Tappoo Duty Free will begin to look at a modernised design concept of its 800sq m departures duty free shop at Nadi International Airport in early 2020.

Fijian travel retailer Tappoo Duty Free has told TRBusiness it is planning a refresh of its 800sq m departure duty free shop at Nadi International Airport.

This follows a similar remodelling of its 150sq m arrivals duty free shop, which completed earlier this year.

“We are looking at a revamp of the departures store, as we’ve done the arrivals and that has made a difference,” said Kaushal Tappoo, Executive Director, Tappoo Group of Companies.

“We need to refresh our departures store. Sometime in 2020 we will start looking at that, making the gondolas and wallbays a bit more modern.

Currently, the arrivals share of the retail business – skewed heavily towards liquor, confectionery and tobacco – stands at 60%, with departures accounting for 40%.

Korean Air suspended direct flights from Seoul Incheon Airport to Nadi Airport earlier this month. Source: Korean Air.

FJ$1 MILLION-PLUS INVESTMENT

“With arrivals what we’ve seen is a fresh look gets people’s attention,” said Kaushal Tappoo. “Sometimes with retail, you don’t even think about buying alcohol but when you see it… the brands speak to you with promotions, the price points and it drags you in.”

Tappoo Duty Free says it intends to consider design plans for the departures refurbishment in the first quarter of 2020, although the actual fit-out could take place either later in the year or in early 2021.

The firm tells TRBusiness it invested just over FJ$1m/US$455.2m in the arrivals shop upgrade and expects to funnel at least that amount into upgrading the departures shop.

“This is necessary; every few years you need to look at how we stay ahead of the game,” said Kaushal Tappoo. “The emphasis will be ‘how do we get more people into the store’?”

The remodelled arrivals hall completed at the beginning of April has achieved a healthy uplift in sales growth (circa +15%) in the first three months that followed (May, June, July), including +20% in May, and is continuing to yield strong gains.

“With the retail footprint we have compared to our competitors, we have a much bigger frontage. In the previous design, the second half of the shop was pretty much blocked with cash counters at the front; we’ve put these to the back,” continued Kaushal Tappoo.

Kaushal Tappoo, Executive Director, Tappoo Group of Companies.

Underpinning the success of the arrivals transformation was early consultation with suppliers.

“Diageo made some specific changes, not just necessarily brands but the overall mix,” explained Kaushal Tappoo.

He says the likes of Diageo and Pernod Ricard in particular were instrumental in helping to inform the future layout and shop footprint.

An area performing particularly well is the Fiji Market concept, which merchandises Fijian handicrafts, souvenirs, paintings and other authentic gifts that are deemed (aptly) ‘uniquely Fijian’.

One such product is Fiji coconut vodka, which contains flecks of coconut inside the bottle and resembles a liqueur.

Tappoo Duty Free says an onus on differentiation and permitting travellers to purchase something they cannot find anywhere else is the overriding objective.

“For example, the vodka sells for FJ$79/$36, but Absolut [vodka] sells ‘two for FJ$89’. We’re converting a lot of the ‘two for FJ$89’ [customers] into FJ$79 for the coconut vodka.”

The Fijian market has in turn been elevated by the rising popularity of the Fiji seven’s rugby circuit – the country is one of the most outstanding and successful teams on the planet.

“The sevens team has actually put us on the map a lot more than tourism and we are seeing people buying jerseys as a souvenir,” said Kaushal Tappoo, in doing so referencing the team’s gold medal victory at the 2016 Summer Olympics in Rio de Janeiro.

Liquor remains an important pillar of the retailer’s duty free arrivals business.

KOREAN PAX EXPECTED TO FALL

Although the success in arrivals has boosted the business, it hasn’t been without its challenges.

“The store revamp has brought in more customers, but still we’re seeing people are spending less,” observed Kaushal Tappoo. “While we’ve had a bit more transactions over last year, spend per passenger has actually dropped.”

One instrumental factor in the downturn has been Korean Air’s decision to cease thrice-weekly direct flights to Nadi, effective 1 October.

According to Tappoo Duty Free this has hampered sales of premium spirits, notably cognacs, aged whiskies and aged rums that are typically popular among Korean travellers.

Chinese volumes have also been hit as a result of the ongoing turbulence in Hong Kong. The combination has resulted in Tappoo Duty Free lowering its forecasts for the coming months.

“It’s not necessarily that we are not getting the visitors, it’s just that they are spending less,” explained Kaushal Tappoo.

“The premiumisation we’ve focused on in the past few years has slowed down this year. To bridge that spend we’ve worked on two-for-one deals and offers.

“Fiji still flies directly from Hong Kong and Singapore; I’m not sure if we are going to pick up Koreans here. I think you’ve got to be a very keen traveller from Fiji to Korea to go via Singapore and Hong Kong. The direct route brought quite a few spenders to Fiji, but now I think Korean numbers will drop.”

In turn, the business has been weathering the impact of a decline in spending at its departures store.

CORE STILL THE FOCUS

Tappoo Duty Free’s business experienced growth of +8% in 2018 year-on-year, a result emblematic of consistent high single- and low double-digit growth achieved over the past five to six years.

“We are doing tough this year,” said Kaushal Tappoo, who concurred with TRBusiness when asked whether the situation regarding departures in the immediate term was looking ‘bleak’.

“If you told me we would be flat over last year at the end of this year, I would take it now. The reality [with Korea and Hong Kong] is hurting us now and we expect a slight drop this year. If we can curb this at less than -5%, I’ll be very happy.”

Tappoo Duty Free’s Fiji Market at Nadi International Airport.

In the immediate term, there are no retail expansion plans for Tappoo Duty Free on the cards at Nadi – the travel retailer won a seven-year core duty free contract (including a seven-year extension option) three years ago.

As it currently stands, the three main categories in departures are (in order of importance): liquor, tobacco and confectionery; perfumes & cosmetics; and the Fiji market concept.

“Club spirits, wines and P&C that Australians and New Zealanders are used to will be [the focus] in the foreseeable future, unless we start getting more Europeans or Asians in Fiji,” said Kaushal Tappoo.

Fiji’s duty free arrivals allowance permits travellers to 2.25 litres of spirits – equating to two bottles. They can also bring in 4.5 litres of wine (six standard 750ml bottles), or a combination of both, and 250 cigarettes or equivalent without incurring customs duty.

“Whether this [tobacco] changes, we do not know,” pondered Kaushal Tappoo. “The [government] is getting pretty strict on the allowance of tobacco into Fiji.”