MAGs must be waived indefinitely, says iS Duty Free

By Andrew Pentol |

International Shoppes still plans to celebrate its 70th anniversary next spring despite the continuing impact of the Covid-19 pandemic.

US travel retailer International Shoppes has called for minimum concession fees (minimum annual guarantees — MAGs) to be waived indefinitely due to the impact of the coronavirus (Covid-19) pandemic on business.

Speaking during a recent webinar hosted by the International Association of Airport Duty Free Shops, International Shoppes Vice President Matthew Greenbaum stated MAGs have been waived at most US airports.

He said: “In the places we operate, those concession fees have been waived at least through the end of this year. We would like to see those commitments for abatement of rent put out indefinitely.

“It’s hard to operate in an environment where we don’t know if the airport is planning on instituting minimum based rents. Those numbers are very dear and would really change the way we can operate.”

Greenbaum, who was the subject of a TRBusiness ‘Adapt & Survive video interview, is adamant the airport concession model must change to address MAG obligations. “Language will be needed so we can be flexible if and when the next event [of this magnitude] happens. For us, when the crisis started, we were just not sure what our obligations would be moving forward.”

COVID-19 RECOVERY

Outlining the impact of the pandemic on International Shoppes, which will celebrate its 70th anniversary in spring 2021, Greenbaum said: “Most stores we had were closed initially for some period of time. Most, however, returned to service by the summer.

“Our airport operations have been impacted differently. The recovery in each location is very different. This is even true in the different terminals at the same airport.”

He added: “At New York John F Kennedy International Airport, where we operate in terminals one, five and eight, the story in one terminal is different from another. It has been interesting to observe.”

The support of most airport landlords in terms of rent and operating hours, has enabled International Shoppes to be flexible on operating hours. “We have come up with some innovative staffing plans to ensure no resources are wasted and that we can continue servicing all international flights.

“Early on in the pandemic, I remember there were certain locations that we would open in the morning, close for a few hours and then re-open later in the day.

“We would also close some stores on certain days if there was no business. We were really hustling just to keep costs down and ensure we service every opportunity.”

Most International Shoppes stores were closed for a period of time but operational again by the summer.

While the expansion of the retailer’s e-commerce platform has yielded ‘encouraging’ results, the in-store experience remains the key focus. “We have expanded our e-commerce platform quite a bit. International Shoppes already had quite a robust pre-order service, but we have put more resources into this and brought more suppliers to be featured on there.

“Although it is encouraging what is happening there, we are also learning that the in-store experience is still critical. We must ensure that our focus on the in-store experience doesn’t slip.”

The creativity and flexibility of suppliers has certainly helped International Shoppes navigate the crisis. Many of its suppliers have been patient with new orders and been open to taking back unsellable merchandise. “This sort of support will need to continue at least for the foreseeable future,” he remarked.

MORE EFFICIENT SUPPLY CHAIN NEEDED

A more efficient supply chain with quicker and more frequent deliveries from suppliers will ensure quicker turns of inventory for International Shoppes and other retailers for that matter. “I expect there will be pressure on suppliers to process orders quickly and to get orders to us quicker, so we are not sitting on inventory in the same way we were before.”

Creative product launches and promotions from suppliers have also benefitted the US retailer. Back in April, L’Occitane Group, for example, came up with an idea to implement totem displays in stores. “These featured their hand-care products as well as a hand sanitising station,” Greenbaum recalled.

“With everyone so conscious about sanitising their hands, we decided to offer them some products to ensure their hands stay in good shape.

“Initiatives like this have been very helpful. We all need to be creative and to try and take advantage of as many buying habits as possible.”

International Shoppes has praised the flexibility of suppliers during this challenging and unprecedented period for the duty free and travel retail industry. 

While Greenbaum is satisfied with the support received from airports and suppliers, the same cannot be said for the US government.

At the end of June, IAADFS revealed it had formed a coalition with the Airport Restaurant & Retail Association, National Parking Association, American Car Rental Association and Airport Minority Advisory Council and co-authored a letter to lawmakers in Capitol Hill.

The letter requested dedicated support for businesses running retail and duty free shops, restaurants and car rental and parking operations via a combination of grants and loans to help concessionaires avoid bankruptcy, begin rehiring staff and gradually resume operations.

Creative product launches and promotions from suppliers have helped International Shoppes.

More than five months on, Greenbaum is disappointed that the $10bn Coronavirus Aid and Economic Security Act did not provide ‘any explicit support’ for airports. “I know IAADFS has been working hard to ensure language is included within the next round of support,” he commented.

An explosion in recreational travel once the Covid-19 vaccine is distributed could also be on the horizon, according to Greenbaum. “A lot of people will be working from home and not needing to report to an office. This is going to open up their schedule in a way that has never been really contemplated.

“I am really excited to see the way that people travel for long-term and short-term periods. The fact they have these more flexible work schedules points very likely to an explosion in recreational travel.”

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