Dubai Duty Free (DDF) is predicting annual sales for 2020 to plummet to around Dhs2.4 billion (US$674 million) from US$2.029 billion in 2019.
Speaking to TRBusiness in late December 2020, Colm McLoughlin, Executive Vice Chairman & CEO, Dubai Duty Free was remaining positive and revealed that the return of passenger traffic in June had prompted traffic figures and sales to gradually increase.
“Passenger traffic and sales obviously remain down quite dramatically compared to 2019,” he remarked, “but one good aspect has been that those travelling and shopping at Dubai Duty Free are spending more per head than previously — around US$50 per head versus US$39 per head. That is a good sign.”
The increased spend-per-head is due to a number of factors, including less congestion in retail areas, the clear display of goods and the number of attractive promotions in place, according to McLoughlin, who revealed very little has changed in terms of purchasing trends.
He explained: “What has been interesting from a category perspective in 2020 and since we re-opened our retail operation in the summer, is that perfumes, liquor, tobacco, electronics and cosmetics are the categories which continue to see trends year-to-date.”
ADAPTING TO CHANGE
Maximising footfall and business through the retail areas which are currently open, following social distancing restrictions and eventually re-opening the rest of the retail areas when there is sufficient demand, are the main objectives moving forward.
Regarding the retail areas, customers have adapted well to changes in layout, which are in line with health and safety guidelines. McLoughlin said: “Overall, our customers understand the restrictions necessary. The retail areas are marked out for social distancing which includes directional floor markings and way-finding.
“We have also looked at prominently featuring the most popular brands in highly visible and easy to reach areas so that the shopper can quickly identify the product and pick up easily.
“Travellers are going into the shop and browsing, but under the control of our rules on social distancing. We have ushers ensuring that happens. It’s a little different, but the customers are very happy. All our staff are providing their full support.”
These times of adversity as a result of the coronavirus (Covid-19) pandemic have taught DDF a number of lessons.
McLoughlin, who celebrated 50 years in the duty free industry in 2019 commented: “I think that we have all learnt that these times of adversity can lead to great team effort, which gives us the strength to get through the bad times.
“This traumatic period definitely taught me that we have a great team here at Dubai Duty Free, who worked together and acted quickly to ensure our operation complied with all the rules as a result of Covid-19 and that we re-opened safely with staff and customers the priority.
“Another lesson is around how quickly the team pulled together to launch the home-delivery service for UAE residents. While not being our core business, this helped us during a time when there were very few passengers going through Dubai International Airport.”
Launched in around four weeks, the home-delivery service gave people the opportunity to shop while the airport was closed. Fashion, beauty, technology and food are among the categories available.
The home-delivery service also proved a big hit during DDF’s three day 37th anniversary discount campaign last month (18 December to 20 December), which generated sales of US$19m.
Total home-delivery sales during the three-day campaign amounted to US$1,086 m. In addition, there were 2,398 orders and 12,917 units sold to home delivery customers. Best-selling categories included perfumes and cosmetics, fashion, food and watches.
Online sales doubled during the campaign, with DDF’s click & collect pre-order service, generating over US$1.902 million in the 72-hour period.
A total of 6,331 orders were received in advance of customers travelling, with the most popular categories including perfumes and cosmetics, liquor, watches and technology.
On the customer response to the new home-delivery service McLoughlin said: “We are pleased with the response to this [home-delivery] service. It has been very beneficial in selling fashion items and goods that are within months of expiry.
“So far, our sales for the home-delivery since we launched it in June have been around US$9.5 m, which is a new revenue source, so that has been a very good development for us.
“Likewise, our click & collect service, which offers travellers the chance to order goods in advance of their flight, is also working well.”
INVESTMENT IN DIGITAL
Investment in digital over the past couple of years means DDF can engage directly with customers and provide notifications on new items and promotions. “This has all been very well received,” McLoughlin emphasised.
Aside the home-delivery service and other digital components, the importance of close collaborations is not lost on McLoughlin. “The pandemic has taught me the importance of working closely with government officials including my own boss HH Sheikh Ahmed bin Saeed Al Maktoum, Dubai Airports Authority and airlines such as Emirates, to ensure we are all communicating well during times of uncertainty.”
Outside the airport arena, McLoughlin says the UAE authorities have been quick and decisive since the beginning of the pandemic and made decisions to close schools, impose restrictions on movement, close shops and offices and implement a mask-wearing policy. Other measures have included street sanitisation on a nightly basis.
He commented: “The messaging has been extremely clear from the outset and the population has followed the guidelines. As a result, overall cases have been relatively low and deaths from Covid-19, although always tragic, have been relatively low.”
McLoughlin also recalls how the authorities were quick and decisive in closing Dubai International and Al Maktoum Airports for passenger traffic in March 2020.
He also praises the authorities for their meticulous preparation ahead of the reopening of Dubai International Airport. “When it came to the re-opening of DXB and our retail operation, there were clear guidelines on how to open safely. we were able to implement these into our re-opening strategy.
“Overall, the UAE authorities have done a fantastic job in handling Covid-19 and in mitigating against some of the situations that we see around the world, even at this stage.”
DDF’s ‘very good’ working relationship with Dubai Airports will also be important as the retailer recovers from Covid-19. “Dubai Duty Free and Dubai Airports are very focused on increasing passenger numbers in 2021 and driving sales.
“This is a major focus for our business. We are working together to drive passengers and footfall to meet our target.”
In terms of suppliers, DDF has received ‘greater empathy’ from some brands compared to others. “Overall, suppliers have been supportive during this very difficult time,” McLoughlin acknowledged.
Looking ahead to 2021, McLoughlin indicated there are commercial projects in the pipeline, but pinpointed rebuilding the retail business as the main focus. “This will be done by working with the airport and its stakeholders to ensure that we gradually open those retail areas that are still closed. These include Concourses A and D and Al Maktoum International Airport.
“We will be ready to open in line with the projected forecast of the airlines and Dubai International Airport.”
He added: “We will continue to drive sales in the current operation, ensuring we are offering great service at good prices and have the latest products in store and online. We will also continue to enhance the home-delivery service which has given us incremental income.”
FOCUS ON SUSTAINABILITY
Sustainability will also remain at the heart of everything the retailer does. “Dubai Duty Free is ISO14001 and ISO45001-certified and committed to the concept of continual improvement.
“We are seriously supporting Sustainable Development Goals and sustainable packaging, which can be seen with our shopping bags which are oxo-biodegradable. All suppliers are also attributed by the Emirates Authority for Standardisation and Metrology.”
Additionally, customers are being offered DDF gusset shopping bags. These are reusable bags made from recyclable materials. Security Tamper-Evident Bags used for passengers to securely carry liquids, aerosols and gels are also made from biodegradable plastic.
“We are in regular discussion with our suppliers to find out their company’s strategy for sustainability and for them to update us regularly.
“The purpose is for them to be aware of the importance of sustainability for Dubai Duty Free. If the suppliers have any significant initiatives, we try and support them within our shops.”
Looking at the bigger picture, McLoughlin believes it will take a few years before traffic and retail business in Dubai return to 2019 levels. “With the roll-out of the Covid-19 vaccine likely to happen throughout 2021 and the opening of travel corridors, such as the one between the UK and Dubai, there is reason to be optimistic.
“Given all the considerations, I would see our business returning to 2019 levels by 2023 and not before.”
Reflecting on the resilience of the DF&TR industry and its ability to overcome numerous crises, McLoughlin is confident in its ability to bounce back again. “Our industry has always been resilient. We’ve faced major challenges over the years, but this is obviously the biggest challenge for us all.
“Given the right circumstances, I’m confident people will want to travel and shop again, although it will take time.”