DFA anticipates growth in annual sales of around 4% to $1.25bn in 2014, and if the company’s San Ysidro duty free proposal is accepted, the retailer looks set to maintain growth momentum in 2015/2016.

 

As reported by TRBusiness.com, the San Ysidro Smart Border Coalition, comprised of residents, small business owners and business leaders, delivered 5,104 petition signatures to the Federal Government in August, urging it to include space for a ‘mixed-use facility’ – including duty free retail and restaurants – proposed by Duty Free Americas (DFA)/UETA.

 

DFA-operated retail brand, UETA, which has operated in San Ysidro for 30 years, will see its flagship store eliminated in the current GSA (Government Services Administration) plan, along with 100 current jobs in a community already experiencing high unemployment.

 

In the final phase of the on-going border project, the GSA plans to connect the Interstate’s five freeway lanes to Mexico’s El Chaparral border crossing.

 

The proposal would inject $30-$50m of private investment into San Ysidro and the City of San Diego, create 100 short-term construction jobs and create 300 long-term jobs.

 

‘THE BUSIEST LAND CROSSING THE WORLD’

The existing 15,000sq ft flagship San Ysidro store sits on about 11 acres of land and lays claim to around 1,400 parking spaces. “The store was built when BAA owned our company,” says Simon Falic.

 

DFA bought World Duty Free Americas (now known as Duty Free Americas) from BAA in 2001 and according to Falic, the store was built by them at a cost of about $13m around 1999/2000.

 

Since DFA took over, over a decade ago, the GSA has been trying to reconfigure the San Ysidro point of entry – the busiest land crossing in the world – working with the retailer along the way.

 

“We’ve been in touch with the GSA for the last 10 years, but about four years ago, in 2010 there was no more funding and the funding for phase two and phase three arrived this year, in 2014.”

 

DFA’s proposal for San Ysidro will more feature around 300-400sq m of duty free retail.

 

MULTI-LEVEL FACILITY

When the funding finally arrived DFA knew that it had to alter its strategy to adjust to a smaller retail footprint. With the reconfiguration of land to make the crossing more efficient, DFA knew that it would have less space to play with.

 

“We were going to be on a smaller footprint with the parking, ending up with a smaller surface area for the duty free store, so we decided we wanted to propose to them a multi-level facility.

 

“We are proposing that we’ll make the full investment; that’s anywhere between a $30-50m investment accommodating almost 1,000 car parking spaces, beautiful retail on the bottom floor, including duty free, and other venues that we might have there depending on how much land we end up with and the design.”

 

Actual duty free retail space will take up about 300-400sq m showcasing international and local brands that will appeal to the huge contingent of Mexican customers.

 

COMMUNITY SPIRIT

As previously mentioned, DFA has tremendous community support. “This is the largest infrastructure project going on in the United States right now and the community obviously wants us to reflect the kind of money that is being put in there,” says Simon Falic.

 

“I mean this is the busiest land crossing so it’s the first point of entry for people coming from Mexico, and literally tens of thousands of people will come in every day, so they want it to be very nice and presentable and have a wow factor.”

 

According to Falic, work on a connecting border bridge is almost complete on the Mexican side of the border and has been waiting on the arrival of funding to the American side to be able to continue with the project.

 

Falic thinks it is ‘highly likely’ that the proposal will be accepted and this new multi-level facility will have a big impact on the community. “It’s going to be such an impressive structure and obviously that’s something that the community wants.”

 

FINANCIAL GAINS

DFA has hired HNTB as the architect on this project; a company that has worked on major government projects in the past including the new terminal at San Diego Airport. If the proposal is accepted, the government’s target date of reopening is 2018.

 

But even if the proposal for a new multi-level structure is rejected, DFA still stands to gain from the land; either from parking or duty free. Falic is pragmatic when he says that turning the land into parking spaces is a big revenue generator.

 

“We own the land under the parking lot and the duty free store; we own that property and it’s a very valuable property. So from a financial perspective the GSA will purchase that property, pay us based on a fair market value appraisal, and whatever that comes out to be, we’ll be willing to take it.

 

“We’re going to get paid for the value of the property and the value of the business regardless, but if we’re able to do what we want do, obviously we’re willing to make a big investment and maintain our presence in that community.”

 

For the full in-depth report on Duty Free Americas pick up the TRBusiness Top 10 Operators Report 2014 at the TFWA World Exhibition.