Industry leaders address trends and opportunities at Hainan Special Edition

By Andrew Pentol |

Charles Chen, President, China Duty Free Group was part of a panel of industry leaders who participated in Tuesday’s workshop.

The Tax Free World Association (TFWA) Hainan Special Edition opened with an enthralling panel discussion featuring leaders from some of the world’s most prominent travel retailers.

Taking place on Tuesday (23 June), the session followed a compelling welcome address from Jaya Singh, President, TFWA and reassessed some fundamental elements of the DF&TR business. These include the current concession model, issues around data sharing and the need to embrace digital and omnichannel opportunities.

A powerful speaker line-up comprised Max Heinemann, CEO, Gebr. Heinemann, Dag Rasmussen, Chairman and CEO, Lagardère Travel Retail, Benjamin Vuchot, Chairman and CEO, DFS Group, Julián Díaz, CEO, Dufry Group and Charles Chen, President, China Duty Free Group.

Kicking things off was China Duty Free Group’s Chen who put the impact of the pandemic into context. “The pandemic has hit economies and especially our industry a lot. I still remember the beginning of last year when almost all the stores in China were closing, as well as big airports such as Beijing and Shanghai. Even our big Haitang Bay duty free store closed.”

Chen, who praised the Chinese government for the way it controlled the pandemic in the country added: “I told my team we must prepare for the long-term as I still believe in the potential of Chinese consumers and reminded them we must maintain strong relationships with our brand partners.”

‘HISTORICAL PLACE FOR RETAIL’

Next to speak was DFS Group’s Vuchot, who initially focused on Europe and today’s (23 June) re-opening of the more than 20,000sq m commercial blueprint at the La Samaritaine department store in the heart of Paris.

Left-right: Charles Chen, President, China Duty Free Group; Julián Díaz, CEO, Dufry Group; Max Heinemann, CEO, Gebr. Heinemann; Dag Rasmussen, Chairman and CEO. Lagardère Travel Retail and Benjamin Vuchot, Chairman and CEO, DFS Group highlighted a number of key issues which the industry must reassess in order to spark a return to growth.

Situated opposite Le Pont Neuf on the river Seine adjacent to the bustling Rue de Rivoli shopping district, La Samaritaine will house more than 600 brands, 50 of which are exclusive.

“This is a historical place for retail with 150 years of history,” Vuchot remarked: “Over the past 10 years, DFS has been revitalising this unique location of three buildings and bringing it to the 21st century.”

According to Vuchot, the work undertaken at La Samaritaine over the past decade echoes DFS Group’s passion for creating destinations within destinations and its commitment to offering a retail experience that goes beyond the ‘pure availability’ of product, price and transaction.

“What makes the La Samaritaine project really unique is this passion for the assortment. La Samaritaine will be an example of what we want to do at DFS in terms of leading the luxury element of travel retail.

“On top of the physical experiences that we are creating in the new La Samaritaine, which includes a spa, hair salon and multiple experiences in the stores, what also makes it very interesting is that we have listened to how the consumer has evolved during the pandemic.”

La Samaritaine will be an example of how DFS wants to lead the luxury element of travel retail, according to Benjamin Vuchot, Chairman and CEO, DFS Group.

Pressed by session moderator John Rimmer on how Lagardère Travel Retail is catering for a different passenger profile, Rasmussen said: “We have a very balanced portfolio both geographically and in terms of business lines (travel essentials, food service and duty free and fashion).

“In the US, things are re-starting and we are close to 2019 figures, which makes us very optimistic. We are also growing a lot in China and Hainan.

“Over in Europe, things will take a bit longer as the borders are closed, but once traffic recovers, we will have all the possibilities to capture the passenger.”

Dag Rasmussen, Chairman and CEO of Lagardère Travel Retail says the company is experiencing growth in China and Hainan in particular.

On how Dufry Group is planning to approach passengers in the future Díaz said: “We have seen trends and I think these align with those we have been discussing over the past few years. The significant difference in this instance is the acceleration.

“At Dufry, we are trying to accelerate digital implementation. We are moving to another step in the life of the company known as Dufry Connect in the sense of increasing the use of digital technology. The challenge is how we adapt this connection point to the travellers.”

Regarding product trends which could be prominent in the post Covid-19 world, Díaz said: “We have seen a significant increase in the demand for sustainable products and novelties.”

Dufry Group is trying to accelerate digital implementation, says Julián Díaz, CEO, Dufry Group.

Gebr. Heinemann has always maintained a strong focus on digitalisation across the company, according to Max Heinemann: “Digitalisation has accelerated throughout the pandemic, but clearly there is so much room in our industry for connected business models we have not even touched yet.

“I always feel a bit troubled when saying we need to digitalise everything and find new ways to connect with all our travellers as we have so many different segments to look at.

“Over the last 18 months we have learnt that our core customer is someone who is really mature in many aspects, but not necessarily the digital native that is coming around the corner. We are customising the traveller journey physically and digitally.”

Over the past 18 months Gebr. Heinemann has learnt that its core customer may be mature in many aspects, but not necessarily digitally savvy.

While Gebr. Heinemann has clearly benefitted from the strong partnerships it has established throughout its 142-year history, the German family-owned company believes certain things need to change.

“We have clearly seen an underlining of that strength and partnership, but we have also seen that when it comes to a crisis of this magnitude, the business model in itself at times is not fit for situations like this and needs to be adjusted.

“If you want to tap the potential that is surely out there you need to adjust a couple of things contractually. I think we need to have the guts to do so.”

Lagardère’s Rasmussen believes contracts based on profit sharing is the best model moving forward. “I think there will be changes [to the concession model] and there are changes. We have recently negotiated some great deals based on profit sharing, which I think is the best model because it takes away many constraints.

“If the industry wants to reach the optimum level it has to rethink the concession model. This is something we started promoting before the crisis and have had more success in doing so now.”

Lagardère Travel Retail is enjoying growth in Hainan, where it opened a 30,000 sq m duty free store in partnership with Hainan Tourism Investment Development in December 2020.

Some landlords, however, still do not believe the model should change even as a result of the pandemic. “If the impact of pandemics is not factored into future contracts, this would be extremely risky for retailers as all the responsibility would be on them.”

Aside the merits of the profit-sharing model, more flexible agreements are also required, emphasised Rasmussen. “We would all like to have long contracts, but if we sign a contract now, will we be serving the same consumer in 2030? Maybe a store that is a restaurant now will be become a duty free store or travel essentials outlet in the future. Some flexibility is definitely required during the course of a contract.”

When it comes to contract models now and in the future, the industry must go in two directions. “One is flexibility and the other is sustainability,” Díaz remarked. “The flexibility part is becoming more important when you are talking about relationships with landlords.”

A Dufry Group store at Hong Kong’s West Kowloon station.

He added: “Contracts must be adapted to the reality depending on customer profile, motivation and nationality, while financial sustainability must also be part of the bid. I think this is essential. We cannot create value if the concession contract or lease contract is not the right one.

“The vast majority of the landlords understood this meaning we were able to adapt most contracts.”

Contract models must certainly be adapted according to most industry stakeholders, but adapting to the needs of consumers is also vital. “Amending the offer is one thing, but amending the way we welcome customers is another,” Vuchot remarked. “Travel retail is about encapsulating the time of our customers and bringing them more choices,” he concluded.

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