Philippe Schaus, CEO, says DFS’ new Cambodian store will be in ‘the top league’ of the T Galleria chain when it opens next year.

 

 

In an in-depth interview with TRBusiness.com supplementing our initial December 19 news report, Schaus says the multi-million dollar T Galleria by DFS is being created in the historic and iconic region of Siem Reap in Cambodia.

As reported, this 8,000sq m store is expected to open in 2016 in a building purchased by DFS, which is directly connected to the celebrated Angkor National Museum across from the iconic Raffles Hotel on the main Avenue Charles de Gaulle.

Philippe Schaus told TRBusiness.com that it has taken DFS three years to find ‘the building of our dreams’ [built in 2007] against a background where imminent regulation changes are expected to open up Cambodia’s downtown duty free preorder market.

He says this has been pivotal in attracting other retailers to the location – most recently the China Duty Free Group – which opened its 4,500sq m Angkor Duty Free Store in Siem Reap on December 30.

Schaus talked to Doug Newhouse in London late last month about the retailer’s philosophy towards this new market, the context of this planned new opening within the retailer’s current activities and how he believes DFS’ new offer will establish a new quality offering in an iconic destination – one which already annually attracts hundreds of thousands of Chinese, Japanese, Korean and other visitors from all over the world.

He said that it wasn’t difficult to see why DFS has chosen Cambodia as a future market for expansion, coming as it does after DFS announced its future expansion into Venice at the Fondaco dei Tedeschi in Italy earlier last year.

(Right:) Philippe Schaus, Chairman and CEO of DFS Group.

CAMBODIA IN PERSPECTIVE

“As you know, DFS has for many years been a pioneer in the world of travel retail and has discovered new destinations for travel retail and has developed them and made them important, with the islands for instance with Saipan, Hawaii and others. In that kind of philosophy we are always looking at what could be the next destinations we should be present in, or the next destinations coming up etcetera’s.

“We also know that of course, a lot of the agenda of the travel retail industry is driven by the Chinese traveller. There is this general perspective out there that last year for the first time we had more than 100m people leaving China and the expectation that this number will double between now and ten years from now. So 100m will become 200m.

“Of course, this 200m are not going to go to the same places as the 100m and the 40m to Hong Kong will not become 80m – so there will be new destinations”.

He said that it is against the background where DFS has been looking at Europe and has identified Venice and the Fondaco dei Tedeschi as the most promising, iconic and exceptional location. The same philosophy obviously operates in Asia, says Schaus, as DFS has been looking at other potential destinations for expansion, as he explained.

“Of course, south-east Asia is an area in which we have been present for many years in Singapore, Bali and Jakarta etc. and one of the most iconic – or maybe the most iconic – destination in south east Asia is in Angkor Wat, or Siem Reap – the town next to Angkor Wat. So we have been looking at Angkor Wat for some time and when we are looking at a destination we are really trying to look at three different aspects.

“First of all, is the destination per se attractive enough in terms of the profile of the customers, the travellers… the number of travellers… the dynamics of the travellers and is that interesting enough for DFS?”

Angkor Wat clearly ‘ticks this box’, he says, with highly impressive visitor numbers, including not only Chinese tourists – one of the fastest growing visitor nationalities – but also Japanese and Koreans.

One of the genuine real wonders of the world: Buddhist monks in front of the Angkor Wat Temple [Photo credit: Sam Garza].

CREATING THE PRODUCT DEMAND

There are also many Europeans and Americans and while they may not necessarily represent potential shoppers for luxury brands when they travel to south east Asia, Schaus says they may well be interested in the high-end local products that DFS plans to make central to its offer in Siem Reap.

He says the second box DFS had to tick is whether Siem Reap is actually relevant to its brand partners and once again its conclusion was affirmative: “So does it make sense for the brands to be there and we have been looking into that and we had to tick the second box as well, yes. But then comes the most difficult one. Do we find a physical location – or can we create one – which is of the standard and level of what we are trying to achieve?

“You have seen our location in Venice which clearly ticks that box, being in the middle of the city on the Grand Canal, blah, blah, blah. So we went to Siem Reap and looked around and it was very difficult because most buildings which could be made available for retail are actually office buildings… low ceilings… low square footage and in streets where there is no distance between the buildings and the street, so you have all of the noise.”

Schaus said these options just ‘didn’t feel right for the luxury business and he says this was the company verdict after three years where he said ’we probably saw every single building which is available on the market’.

“We had been looking for a long time and then we found the building of our dreams at the Museum,” said Schaus, adding that it is all about ‘location, location, location’, with access to every major luxury hotel – plus the sheer quality of the building itself.

He said location was always going to be a big consideration since DFS had already identified that its potential customers would be using quality hotels. He said: “They have 14,000 rooms of four and five-star hotels and there are more rooms for lower-level hotels. It is a quality destination and the expectation of a customer who goes to visit the ruins of Angkor Wat is a high one.

“It is a cultural customer. It is not somebody who visits the beach or someone who travels for shopping. It is somebody who goes for cultural purposes.”

An artist’s impression of the new rendering for the T Galleria by DFS which will be adjacent to the Angkor National Museum.

SIEM REAP VISITORS SET TO DOUBLE

The number of annual visitors to Siem Reap largely there to witness the incredible remains of this once grand ancient civilisation is also increasing, with DFS expecting discerning visitors to double by 2020. Similarly, it is expecting an increase in average shopper spending to be ongoing through to 2020.

Right now, DFS says the average traveller to Siem Reap stays around four days and the retailer is already predicting an increase in the ratio of foreign independent to conducted travellers, which it says is entirely consistent with trends at other destinations.

As for the store itself, DFS describes the double level floor space as ‘massive’ and says it will reflect a design in keeping with the local market, combined with an assortment of premium brands. DFS is also promising to immerse its travellers and customers into Cambodian culture with its selection of local products.

The retailer says that the Atrium will comprise ‘the striking centrepiece of the store’, which is designed to open up the shop floor and flood the space with natural light. This, in turn, is designed to shine on and highlight the intricate stone carvings indigenous to Cambodia, alongside coloured tapestries, which will dangle down from the rafters.

The location is also a very central one on the Avenue Charles de Gaulle with the National Museum and the adjacent connected buildings highly visible. Schaus explained that this was originally built as a shopping mall, although it has never been used prior to DFS taking it over.

Schaus simply describes the location as ‘fantastic’ and he believes 100% of visitors to the Museum will visit and at least see the store. He also acknowledges that like everywhere else, there will also be conducted tour customers, but the key for DFS will be successfully marketing its new quality offer to mostly sophisticated, independent travellers he says.

The importance of independent travellers also goes hand in hand with store visibility and DFS will be addressing this with the creation of a new welcoming Cafe at the entrance where visitors can assemble prior to their Museum (and store) visits and – significantly – be protected from the very strong heat of the afternoon.

The Angkor National Museum as it is today.

A TRUE DEVELOPING MARKET

Of course, Schaus acknowledges that Cambodia has long been a destination of two sorts, as backpacker heaven on one level and an upmarket location on another and while DFS is obviously appealing to the latter, he agrees that it was not so long ago that this was a troubled country where development was held back by well-documented conflict.

He commented: “Well luxury brands didn’t go there and I know that from my previous time [with Louis Vuitton-Ed] and that’s because there just was no real estate.

“Then you had the whole dilemma that you have Phnom Penh which is the capital, but which doesn’t really have many tourists and then you have Siem Reap which is really a tourist destination, but doesn’t have quality buildings, except for the hotels and the Museum. So that was always our dilemma and I think we have solved that now with our project.

“In the same way that in Venice we are giving a Venetian total project, we are going to be giving a Cambodian total project. The idea is that every DFS store should be embedded in its own destination, while the linking element will be the service we offer and the loyalty programme and all of that. Every one should be a different experience and part of the destination.”

Having said that, Schaus acknowledges that DFS is hardly alone in a Cambodian market which has taken on a degree of retail magnetism for ‘duty free’ operators lately, especially with imminent regulation changes which will finally permit pre-order duty free sales, as he explained: “First of all the facility to operate on a duty free basis is very recent and it is just in the making right now and everything is not entirely finalised, but it will be very soon.

“That has, of course, attracted not just DFS, but other operators and that is number one. Number two, when you get the number of tourists coming to Cambodia it definitely justifies more than one project and I am sure that everybody will do great things.

“What makes our project unique among all potential projects is the location. As I told you, we have been looking at many, many locations in Siem Reap and it is only because we found this location that we decided to go and open. We would not have come if we had not found this location. There are other locations where we are looking of course, where we see the potential and it is attractive, but we don’t go because we don’t find a qualitative location.

 

Source: Ministry of Tourism of Cambodia.

MARKET POTENTIAL: BIG ENOUGH FOR TWO

“It is very important. We would not have gone to Venice if it had not been for that building. We would never have taken a square box somewhere in the suburbs and said this is now DFS. That doesn’t make any sense in the long term. So you have to find a great location.”

The critical masse of quality visitors is also vital and Schaus readily acknowledges that DFS will certainly be spreading its net in terms of attracting several nationalities of visitors/customers and not just Chinese. He said: “There are Chinese and there are as many Koreans and Japanese. There are a lot of southeast Asian visitors and a lot are coming from Vietnam, Thailand and Indonesia and they are also interesting for us.

“There are also westerners, Australians, Europeans and Americans and of course, Europeans don’t go to Cambodia to buy European luxury brands. But they go and visit the museums and that is also why we are putting so much emphasis on having a destination offer of the highest quality, so that they also find something that they will be interested in.”

On this subject, Schaus said DFS is also already engaging with local companies and craftsmen to make its offer special: “That is starting right now as we speak. I mean we are really at the beginning of the project, where the first objective is always to identify the location and the structure and then you start working the architecture and the product. There are already some very serious companies in Cambodia who are doing that and we are going to talk to them and then we might talk to some artists.”

Schaus says this is very exciting and admits that the project is now at the creative stage where ‘this is the stuff I love to do’, while he is also generous in his prognosis for the rival China Duty Free Group’s downtown operation, albeit very different in offer nature. “I think they will have a great business and we think we will have a great business. There is enough potential in this market.”

As for the Phnom Penh duty free airport business currently held by Dufry under the present concession until 2020, Schaus says DFS will also be interested in this when it comes around again – as it was when it was last tendered. “Look, we were interested in the airport and we remain interested in the airport.

“We think it would be a nice combination to be able to have both and to play on the loyalty programmes and all of that and you know, we will see in the long term. We will definitely remain a candidate for the airport when it comes up.”

Source: Ministry of Tourism of Cambodia.