INTERNATIONAL. Sometimes, not often, industry events come along that not only capture the mood of the business but actually manage to shape its future. Last week’s Trinity Forum in London was one of them, writes Martin Moodie.
Given The Moodie Report’s involvement in the event, readers have a right to be wary of such claims. But delegate reaction itself told the story of arguably the most stimulating and compelling industry conference of the past two decades.
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 that kicked off with the events of 9/11 and have long since exposed the traditional industry model – an artificial one built for glory days long since gone – as being wholly inappropriate for our times. 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.
Does the industry want to be a thriving 21st century retail channel or a relic of the past? That was the fundamental question posed at the beginning of the event and never lost sight of during the ensuing two days. “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, often consumer’s perspective, the ceo of the world’s biggest foods company (which has a turnover three times the size of the global travel 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 detailed knowledge of domestic retail, Brabeck-Letmathe also focused on footfall and penetration. Would Wal-Mart, Carrefour or Tesco he asked, 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 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, extraterritorial world of airports”.
Brabeck-Letmathe concluded, memorably: “This “˜splendid isolation’ has made it [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”.
In the space of 40 riveting minutes, there you had it. The dilemma exposed, attitudes and archaic practices laid bare, solutions made possible. And thankfully, instead of dismissing Brabeck-Letmathe’s views as those of an outsider – as it once may have – this gathering of the airport “Trinity” (airports, retailers, suppliers) instead took up the challenge to throw off its isolated, parochial past and engaged in an uncompromising debate on the key issues of tenders versus other more partnership-based retail models; transparency; price & value; penetration and footfall.
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.
Will it? That responsibility lies not with a two-day Forum but with all the stakeholders in the business. The groundwork has been laid. The speakers, without exception, deserve the highest praise for refusing to expound platitudes and being prepared to speak their minds (much of the proceedings were “closed doors” to encourage free debate, so we are unable to publish all the full speeches).
Individuals such as Aelia’s Michel Perol; Allied Domecq’s Charles Richardson; Estée Lauder’s Fabrice Weber (see below); Nestlé’s Stewart Dryburgh; Swatch Group’s Frank Furlan; TFWA’s Erik Juul-Mortensen (his feistiest and best speech by some way); Eraman’s Syed Ahmad Syed Salim; and Dubai Duty Free’s Colm McLoughlin added weight, wit 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 can be transferred from wish list to reality.
From a widespread pessimism at the start of the event, most delegates left feeling optimistic that real change was actually possible. But first, the industry at large must act upon the warnings and challenges issued by Brabeck-Letmathe. It is time to change the model, revise attitudes and instil new practices and disciplines.
The Moodie Report plans to revisit these issues time and again – for around them lay the future health of our business.
CONFERENCE SUMMARY
Trevor Lloyd-Jones writes: The Trinity Forum held in London last week 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 a small 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.
Footnote: In the next few days we will be publishing more details of the proceedings online, complete with pictures. The Moodie Report and its partner Marshall Lightfoot Co (Travel Retail Business) would like to acknowledge the support given by certain rival media to the event, who put parochialism and competitive factors aside to promote the event intensively in the run-up to the Trinity Forum and who benefited it with their attendance. Thanks to Paul and Lois Pasternak at Travel Markets Insider and Soraiya Qadir at Travel Retail & Duty Free Markets Middle East and Africa.
