This week’s TFWA Asia Pacific Gate One2One Conference at the Suntec Centre saw a packed audience enjoy a very lively first session, with no dud presentations and a good deal of thought-provoking material from Erik Juul-Mortensen, TFWA President, Sunil Tuli, APTRA President, Christian Blanckaert, Petit Bateau, President and Rohit Talwar, Fast Future Ceo.

This year’s TFWA Asia Pacific Gate One2One conference began with the customary State of the industry address from Erik Juul-Mortensen, TFWA President who offered his reflections on the business in the region today, plus some of the business opportunities coming up in the region over the coming months – all against a backdrop of in-depth analysis on the recent performance and growth potential. 

He talked first about the tragedies that have hit Australia, New Zealand and Japan and noted how quickly these tragic extraordinary events can hurt peoples’ lives. At this point he asked everyone in the room to stand and respect one minute’s silence as a tribute to the poor victims – a request which was duly respected by everyone.

INDUSTRY RECOVERY GOOD
Juul-Mortensen then took the audience through a statistical journey pointing to last year’s 13% increase in sales to $39bn (courtesy of Generation Research) and the fact that all product categories showed very good progress – especially the luxurygoods sector.

He said airports in the Asia Pacific region generated both the highest sales per passenger and per square metre and he predicted more of the same growth – between 8% to 10% – in 2011, barring no further disasters.

China continues to lead the pack, he added, with more than 900m air trips expected to be made in the country alone by 2019.

He then predicted that the major markets for more growth will be China, India and Indonesia and made the crucial point that the challenge now is to provide the aircraft infrastructure to support this soaring demand.

FAST-GROWING INFRASTRUCTURE
The Asia Pacific region will take delivery of more new aircraft than any other region in future, according to Boeing and airports in the region are also responding to the challenge well with more than $290bn set to be spent on new facilities, and/or expanding existing airports.

China alone plans to build an additional 78 airports alone over the next few years, while expansion plans are also well advanced for existing airports and new facilities in several other countries – amongst them, Indonesia, South Korea and China (Beijing).

India now has 92 airports, said Juul-Mortensen, while expansion is also planned at Perth, Melbourne, Brisbane and Canberra airports in Australia.

With the exception of China, he said it is the low cost carriers who have been driving this growth, taking advantage of increasing deregulation of the airways in the region and this will only grow further when China embraces deregulation.

Meanwhile, luxurygoods companies have been performing particularly strongly as more brand-hungry Asians travel to discover more about their continent and Juul-Mortensen pointed to predictions that this market will grow by another 25% in the short term.

BEWARE COMPLACENCY
In short, Juul-Mortensen painted a picture of almost perfect optimism, but he added a few words of caution that there is still latent concern about swine flu and who knows what other natural disaster might be lurking around the corner.

The industry should be concerned that there is no future Asian airline adoption of the so called ‘one bag rule’ for carry on luggage that has cost it hundreds of millions of dollars in Europe and he also said that it is his belief that the carbon footprint left by the travel industry in Asia will become a much bigger issue over the next two years.

As for TFWA itself, he said the organisation is continuing to review its future structure and strategy and as part of this exercise the feedback it has received has been ‘very positive’. TFWA also continues to invest in research and to honour its commitment towards social responsibilities, with its TFWA Care arm having identified six charities that it will support in future.

Juul-Mortensen was then followed by Sunil Tuli, President of APTRA and Managing Director King Power Group (Duty Free and Travel Retail) Hong Kong.

He looked at how the regional association is aiming to provide exclusive insights into travelling consumers’ behaviour with new APTRA consumer research. He also covered regulatory issues affecting the region, stressing the need for concerted action.

HUGE ROLLER COASTER
While the association has sent its sincere condolences to those who have suffered from the appalling disasters in Australia, New Zealand and Japan, Tuli said that more happily it is clear that the Asia region has been on a huge roller coaster since last year. 

He said the potential is massive and that transport infrastructure is good, but he was quick to point out that everyone has to seek a healthy margin if the real opportunity is to be realised. As part of this, he said APTRA has just launched a study looking at who the customers are and what they want, with the first two phases of this research focused on wines and spirits and perfume and cosmetics.

Despite being six years old, Tuli also pointed out that the association still needs subscriptions and money to be able to serve its members properly, while he thanked all of the executives who have served and continue to serve with him on the board to date.

APTRA is there to protect its members he said, having had good successes in some areas in cooperation with ETRC – particularly on the recent threat to liquor at the WHO.

Tobacco remains an ongoing fight he said, while the delay in relaxing the LAGs situation in Europe was necessary if wholesale confusion was to be avoided considering airports were clearly not ready to meet the technical requirements last month. He said APTRA now hopes that a new date will be set to allow transfer passengers with LAGs to transfer on in Europe from more than the handful of countries (Singapore etc) where this is currently permitted.

APTRA is now taking its messages to a much wider audience today, he said and the plan is to make it even stronger in future.

UNPRECEDENTED LUXURY GROWTH
The next speaker was Christian Blanckaert, President of Petit Bateau and the former Vice President of Hermes International, who had some interesting and often amusing insights into the success of luxury brands in Asia Pacific, while looking at the global competition against some of the emerging high-end brands from the region. 

He also examined the shift in emphasis of the luxury market from traditional consumer markets to Asia, focusing on the opportunities for luxury brands and highlighting some of the risks. He also turned out to be a big fan of airports as the ideal environment for luxury retailing in Asia Pacific where the space and the conditions are right.

Blanckaert pointed to the stellar performances of luxurygoods companies in the first quarter of 2011, mentioning LVMH (+17%); Hermes (+25%); Burberry (+30%) and others as examples. 

The growth trend remains very good, he said, predicting that watches and perfumes and cosmetics will most likely have the highest growth in future – even more so than leather and accessories.

He said last year’s results were so good that this almost suggested that there was no recession at all in 2009 and he added that those numbers would never have been imagined possible two years ago.

STIFF COMPETITION
The luxurygoods market has also changed from the old days when most of the members of the Comite Colbert were good friends to being one of stiff competitive rivalry, he said, also pointing to the strategy of Coach as a good example.

He said this brand had actually had the audacity to enter the luxury world ‘without permission’ from other luxury brands and there was an almost ‘how dare they’ attitude from some competitors when Coach began opening stores next to Hermes and other luxury brands around the world.

The result is that Coach’s sales are now in the region of $3.7bn, with his point well made that there are now no longer any frontiers barring competition and many more companies can be expected to come into the sector in future. At the same time, he pointed to many victims who have fallen by the wayside.

In amusing fashion he said the old adage in the luxurygoods world that everyone is always doing so well and no companies are ever in trouble is dead. He said the reality in many cases is that several brands in the luxury sector are in bad shape, or even bankrupt.

He said that the lesson of 2009 should be remembered, because the crisis did not only hit the big companies. But some smaller companies did resist the crisis very well and this was a lesson for some of them that they were able to do this. 

CRISIS DID DAMAGE
That the crisis itself was damaging to the business was there for all to see, said Blanckaert. He said watch industry sales plunged by 20% in one year, with perfume minus 5% to 7%, while ready to wear also suffered badly, although leather and accessories resisted very well. But the turnaround has been little short of ‘tremendous’, he said.

The three countries that remain important in the region he said, are Japan, India and China, but all for different reasons.

He said Japan will now become a country of reference for what can happen to a market. He said the crisis in Japan has caused consolidation. Meanwhile, the evolution and the understanding of luxury is extremely important and his second country is India which he said is clearly not ready as a luxury goods market today, with few stores and limited distribution. In India they like to invest and not to consume, said Blanckaert, predicting that it will not be a big market for luxury goods in the short term.

But China will continue to grow fast, he said, reasoning that 80% of all buyers of luxurygoods in China are below 40 years old. He also predicted that the duty free side of the luxurygoods business will also grow in parallel and there will even be passengers making decisions on which airports they should transit through, based on their shopping aspirations and the brands present here and there.

AIRPORT IMAGE MATCHES LUXURY
In a brief Q&A session that followed this session, Blanckaert said it was his view that as long as there is the right service and the architecture is good, the airport environment does not conflict with the image of top line brands and he was all for it.

However, he was rather severe in his comments on Delhi Airport when he described Indian airports as a joke for a luxury brand, even though one questioner pointed out that he was trading in luxury goods at the new Delhi Airport and doing rather well.

But Blanckaert stuck to his guns and while he acknowledged that Delhi Airport has greatly improved, he also said bluntly that this was comparing it to the facility that was there before, which he likened to something out of Zimbabwe.

The last morning session was entitled Strategies for Duty Free and Travel Retail in a Decade of Change and this was presented in bright and breezy fashion by Rohit Talwar, Ceo, Fast Future.

COMPANIES SHOULD STILL BE CAUTIOUS
TFWA promised that this would be a fast paced, provocative and inspirational talk and Talwar did not disappoint, as the global futurist and retail industry thought-leader explored key opportunities and challenges facing the duty free sector in Asia Pacific markets over the next decade. 

Talwar began by examining how the industry can increase its penetration levels and once captured, how could retailers then increase the spend, while attracting more customers. He said that it was also important to realise that a lot of people will be first-time travellers and while they may not buy luxury goods, they do buy a variety of other goods because they believe they are cheaper than in their domestic markets.

He then made some amusing analogies about the amount of money that was being borrowed to elastoplast economies around the world following the 2009 crisis.

He said the current recovery was obviously very welcome, but he hoped that companies listening to his presentation have made some contingency should the economic recovery today take another blow in future.

Are we prepared for future shocks, he asked and he advised all in the room to devote some time for possible bad times ahead.

THINKING IS BACK IN FASHION
More happily, he declared that thinking is back in fashion, instead of sales, sales, sales and spreading the risk is important, along with understanding how people buy goods today. He said up to 40% of people now compare prices on their mobile before they buy certain products.

He said peoples’ attention spans are also changing and he made particularly reference to the 18-30 Asia target market, where he said their span has disappeared completely.

According to his teenage daughter, only old people talk on the telephone today, while she is sitting in front of the television, texting her friends and telling Dad that this is doing her homework.

But more seriously, Talwar said the reason for the huge growth in sales in Asia ‘is a population thing’. He said that in the last 30 years China has taken more than 400m out of poverty and almost into its middle class.

But at the same time he also highlighted the growth of the older generation as one that is almost completely ignored by many retailers. This is a potentially lucrative sector and very underestimated he said.

TECHNOLOGY IS IMPORTANT
Talwar also predicted that technology will also be more important in future, with smart phones almost becoming the remote controls of our lives, as people configure their devices to their own worlds on a customised basis. He said the current estimate is that there are currently 135m smart phones in Asia today.

As part of the ‘airline chain’ the futurist also warned the audience that it might be prudent for the travel retail industry to involve the airlines in some sort of profit share with regard to airport shopping and particularly since airlines appear to be the one part of the chain that doesn’t seem to be making any money. He said it was only a matter of time before they would finally come knocking on the door.

Talwar also showed a wide range of statistics that are too lengthy to report here, but which are expected to be made available on the TFWA website quite shortly. (More comprehensive coverage of this conference will also appear on these pages shortly and also in the June edition of The Travel Retail Business magazine).