Today at the ACI Europe Airport Commercial Retail Conference, price was a hot topic for a number of speakers during the morning presentations – with some concerned that the airport channel was pricing out ordinary travellers in the quest for high spending nationalities.

At the 25^th anniversary event – hosted this year by Finnish airport operator, Finavia, in Helsinki – keynote speaker Jaya Singh, Head of Global Key Accounts at confectionery house, Mondelēz World Travel Retail – and also President of the Asia Pacific Travel Retail Association – cautioned about over-premiumisation.

He told the audience – which organiser PPS put at over 360 delegates – that premiumisation can be overdone and be intimidating for many travellers. He said: “Our channel has become a shop window for luxury brands with much of its recent growth driven by sales to high net worth individuals; the Chinese in particular.

“But I am convinced that the China fever we experienced in the past few years is over. Gone are the days of ostentatious and conspicuous consumption. But have we adjusted accordingly?”

SUB-OPTIMISATION OF SPACE PRODUCTIVITY

While he let the audience ponder that question, he noted that duty free and travel retail’s obsession with premiumisation could potentially be over-extended to the point where it could contribute to the sub-optimisation of space productivity – and therefore total potential revenue.

“Intimidating store designs all too often suggest exclusivity over accessibility and could be a barrier to penetration and conversion,” he said. “While premium and ultra-premium products are given high visibility to build brand equity, this actually impacts on the value perception of most shoppers.”

Singh suggested that a rebalancing was required especially of the space given to high-cost items that are purchased on an infrequent basis.

Shortly afterwards, in the first working session entitled: So just how good are airports for brands? Garry Stasiulevicuis, Founder and Managing Director of travel retail analyst, Counter Intelligence Retail, was also sceptical that luxury was the right way to go in the current DF&TR climate.

‘IT’S TOO HIGH END’

While he acknowledged that DF&TR is “the Formula One of retail” he said 52% of travellers still don’t enter duty free. “More than half of them say the offer is now too expensive and too premium. For this shopper it’s poor value, it’s too high-end and completely out of reach,” he added.

Like Singh, he asked whether the premium bubble had burst, or backfired.

He said that shoppers, of course, expected to see luxury brands and high-end experiences, but he asked: “Are we spending more time and money trying to win an ever-decreasing audience? Are we relying on a smaller and smaller percentage of people to prop up the channel?

“Ignoring the masses is a fool’s errand. Give them familiarity, give them a sense that our channel is within reach and give them intrigue and excitement – but not fear. Trading up for most people is not spending $5,000 on a Scotch whisky but moving from a 12yo to a 15yo Scotch.”

PRICING EXTREMES

In the same session, Aude Rocourt, Regional Director, Europe at Bacardi Global Travel Retail said that there was a pricing paradox at play at the moment in DF&TR.

“We have the extremes of over-premiumisation and then to counter-balance it – in order to remind the shopper that airports can be cheap – we over-discount. We are now at the stage that when we get to these extremes we have to go back to the middle.”

Rocourt pointed out that travel retail is an expensive channel to be in and warned that “heavy discounting is more likely to destroy than create value – and that is a threat we face currently as brand owners”.

[A full report on the two-day ACI Europe Airport Commercial Retail Conference will appear in the May issue of TRBusiness.]