Jack MacGowan, CEO, Aer Rianta International called for a more coordinated and consumer-facing approach from travel retail trade bodies this morning during the second and final day of the Meadfa conference in Dubai.
He also called for a reworking of traditional retail and marketing methods to re-invigorate sales in DF&TR. Essentially he made the point that after years of consistently strong growth, fuelled by healthy passenger numbers, the industry had become complacent.
“Industry leaders are unanimous on the need to redefine how travel retail offers value to the customer,” he said. “The customer isn’t as excited or engaged about duty free as they once were. We need to redefine the duty free promise.”
TRBusiness has been ‘live-tweeting’ during the Meadfa conference. View the stream here.
He highlighted the fact that consumers are frequently reading critical newspaper articles [consumer press] about duty free pricing, which undermines ‘trust and transparency’.
“Our own multiple price messages are also confusing,” he said. “If this continues, discounting will ultimately devalue the channel.”
Interestingly he said that, on average, only 1 in 4 customers benchmark on price yet the industry is still focused on discounting as a key response to the decline in passenger spend.
TOO MANY PROMOTIONS?
“Are we doing too many price promotions? Could we have clearer and more compelling price messages?” he asked the audience (rhetorically).
Instead he suggested that there should be an even greater focus on exclusive and personalised products that customers can’t get elsewhere. He used the example of Diageo’s personalised labelling activation with bottles of Baileys. [The new printing unit allows staff to print off customised Baileys labels featuring the names of travellers].
According to MacGowan, sales sky rocketed in Dublin’s T2 by +58% following the implementation of the labelling unit. What was perhaps even more enlightening was that conversion from query [about the activation] to sale was 70%.
“Customer experience and service can really differentiate us from the competition,” added MacGowan “As well as highly trained staff, indulgent and seamless shopping services – such as Jo Malone hand massages or MAC makeovers.”
MacGowan called for more services/activations such as those mentioned above – both conducted by Estée Lauder Companies – which could convince passengers to arrive at the airport earlier.
GET TO PASSENGERS EARLIER
“We want to drive penetration and dwell time at the airport; get passengers to the airport earlier…Retailers should focus on engaging the consumer pre-travel and harness the power of digital.”
Although he was overall very complimentary of travel retail trade bodies he did say that they should make more of an effort to be more consumer-facing.
“Can we work together to reignite consumers’ belief in the duty free promise?” He suggested that the industry should come together to conduct a campaign to promote the duty free industry as a single entity and highlighted how this was done in Europe following the abolition of intra-EU duty free in 1999.
“We have obviously restructured the business model since then and seen a great return on investment.”
Much of the Meadfa conference was preoccupied with issues surrounding pricing and a fear of ‘a race to the bottom’ mentality. MacGowan addressed this when he was asked a question by the audience [through the Pigeonhole application utilised at previous TFWA conferences].
“We [ARI] have moved away from being margin focused to being value focused. We won’t necessarily have the cheapest prices, but we won’t have rip off prices either.
AROUND $50M IN STORE INVESTMENT
“We are investing greatly in staff and shops. We’re currently investing everywhere in the Middle East. Bahrain Beirut and Abu Dhabi of course.”
As reported at the end of last year, ARI won a contract to operate perfumes, cosmetics, skincare, sunglasses and jewellery concessions at Abu Dhabi International Airport.
Interestingly, MacGowan said that the Abu Dhabi Airports Company (ADAC) didn’t stipulate anything about ‘low prices’ in the tender brief. “Nobody said anything about offering the lowest prices. Customer experiences and enjoyment was paramount.”
As is evident from ARI’s activity and contract wins over the last couple of years, the company is in an investment phase of its growth at the moment.
“PAS [passenger average spend] is down because of a lot of issues at the moment, but I think it’s a great sign that when profitability is struggling that we still invest in all locations in the Middle East and I’m very proud of my team for that.”