Many luxury brands want to be part of the commercial offer at the new Istanbul International Airport.

Unifree Duty Free has revealed that strong interest from luxury brands sparked the opening of the new 800sq m Luxury Square concept in the centre of Zone 5 at Istanbul International Airport.

The concept is operated by ATÜ Duty Free, the partnership between Unifree Duty Free/Gebr. Heinemann and TAV Airport Holdings.

TRBusiness joined members of the trade media and representatives from ATÜ Duty Free, Gebr. Heinemnn and airport operator İGA at Istanbul Airport on 27 February for the official inauguration of the new Luxury Square. This has been trading for around one month.

The Luxury Square offers 28 brands including several clothing and accessories labels such as Burberry, Kenzo, Givenchy, Loewe, Stella McCartney, Alexander McQueen, Chloé, Marc Jacobs, Off-White, Palm Angels and Alanui.

Watches and jewellery brands including Chopard Watches and Jewellery, Messika, Piaget Watches and Jewellery, Atelier Swarovski, Tous, Bee Goddess, Gucci, APM Monaco and Rado are part of the offer. Balenciaga glasses, along with products from Cartier, Celine, Chloé, Dior, Fendi, Gucci and Saint Laurent are also available.

HIGH-QUALITY LUXURY PRODUCTS

In addition, the Luxury Square features a 110sq m sunglasses shop and 92sq m luxury watches and fine jewellery outlet offering high-quality luxury products.

Ali Şenher, CEO, Unifree Duty Free (left) told TRBusiness: “There was a high number of luxury brands which wanted to be part of the commercial offer at the airport, but we didn’t have enough space to accommodate them all. As a result, we created this new Luxury Square with successful international brands running in the area.”

With Unifree and ATÜ Duty Free operating a plethora of branded boutiques in the luxury area of the Bosphorous Zone, cannibalisation was a concern during the Luxury Square project. “Thankfully, this did not come to fruition. As soon the Luxury Square opened, the stores at the back of the open-plan department store increased sales by 15-17%.”

Assessing the impact of the Luxury Square, which has been open for around one month, Şenher said: “The Luxury Square has had a very positive effect on general sales. Obviously, there has been a decrease due to the coronavirus, but the general impact has been great.”

Aside the Luxury square, Covid-19 has impacted sales across the 53,000sq m commercial space at Istanbul Airport. This is because there are fewer high-spending Chinese passengers — Turkish Airlines has suspended all Chinese flights — and other passengers are not flying as much.

Şenher, however, remains positive. “Since it is the low season, we have not suffered that much because of the coronavirus. In duty free, sales have dropped around 7% or 8%, but it is a slightly different story as far as the boutiques are concerned.”

He added: “If the coronavirus situation is under control by the end of April, we will be able to cover up the losses of the first few months. This is because there will be a new runway in June, which will be a game-changer for everyone. Several large airlines have agreed contracts with the airport including China Southern Airlines and IndiGo.”

Once the new runway is operational, air traffic capacity will increase from 80 plane landing/take-offs to 120 per hour. Airlines’ slot flexibility will also improve and taxi durations will reduce by 50%.

Next month will be an important one for Unifree, which has a 25-year exclusive retail contract at the airport and manages the sub-leasing of all brands. This is because April marks the completion of the first full year of commercial operations in the new facility.

The opening of the Luxury Square open-plan department store has had a positive impact on sales in other stores, according to Ali Şenher, CEO, Unifree Duty Free.

Just a few duty free stores were operational when the new airport opened on 29 October 2018. As reported, all duty free zones were fully open and operational as of noon (local time) on Saturday 6 April 2019. Other stores have opened on a gradual basis.

“If the coronavirus effect slows down in April, we will exceed our budgetary expectations for the year,” Şenher remarks. “By this time, we believe 92% of sub-contractors’ assets will have exceeded expectations. The other 8% of sub-contractors’ assets may not have done so because it is their first time in the travel retail business.”

ASSISTING SUB-CONTRACTORS

Helping tenants which have failed to hit the ground running is priority for Unifree, according to Şenher. “Our marketing team has been working on ways to improve sales for those sub-contractors which have struggled a little. The positive thing is that no companies have expressed a desire to leave which is absolutely fantastic. In fact, many want additional stores.”

The 400sq m Luxury Timepieces store operated by ATÜ Duty Free at Istanbul Airport comprises 22 brands.

Reflecting on the overall commercial project at the new Istanbul Airport, Şenher, who reveals 27 ‘succession brands’ are vying for space commented: “Obviously, there were delays, but when you consider the fact we signed the contract in January 2015, the airport opened in October 2018 and almost all the duty free shops were trading by April 2018, it was a great success.”

Making the transition from the old Istanbul Atatürk airport to the new facility, was the biggest challenge, emphasised Şenher. “We were really curious about how the transition would pan out. Turkish Airlines made the move on a day-to-day basis and the outcome was perfect. The transfer was complete in three weeks.

Unifree Duty Free is confident of exceeding budgetary expectations for the year, despite the impact of the Covid-19 outbreak.

“From our perspective, it was not easy to unite all the brands in one place, but with the support of Heinemann we managed to do this.”

Avoiding cannibalisation, which as mentioned previously was a concern during the Luxury Square project, was the aim throughout. “Most things were being tried for the first time here, so the challenge was to avoid a scenario where customers spent too much time shopping particular brands and insufficient time in duty free. Thankfully this was never the case.”

When some stores opened, they immediately required modification. Unifree was on the case from outset. “In one store, for example, there was a wine area which required work. One week later, our architect started work on a redesign. Once this was complete, sales in the area rose 22%.”

RESERVE SPACE PLAN

When TRBusiness spoke to Ian Foster, Chief Commercial Officer, Unifree Duty Free at the official opening of the new ATÜ Duty Free Bulgari store last year, it became clear that reserve space was available to grow the commercial operation. But before determining how to utilise this space, Foster said the company would wait for passenger numbers — which were up just 6% as of 16 September 2019 —  to increase.

Regarding current passenger traffic at the airport, Şenher said: “After we signed the contract in 2015, aviation decreased in general. Passenger numbers at the new airport, therefore, have slightly exceeded expectations.”

Some of the 16,000sq m reserve space is expected to be utilised from 2021. “The dimension of the stores in that area is a little lower. When passenger numbers increase, we will enlarge the stores.”

Passenger numbers have slightly exceeded expectations at Istanbul Airport.

Despite the impact of Covid-19, Unifree Duty Free is confident of achieving its 2020 sales target of €860m ($948.4m) at Istanbul Airport. This includes sales generated from sub-contractors. “If the coronavirus slows down in April, we can still exceed our budget.

“We have a very strong team and big investments and plans. Every month there will be changes. This is a never-ending story.”

With 99% of stores operational, the focus is on communication, digitalisation, innovation and visibility. “We are planning to distribute maps to passengers at passport control, welcome passengers through digital advertising and promote the commercial offer downtown.”