The first session at this year’s Trinity Forum 2014 was introduced by Martin Moodie, Founder and Chairman of The Moodie Report in Taipei yesterday.

 

In front of a packed audience of over 340 attendees, he began by thanking Taoyuan International Airport for stepping in to host the event at such short notice in June after the Bangkok venue was deemed unsuitable due to political instability.

 

While complimenting the airport on being ‘the best in the world’, Moodie also showed several images, including some of Ever Rich’s Kinmen Islands downtown store.

 

He thanked Director General, ACI World; Angela Gittens and Patti Chau, Regional Director for their help and friendship with the event and then hinted at more joint ambitions between the parties under the Trinity umbrella – details of which he promised to divulge later.

 

Moodie then highlighted four events that he believes are part of one of the greatest periods of change in the industry’s history and he cited Dufry buying Nuance and China Duty Free’s new mega downtown store in Hainan amongst them.

 

 

Martin Moodie, Founder and Chairman of The Moodie Report.

 

KEEPING THE MONEY AT HOME?

While CDF’s Hainan store is not an airport outlet, he said it is relevant and important competition to airports for other reasons and this includes keeping Chinese travel retail spending within the country.

 

He also placed Beijing and Shanghai airports operator Sunrise Duty Free in at third with its pilot e-commerce launch and the sudden imminent departure of World Duty Free Group CEO José Maria Palencia Saucedo at number four.

 

Could this signal the next phase of industry consolidation as WDF’s senior management has simultaneously suggested it may look for greater cooperation with other operators, he asked?

 

Moodie then talked about how Trinity has addressed the airports, retailers and suppliers over the last 11 years and focused on several issues involving all three stakeholders.

 

He said that Trinity had even produced a position White Paper in the early days, although it has also become increasingly clear that industry stakeholders are often not aligned.

 

Dr. Kuang-Shih Yeh, Minister of Transportation and Communications of Taiwan R.O.C.

 

TOO MANY HIGHEST BID WINS

Rhetorically he posed the question whether there has been progress since 2003, but answered this swiftly in the affirmative, pointing to longer contract lengths and airports working more meaningfully with their partners. But having said that he also acknowledged rightly that far too many tenders have still been all about the money.

 

The Trinity theme has also championed excellence and he believes there has been a retail revolution in the DF&TR industry. The food business is also changing in the airport world on a scale never seen before, he said.

 

In this scene-setting address, Moodie then showed a film featuring some of the events he mentioned earlier, the latest Gallerias from DFS, and various airports, plus stories and special issues.

 

He also  made reference to industry developments such as the Dufry acquisition of Nuance and various other developments such as in-house operated retail at Dubai Duty free and Qatar Duty Free, recent tenders, technology and excellence in airports.

 

 

[Jack MacGowan, CEO of Aer Rianta International].

 

ORIGINS OF FLIGHT AND DUTY FREE

He then introduced Frederick Piccolo, President and CEO of Sarasota Manatee Airport Authority and also the ACI World Chair who made some brief introductory remarks.

 

He also thanked the host for stepping in at such short notice and all of the sponsors and organisers of the event. He touched on the founders and origins of flight and duty free and noted that the industry is now full of excellent service providers meeting high standards and he singled out Ever Rich as one example.

 

He then talked about how airports fit into the overall picture, citing data from more than 600 airports researched by ACI World, with particular reference to aeronautical and non-aeronautical income from reports already made available by ACI

 

He underlined the well-known fact that aeronautical revenues today are simply not sufficient enough to run most airports, with retail continuing to be the leading source of total other revenue at airports worldwide, coming in at around 29%. Having said this, he added that 67% of all airports make a loss with the bigger airports mostly the ones who remain in profit.

 

Piccolo said he would like to see more retailers developing their businesses at smaller emerging airports and more attention paid to getting more passengers into the shops, since the majority never enter.

 

ASQ HAS EARNED ITS STATUS

He also pointed to ACI’s increased activity where passenger services are concerned, as its ASQ/Airport Service Quality concept has become a very important barometer of quality for airports worldwide.

 

He said international traffic will also be the main growth driver for the world’s airports in future and is now expected to outpace domestic growth in all regions except Asia and Latin America. Having said that, the well-developed international traffic in and out of Europe and North America is only expected to grow at rates of between two to three per cent.

 

Dr. Kuang-Shih Yeh, Minister of Transportation and Communications of Taiwan R.O.C. then addressed the audience in very good English, extending a warm welcome to all the conference delegates from the Taiwanese people.

 

He noted proudly that Taipei Airport has now hit 30m passengers and also has good cargo growth. So far, this year has also been a good one with new airlines helping to bolster growth at the airport.

 

He said Taiwan is expecting more than 9m tourists by the end of this year, while the new Terminal 3 will also transform the airport into an east-Asian hub and commercial income will make a crucial contribution.

 

[David Hourng-Jiun Fei, CEO of Taoyuan Airport Corporation].

 

STRONG COMMERCIAL OFFER

This new facility will feature hotels and shops and he added that the airport is willing to embrace new ideas and possibilities for T3. He said the idea is to gather the best that professionals have to offer to put Taiwan’s best foot forward on the international stage.

 

The Minister was then followed by the first panel session of the day, entitled ‘Raising retail ambitions to a complete new level’. Distinguished guests were asked how they think the sector can truly deliver an exciting, consumer-focused offer in the future.

 

Jack MacGowan, CEO of Aer Rianta International presented his view first, explaining that ARI likes to utilise data to understand most things. But seeking to raise retail ambitions to a completely new level is a lofty goal he said and only when you get it right can you really pay the wages.

 

Having said that, MacGowan said the size of the prize is still there considering two thirds of all passengers don’t shop and even a one per cent increase in penetration is somewhere equivalent to €350m ($452m) in estimated sales value. Just imagine what this could mean if the industry could raise its penetration from 30% to 40%, he remarked.

 

He then talked about the industry’s idiosyncrasies and highlighted some by showing a girl shopping in downtown Dublin in an imaginary scenario where she was asked to give up any liquids and gels in a department store, remove her shoes and show her boarding card before shopping.

 

Then, when finished, she was told she could not carry her shopping into her car as this would have to be stowed in the boot unless she wanted a €50 ($65) fine.

 

DIFFERENCES AND BARRIERS

All good fun from MacGowan of course, but this also demonstrated the serious side to some of the real differences and barriers that still work against a relaxed airport shopping environment for customers.

 

He then pointed to the challenges of the environment, including the erosion of the competitive price advantage and the lack of point of difference in terms of exclusivity of offers.

 

He said all of this and other factors are putting more consumers off of shopping and for many free Wifi is now more of an issue in an airport than shopping.

 

MacGowan argued that we need to persuade customers to think differently and address the 75% who are deciding whether or not they will shop before they get to the airport. Having said that, he also acknowledged that it is easy to see what the negative factors are.

 

We are good at giving passengers more choice and Trinity-type activations and promotions and these do work he said, but even with attractive shops we cannot and should not ignore the negatives.

 

Nobody wants to be forced into a way of doing things, he said, but there should be a more organised industry approach to shopping… MacGowan said the real competition for consumer’s hearts and minds are the giant Macys and Amazons of this world.

 

Barbara Lavernos, Managing Director, L’Oréal Group Travel Retail Division Worldwide.

 

COMPETITIVE RESPONSE…

The industry needs to be able to compete with these retailers and their services, such as emailing a shop to ask if they have this or that in stock, or preordering a perfume so it won’t be out of stock, he said.

 

MacGowan admitted that’s he didn’t know how this could be organised, but maybe it is something that the Duty Free World Council could look into as part of a global duty free shopping campaign into which everyone contributes.

 

He said the alternative is his fear that the business will simply keep losing more customers to downtown retailers in future.

 

David Hourng-Jiun Fei, CEO of Taoyuan Airport Corporation presented next, basing his address on learning from the experiences and the commercial development at Taoyuan Airport.

 

Introducing the airport to the audience he said terminals one and two can accommodate 34m passengers and this total will most probably be reached by the end of this year. However, the new terminal 3 will offer another 20m of capacity.

 

This is exciting, he said, but there are still challenges and constraints on commercial development such as the airport’s linear type concourse. He says airport management will now have a new commercial strategy to try to generate optimum commercial revenue.

 

 

[Keith Hunter, Senior Vice President, Qatar Duty Free].

 

ASK THE PASSENGERS

It will also want to offer value for money and will ask passengers about this, as well as how to improve customer service.

 

David Hourng-Jiun Fei said that the airport’s duty free contracts are divided into three master contracts at present, with all of them extended from six to 12 years with fixed rent and sales percentages.

 

As reported extensively by TRBusiness in its interviews with the airport and all of the operators this year, Taoyuan’s retailers are also required to take care of public amenities.

 

He added that Taoyuan was voted as one of the top 10 layover airports in the world last June – an award it is very proud of and the next step to improve the current business model will involve mobile electronic commerce.

 

The next speaker was Barbara Lavernos, Managing Director, L’Oréal Group Travel Retail Division Worldwide, who pointed to some of the more recent travel retail openings such as China Duty Free’s Hainan downtown store as ‘incredible’, as she also demonstrated one new vision after another in terms of retail excellence.

 

She said the challenge now is how to reach the next level. So far the growth has been good, allowing travel retail to become one of the most dynamic markets in the world, but she also cautioned that there is a revolution taking place outside the conference room, with customers now exposed to all different types of shopping.

 

KNOWING YOUR CUSTOMERS

In total, she said there is more than 39m square metres of new shopping space under construction around the world today and then there is the domestic retail sector and the internet. She said that the latter users know their consumer by heart and have developed intricate business intelligence.

 

Lavernos added that to raise ambition to a completely new level you have to be customer concentric and more than anything this will be the challenge of the Trinity, since consumers will be the judge of how good the industry can become and only consumers.

 

The industry has to change its benchmarks and stop using comparisons of airports with airports as it has always done and start getting to know its customers much better by targeting the right offers with the right customer service.

 

She rightly added that customers today are increasingly demanding and the industry must get to know them in much greater detail.

 

Lavernos added that L’Oréal has a complete dedicated team taking care of its customer knowledge and a store-by-store tailor-made approach, location by location.

 

But even so, she said comparing her team’s knowledge with that of her domestic market colleagues still reveals a measurable gap. She said travel retail is still missing some fundamental pieces of information.

 

FINDING THE RIGHT TOOLS

She believes the industry must target its offer by nationality because the preferences between people are different. Lavernos says she sees her colleagues with complete data on their markets, so how can the travel industry compete with that?

 

The industry needs the right tools to drive the business, said Lavernos, in the same way that other retail channels are able to do.

 

Customers also need to believe that the travel retail experience is the best amongst their exposure to all channels. She then referred to some research by L’Oréal who asked 2,000 Chinese and 2,000 Brazilians how they evaluate their respective shops.

 

The answer for most of them was that travel retail shops were in a convenient place, but not an enjoyable experience.

 

Lavernos said the industry can learn much from looking at how its downtown retail competition targets these and other customers and she cited the whole approach to gifting in Sephora’s department stores as a prime example.

 

If the industry is to learn from this superior approach then it needs to look more closely at what is happening through the eyes of its customers. For example, 80% of customers are now searching for products online before purchasing offline.

 

This interesting session then ended with a Q&A between moderator Moodie and Keith Hunter, Senior Vice President, Qatar Duty Free, where the general retail approach to the opening of the impressive Hamad International Airport was explored. This subject has been extensively covered by TRBusiness in two interviews with Qatar Airways CEO, H.E. Akbar Al Baker and Keith Hunter earlier this year-Ed].

[TOP IMAGE: Barbara Lavernos, Managing Director, L’Oréal Group Travel Retail Division Worldwide].