Lagardère to ‘complement & not compete’ in Sanya

By Andrew Pentol |

Eudes Fabre, Chief Executive Officer for North Asia at Lagardère Travel Retail.

Lagardère Travel Retail has vowed to complement rather than compete following the opening of its new 30,000sq m downtown duty free store in Sanya, Hainan Island. The complex opened in partnership with Chinese state-owned enterprise Hainan Tourism Investment Development on 30 December 2020.

The impressive new facility joins a number of new stores opened on the tropical island towards the end of last year. These include the new Sanya International Duty Free Plaza in Hainan Island operated by the China National Service Corporation for Chinese Personnel Working Abroad and a China Duty Free Group (CDFG) store at Sanya Phoenix International Airport Terminal 1.

There were four duty free shops on the island prior to these openings, which are all operated by CDFG. These include the CDF Mall in Haitang Bay, Sanya and other outlets located in Haikou Meilan International Airport Terminal 1, Haikou City Riyue Square and Bo’ao, a town in the city of Qionghai.

Further Hainan openings are in the pipeline, including a new downtown duty free shop operated by Dufry Group and Hainan Development Holdings.

DFS Group will also partner with Shenzhen Duty Free Group to establish a world-class duty-free retail experience for visitors to Hainan totalling around 30,000sq m. The project will be completed in phases beginning this month.

STRONG BRAND MIX

Lagardère Travel Retail and Hainan Tourism Investment Development opened a new large-scale downtown duty free store in Sanya, Hainan Island on 30 December 2020.

Lagardère Travel Retail had brought 278 brands to Hainan for the opening of the store last month.

Product categories include perfumes & cosmetics, fashion and accessories, watches and Jewellery, wine & spirits, confectionery & fine food and toys.

“The idea is not to compete, but rather to complement, because the market now is big,” Eudes Fabre, Chief Executive Officer for North Asia at Lagardère Travel Retail told TRBusiness: “Sanya is also very spread out,” he acknowledged.

“What sets our store apart is first our location which is very central. We are downtown and in the middle of Sanya city. The second point is the scale of our project, which is huge in terms of square meters and categories. We have the critical mass to really attract the traffic.

“The third key point is our partner and their background. Hainan Tourism Investment’s business is actually travel. They own a hotel, tourist attractions, ground transportation and all the infrastructure required to drive traffic to our store.

“Incidentally, they are also the local champion because they are the duty free company under the Hainan provincial government, which has been very helpful at all levels in terms of making things happen.”

Wine and spirits is among an extensive list of product categories represented in the 30,000sq m complex in Sanya.

Shedding some light on the strategic partnership between Lagardère and Hainan Tourism Investment Development, Fabre said: “It is a long-term strategic partnership between our two companies. This covers the supply of duty free goods and all the related services such as management, promotion, training and visual merchandising and everything that is required to animate and run the business.”

“They have the duty free licence. Ultimately, they are like the landlord and also involved in the operations.”

Reflecting on the project which was completed in a record 120 days, Fabre was pleased with how things progressed. “Considering the time-frame in which everything was done and the difficulties caused by the pandemic — whether this relates to people’s day-to-day work, production or logistics — the challenges were definitely huge.

“That said, we were still able to bring almost 280 brands to Sanya, many of which were new and exclusive.”

‘A SPEICAL MOMENT’

On the actual opening and its significance in terms of Lagardère’s overall Chinese business he commented: “The opening was a special moment. It was a large-scale project pulled together in record time.

As of 30 December 2020 when the store opened, there were 278 brands for customers to enjoy.

“We managed to pull it off because we have had a large team in China for many years. This was probably the enabler that helped us get everything done.

“For us, in China it’s a big step of course. It is our entrance to the Hainan duty free market which has a lot of potential.”

As reported, duty free sales on Hainan island skyrocketed by 195.16% year-on-year to RMB 540 million/US$83.6 million between 1-3 January 2021, according to Haikou Customs.

The New Year’s holiday period, including New Year’s day, set a new revenue record with shopper numbers up 80.9% to 776,000 with the volume of duty free items purchased surging by 200%.

Correct as of 28 December 2020, Haikou Customs presided over a total RMB19.567 billion/ US$3bn in duty free sales since the tripling of Hainan’s offshore duty free allowance on 1 July. This represents an increase of +193.75% year-on-year.

The duty free policies in Hainan Island are stimulating interest, according to Eudes Fabre, Chief Executive Officer for North Asia at Lagardère Travel Retail.

Sales exploded by 214% to $1.81 billion in the four months to 31 October. In the Golden Week national holiday period (1-8 October), duty free sales were up by 150% to $155.3m.

As of 30 December 2020, and in line with the improved sanitary situation in China, Hainan had been free of the Coronavirus for over six months. Fabre said: “Hainan is very busy right now, in part because of the closed borders. This obviously gives the island a lot of appeal and provides a good reason to go.

DUTY FREE POLICIES STIMULATING INTEREST

“The duty free policies are also stimulating interest, along with the overall development of the tourism infrastructure. There are more and more hotels, Haikou Airport is being extended and there is new transportation, tourist activities and things like that.

“It’s a combination of all these factors coming into place which are making Hainan an attractive and competitive destination for years to come.”

Elsewhere, Lagardère Travel Retail, which has been operating in China since 2007 has opened duty paid stores at several new airports including Nanjing and Hangzhou.

Duty free sales on Hainan island skyrocketed by 195.16% year-on-year to RMB 540 million/US$83.6 million between 1-3 January 2021.

Additional outlets have also been opened in Shanghai Hongqiao (Chanel Beauty and Accessories, Shiseido, Sandro and Gucci Watches and Jewellery) and Shenzhen Bao’an (Cartier and Burberry) International Airports.

Aside China, Lagardère has opened its first fashion door in Japan in partnership with the Asahi Airport Service at Kansai International Airport Terminal 1. This followed the inauguration of the retailer’s first travel retail store in the country at Tokyo Station in August 2020.

“Japan is going to be one of the first places to rebound [from the Covid-19 pandemic] because it is very attractive and a close destination for visitors from China,” Fabre concluded.

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