The shape of luxury debated in TFWA 365 webinar

By Luke Barras-hill |

Luxury fashion brands should be realistic with their space expectations within airports and demonstrate flexibility and agility to optimise the retail trading environment, advised retail and airport panellists during a TFWA virtual panel session that took place today (22 February).

Attendees to the first of two 90-minute ‘Fashion in Travel Retail’ webinars hosted on TFWA’s 365 virtual platform (the second session will take place on 23 February at 11am CET) learned about some of the core issues shaping the travel retail fashion & accessories category as it negotiates its recovery from the pandemic.

Co-moderated by TRBusiness Editorial Director Charlotte Turner and TFWA Conference Manager Michele Miranda, session one featured contributions from several influential stakeholders including Sharon Beecham, Vice-President Purchasing, Dubai Duty Free (DDF); Fraser Brown, Retail & Property Director, Heathrow Airport (LHR); Lisa Baldzicki, Chief Merchandising Officer, Starboard Cruise Services; and Casey Hall, journalist and Asia Correspondent at The Business of Fashion.

Sharon Beecham, Senior Vice-President Purchasing at DDF, noted the challenges facing luxury brands such as the complexities and practicalities of operating within an airport environment; execution timelines (historically an average of 18 months to two years at DDF) from introducing a brand to opening a shop; and understanding the limitations of space, particularly when it comes to considering fellow retail tenants.

“Space needs to be thought about in context and can’t be used as a bargaining tool,” said Beecham. “We’ve had quite a few discussions with some of the brands where they’ve tried to limit the offer and it just hasn’t worked,” she said, adding that constructive conversations were needed to reach a compromise that worked for both sides.

USING SPACE INTELLIGENTLY

In turn, the issue of being clever with space was flagged by Fraser Brown, Retail & Property Director at LHR.

During an address in which he illuminated on LHR’s retail strategy – Digital, Space, Experience, Offer (range and price) – Brown stressed the importance of cross-channel collaboration to meet consumers’ expectations.

“Similar to Dubai Duty Free, we do not have the amount of space that every single luxury retailer is going to want, so how we intelligently use space in tandem with digital becomes really important. Those two things together then ensure that you’re in the best place with the right colleagues and the right offer to deliver a great experience.”

In a broad-ranging discussion, Beecham set the scene for the session by updating attendees on DDF’s operations. DDF netted sales of Dhs 3.563 billion/US$976 million in 2021.

The webinars feature expert moderation from TFWA Conference Manager Michele Miranda and TRBusiness Editorial Director Charlotte Turner (pictured).

The sales contribution by product group was topped by fragrances & cosmetics (24.4%) with other top performers (ranked in order) as follows: wines & spirits (17.3%), tobacco (9.78%), confectionery (9.74%), gold (8.15%) and fashion accessories (8.07%).

As reported today, Dubai International Airport handled 29.1 million passengers in 2021 – representing year-on-year growth of +12.7%.

The result represents 33% of 2019’s total traffic volume. Looking ahead to full-year 2022, should DXB process 56.9 million passengers that would – using an estimated base – equate to 65% of 2019 passenger traffic volumes.

The forecast split of passengers across the terminals in 2022 is as follows: Concourse B (32%), Concourse D, T1 (23%), Concourse A (18%), Concourse C (14%) and Terminal 2 (12%).

There remains a buoyancy in the estimated numbers this year and this bodes well for DDF, which according to Beecham had opened almost every retail operation by the end of 2021.

DDF EYES US$1.4 BILLION IN 2022

This year, DDF’s is budgeting for sales of DHS 5.1 billion/US$1.4 billion.

In 2021, boutique and luxury sales grew and witnessed a significant recovery, continued Beecham, who elucidated on the evolution of DDF’s luxury boutique footprint over the past eight years.

“Space needs to be thought about in context and can’t be used as a bargaining tool,” according to DDF’s Sharon Beecham. Click to enlarge.

Today, that footprint includes the likes of Chanel, Gucci, Dior, Hermès, Bulgari, Burberry and Tiffany.

Louis Vuitton and Cartier are the latest additions to the lineup having opened in December 2021 and February 2022, respectively.

“No one would of thought that luxury would have been one of the categories to recover to a great extent,” said Beecham. “People’s attitudes to luxury have changed considerably during the pandemic times.”

Addressing discounting, she said boutiques and brands do not want to discount but being at an airport allows such a practice in a ‘soft way’.

“Customers are going to be saving [on the sales tax] in that particular location, which is going to be appealing if you’re saving 10% when spending $5,000 on a handbag,” said Beecham.

Heathrow has invested a ‘ferocious’ £11 billion across its terminals including at Terminal 5, which is set to celebrate its fourteenth anniversary soon.

She said when Concourse A was being designed, the opportunity to house boutique spaces led to the existence of Hermes, Chanel and Gucci at DDF.

Reflecting on the challenges at Concourse A, she said margins for brands in the boutiques ‘are not great’, meaning ‘sales absolutely have to make up for it’.

“There were many brands we had to draw a line under, we could not progress. If that isn’t going to change moving forward, that is always going to be a problem in deciding which additional brands to introduce.”

On the future, Beecham spoke to the importance of brands remaining valid and fresh within the airport environment and as such pointed to the success of the boutique experience to date.

“We will have to see what the future holds in terms of new trends, demands and brands but at the moment our experience has shown that those long-time brands with history and heritage are the ones with the most amount of longevity,” she added. “We have to assume that is going to continue but we also need to constantly examine ourselves. It is safe to say that boutiques at DDF are here to stay.”

Casey Hall, Asia Correspondent, The Business of Fashion (pictured above) and Lisa Baldzicki, Chief Merchandising Officer, Starboard Cruise Services also featured on the panel.

Heathrow Airport Retail & Property Director Fraser Brown then set the scene with a view of the airport’s ‘ferocious’ commercial investment totalling £11 billion across the terminals including at T5, which is set to celebrate its fourteenth anniversary soon.

The airport is looking at around 45.5m pax in 2022 (circa 55% of 2019) and that will begin to rise to around 60m in 2023 and 70m by 2024, at which point pax numbers will begin edging towards pre-pandemic levels.

He said there are about 350 retail units across seven areas (F&B, high street + fashion, duty free, essentials & tech, luxury, bureau & services and vending), in doing so earmarking several key variables to success: driving a strong passenger mix, providing a market-leading offer and offering world-class facilities.

Fraser Brown, Retail & Property Director, Heathrow Airport is this month’s e-zine cover star.

‘DISCOUNTING NOT EXPECTED, BUT ADDED VALUE IS’

The total retail footprint counts 272 units (including luxury boutiques) over 40,000sq m of in-terminal retail space.

There are currently 53 luxury boutiques across the four terminals occupying 7,500sq m of boutique in-terminal space. Pre-pandemic, luxury was about 20% of the retail business by value.

“Luxury has been a bigger part of Heathrow’s mix, certainly for the last five years or so,” commented Brown. “We are seeing a good return of volume and with the help of brands and retailers we have reopened virtually everything in T2, T3 and T5.”

On the decision taken by the UK government to cease airside tax free sales, he explained: “As an airport operator we are very upset at what the government have done. There is no sales tax benefit.”

Heathrow alongside Dufry and Global Blue launched a judicial review of the decision, but the challenge was ultimately defeated in the High Court.

With the UK airport environment (aside liquor & tobacco) being tax paid, Brown said: “At Heathrow, it means we have to work harder with the brands and retailers to make sure the offer is relevant and attractive across the categories and particularly in luxury.”

While he stated that Heathrow does not expect luxury retailers to be discounting, they need to ensure they are listing the most up-to-date and unique products that act as a point of difference, combined with elements such as GWP or personalisation.

As the change in the law took place during the pandemic, Brown said it has been difficult to observe the impact on passenger trends. However he pointed out: “For those businesses that work with us, we’re still seeing good footfall relative to passenger numbers into the luxury boutiques and we still believe they will be very successful.”

The Fashion in Travel Retail webinars are among a number of themed online events planned to take place on TFWA 365 over the course of 2022.

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