TFWA President Erik Juul-Mortensen.

Sales in Asia Pacific DF&TR surged by 11.6% to record $30.6bn in 2017 but stagnant global spend per head versus passenger traffic is undermining potential ‘boom times’ in the industry, delegates at the TFWA Asia Pacific Conference heard yesterday.

Opening the plenary session held at the Marina Bay Sands Expo & Convention Centre, TFWA Managing Director John Rimmer pointed to a sense that the industry ‘is not fulfilling its true potential’.

TFWA President Erik Juul-Mortensen then revealed in preliminary data from Generation research that Asia Pacific accounts for a 45% share of global sales.

The fastest growing category remained perfumes & cosmetics, which grew by 19.9% to $14bn, with a +12.9% return to $3.9bn demonstrating a strong showing from wines and spirits.

GLOBAL SALES AT $68.6BN

Global industry sales lifted by 8.1% to $68.6bn, with perfumes and cosmetics again the frontrunner with growth of +13.8% to hit $24.5bn.

The TFWA President noted that a number of Asia and Indian subcontinent hubs ranked among the globe’s 60m-plus passenger airports, underpinning ACI’s reported 8.4% rise in global pax traffic in 2017.

Asia Pacific delivered another standout performance in 2017, outpacing nearest rival Europe in the DF&TR growth stakes. Click to enlarge.

“Singapore Changi, Bangkok, New Delhi, Jakarta and Guangzhou all broke through the 60m-passenger structure, with Shanghai (Pudong) and Hong Kong surpassing 70m.”

Airports took the lion’s share of sales at $38.3bn (+7.7%), closely followed by other shops at $25.5bn (+9.3bn), while the ferries business grew to $2.2bn (+7.4) and airlines showed modest improvements (+4.2%) to $2.6bn.

“Airports continued to increase their share of sales but also other shops, effectively duty free and tax free downtown malls and shopping centres,” said Juul-Mortensen. “The promising cruise line market delivered the strongest performance in terms of year-on-year growth.”

Referring specifically to challenges to airlines’ profitability, he continued: “With some airlines pulling out of inflight sales entirely, the market is in need of fresh re-thinking.

“We at TFWA continue to believe in the potential of this sector, which will be the subject of TFWA research later this year.”

VALUE PROPOSITION ‘UNDER THREAT’ 

Turning to ‘positive background factors’ in global economic activity, he reminded delegates that emerging and developing Asian markets continue to perform as the IMF revises its growth forecasts for 2018/19 to 3.9%. 

This was led by export growth in China, South Korea, Taiwan and Malaysia.

However, global geopolitical uncertainty poses downside risks, particularly in light of the current US administration, UK Brexit debate and delicate diplomatic relations in Korea.

He added that the pressures on DF&TR have arguably never been greater, with some of that pressure self-inflicted.

The airport business model has placed heavy demands on retailers particularly in this region, Juul-Mortensen explained, in doing so referencing contract terminations or re-negotiations ‘on less onerous terms’ that have posed challenges.

“Our value proposition remains under threat, as is our ability to compete convincingly with m-and e-commerce,” he said. “Virtually every retail sector with a bricks and mortar component is having to redefine how they are doing business with consumers – and very quickly.

A clutch of Asian airport hubs spearheaded by Beijing and Hong Kong surpassed the 60m pax barrier in 2017. Click to enlarge.

Meanwhile, Juul-Mortensen drew attention to the burgeoning increase in retail m-commerce sales, which are predicted to generate $1.8tn in 2018 and rise to $3.6tn by 2021, according to a E-Marketers Retail & Ecommerce Sales report.

Themed #TRevolution, this year’s Asia Pacific summit honed in on the irrevocable shift taking place in retail and consumer goods, with the power of choice and pricing in the hands of consumers a central topic.

Debate was framed in the context of the business practices, communication and the use of technology to determine the industry’s future direction and relevance in an ever-changing world.

Andrew Ford, APTRA President; Adam Cheyer, Co-founder and VP Engineering at Siri Inc./VP Engineering of Viv Labs; and Shivvy Jervis, Futurist and expert on the digital economy were among a raft of speakers to set the scene on day one.

Further coverage to follow…