,000sq m of terminal retail space. 53 of these are luxury boutiques, which represents 20% of the airport’s total sales value. Brown commented, “Luxury plays a bigger part of the Heathrow mix and is really important for us as an income driver. For retailers and brands, having a prominent location at Heathrow is key to their retail strategy.”
Brown offered his views on the UK Government’s removal of the VAT Retail Export Scheme and withdrawal of the tax-free pricing benefit on airside goods. He said, “There is now no benefit in the UK. We think this is the wrong decision. It has impacted all retailers and because of this decision, some partners have exited travel retail.
“Heathrow challenged this decision with Dufry and GlobalBlue via a Judicial Review and we will continue to lobby the Government to reintroduce an airside tax-free shopping regime.”
So, how will luxury brands take on the challenge? Brown says it’s all about differentiation. “Brands need to offer unique products so that we have a point of difference. Gifts with purchase, personalisation, exclusivity and memorable experiences are all very important. Even without the VAT benefit, luxury fashion at Heathrow is and can still be very successful.”
Offering his insight on Heathrow’s future, Brown said. “We see a few tricky years ahead coming out of COVID, but we are fortunate to have long-term investors to secure our finances. Brands and retailers can be confident in the medium term that we will get back to our 80 million passengers a year. Our vision to grow to over 100 million passengers is still happening and travel retail is a huge part of that.”
*Fraser Brown was named one of The Moodie Davitt Report’s People of the Year in 2021. Click here for more details.
Reimagining retail at sea
Starboard Cruise Services Chief Merchandising Officer Lisa Baldzicki offered her insights into how luxury is evolving in the cruise sector. She said, “As part of LVMH, we have the backing of the largest luxury group in the world. We also have access to unparalleled global resources, data and portfolio brands. This means that we offer global luxury brands and that our onboard experiences reflect the same identity and customer service as our partners’ land-based stores.”
For Baldzicki, luxury retail in cruises has expanded outside of the traditional store environment. Instead, luxury retail takes passengers on a 360 immersion throughout their vacation; whether that be in-cabin, in public spaces or in the digital realm through pre-cruise engagement and ecommerce integration.
“We are in the business of curating vacation retail experiences,” she explained. “We want to reimagine retail at sea with curated assortments and experiences that invite guests to discover, engage and purchase. We see luxury brands as a valued partner to help curate a vibrant world for our guests.”
Baldzicki forecasts a robust recovery for Starboard in the post-COVID landscape, predicting a strong double-digit growth by 2024. “We are operating on 90 ships worldwide on 12 cruise lines that have different propositions. Starboard Cruise Services is poised for growth, creating opportunities for our fashion and luxury partners.
“In the cruise sector, there is a huge opportunity to rethink and innovate the more traditional models of the past,” she explains. “Over the last two years, luxury brands have adapted to maintain relevancy with new and existing customers. They do this by creating elevated, exclusive experiences. High-end luxury is evolving so brands need to focus on their keys to success. This is backed by information and a deep understanding of customers.”
Hainan, still the lighthouse of travel retail
Business of Fashion Journalist and Asia Correspondent Casey Hall reinforced Hainan’s position as a hotspot for travel retail. She said: “A lot of people are interested in the future potential of Hainan as a destination. Growth in Hainan reached +151% during the Lunar New Year period versus last year.
“Everyone is looking at how the situation will change once the borders reopen, though that won’t happen anytime soon. As soon as they do open, Chinese travellers who like to shop abroad, will be travelling again.”
“However, the very Chinese-oriented offer that Hainan presents, with a growing roster of global brands, flexible propositions, expanded allowances, and other last-mile services, make it an appealing domestic shopping destination for the Chinese. That won’t change even if borders reopen.”
