Category Insight. A Special Report on Fashion & Luxury in Travel Retail

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1 Category Insight A Special Report on Fashion & Luxury in Travel Retail Published by The Moodie Report May 2007

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4 CATEGORY INSIGHT Fashion & Luxury May 2007 Welcome to Category Insight, the first edition of a new series from The Moodie Report print division. In creating this series which begins this issue with a focus on fashion and luxury we wanted to create a vehicle for more in-depth coverage of the big issues. We also wanted to champion some of the best practice retailing of the key categories that we and you, our readers see out there in the global market. We believe that the trade media coverage of product categories in this market has for too long been characterised by lightweight, anodyne reporting driven mainly by commercial concerns that fail to address the real concerns of landlords, retailers and brand owners. This is our attempt to redress the balance, and we look forward to your feedback on whether or not that attempt has been a success. We lead with a series of features that touch on the critical issues of space, range and the store environment for the fashion industry in travel retail. At the ACI Airport Business & Trinity Forum in Dubai in March, Luxottica Group Duty Free Manager Worldwide Martha Rosas delivered a call to arms to brand owners, airports and retailers, and asked a searching question: Is travel retail the black hole of the luxury goods market? To set the scene, we present edited highlights of her presentation from Dubai, in which Rosas offers a wartsand-all opinion of the best and worst aspects of the channel as it affects her category. But we also wanted to hear the reaction of retailers and airports. We canvassed some of those who attended the Trinity Forum, and asked some of the same questions that Martha Rosas had so pointedly put in her presentation. Encouragingly for brand owners, every one of the airports we contacted had firm plans to increase the share of space devoted to fashion and accessories, and almost all could point to excellent sales growth in what is still, for some, a niche category. But one other thing is clear: airports want to hear more from brand owners, as well as their retail partners, about the opportunities that fashion can offer them, as a revenue stream and as an element that adds value to customers perceptions of the airport environment. Unique Zürich Airport Chief Commercial Officer Peter Eriksson sums it up neatly: To suppliers I say this: we can offer you a great platform to present your offer: come and challenge us! Dermot Davitt, Editor Contents 4 Introduction 6 Is travel retail the black hole for luxury goods? 10 The critical airport viewpoint 18 Fashion in the Middle East: a niche but growing category 21 Best practice 1: Runway Sunglasses, Moscow Domodedovo Airport 27 Best practice 2: InterBaires, Buenos Aires Ezeiza Airport 30 Best practice 3: 5th Avenue, Tokyo Narita Airport 33 Best practice 4: SkyPlaza, Hong Kong International Airport 34 Analysis of a fashion tender: Singapore Changi Airport 36 The supplier viewpoint: soundbites from the world s leading brand owners 40 Inside the consumer mind: fashion at Asian airports 4 The Moodie Report

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6 May 2007 CATEGORY INSIGHT Fashion & Luxury Is travel retail the black hole of the luxury market? This was the searching question put by Luxottica Group Worldwide Duty Free Manager Martha Rosas at the recent Trinity Forum in Dubai. She questioned whether airports, concessionaires and even brand owners are really maximising the luxury goods opportunity at airports, and in this in-depth feature we present edited highlights of her presentation. We also sought the views of airport authorities and retailers, and asked what they were doing to enhance the attraction of the pivotal luxury goods sector to their consumers? Their responses feature in the pages that follow. Luxury is a very difficult word to define. What springs to mind when we think about luxury? Indulgence, pleasure, comfort, reward? Luxury seems to be one of our customers favourite distractions. In some cases it is an urge, a desire to break out of the daily routine. Martha Rosas: We are in serious danger of taking the luxury sector for granted But in my view we are in serious danger of taking the luxury sector for granted. We have come to expect a vast assortment of luxury goods when we travel. The very presence of some of the world s most exclusive brands enhances any airport we visit. However, these brands need to be more than just expensive airport decorations if we are all to maximise the revenue opportunities. Our approach to this category needs to reflect the highest of standards, as befits luxury brands. But is travel retail the black hole of the luxury market? Why do I say this? The luxury market is frequently misunderstood and is certainly not clearly defined. I recently asked three different people for a definition of what they understood to be the luxury market in travel retail. I received three very different answers. That makes analysis of the luxury market much harder than of traditional categories such as liquor, tobacco, fragrance and confectionery. When we talk about the luxury market, what do we really mean? Watches, 6 The Moodie Report

7 May 2007 CATEGORY INSIGHT Fashion & Luxury sunglasses, handbags, pens, clothing: what do these items have in common other than a high price? We need to be careful that the luxury category is not just a collection of disparate, expensive brands. According to Generation, luxury goods account for some 36% of the total duty free and travel retail business, or US$9.7 billion. That is double the size of liquor s share, and +25% larger than perfumes and cosmetics. Those are huge numbers, but they cover a huge range of products. To understand the luxury market better, perhaps we need to understand what is happening in the domestic markets. It shocked me to see that 35 European and US companies control 60% of the total luxury market. And that luxury apparel is growing faster than mass retailing. However, some of the most interesting research I found recently suggested that the store environment is more important to the purchase decision than the brand or designer the consumer is looking at. So, if the environment is not right, we re not exactly giving ourselves the best of starts. And, beyond the environment, we need to make sure that the right styles and designs are on display, and are available. Given the right conditions, consumers are willing to spend big money on luxury products. They want real value, and value doesn t necessarily mean the cheapest. Are we maximising the opportunity? Sometimes, yes. Many regions have downtown duty free stores that are more than a match for the best domestic high street shops. Look at DFS Galleria in Guam or Okinawa, Lotte in Seoul or King Power in the heart of Bangkok. By contrast, we need to look long and hard at what we are doing at the airports. The industry is missing something. We need to review every element of the sales and marketing mix. How is each category merchandised, and how does each flow into the next? We need to have better informed discussions with retailers about how much space and more importantly, how much quality space is allocated to luxury products. We need to invest in better market research and better consumer understanding so that we can grasp the huge opportunity that exists. We need to become much less protective about the information we have: from flight schedules to fashion trends to consumer attitudes, from sales data to supply logistics data. We need a spirit of cooperation between all parties if we want to grow the overall size of the luxury sector. But there are also some issues that luxury faces that are more complex than those faced by other categories. There is the issue of range and stock levels in airport shops. Fashion inevitably comes and goes, and new collections are the lifeblood of our business. I don t underestimate the logistical issues that shops face in securing the right stock level of sizes and styles: if the item is not available, the sale is missed. However attractive the store environment, the customer can still be frustrated by not being able to find the right product. Apart from convenience, do we really give customers enough reasons to buy at the airport? How well do we communicate with customers before they travel, if at all? Do we really expect luxury purchases at the airport to be impulsive? Do we reassure customers enough about aftersales service? What happens if something goes wrong with the purchase? All of these elements need to be addressed to give consumers confidence to shop at the airport. What do we know about consumer attitudes? What are they looking for and what are the key factors in their purchasing decisions? Did you know for example that 90% of Tokyo women in their 20s own a Louis Vuitton bag? Most of these purchases are way out of proportion to their incomes. It s just one example of how luxury brands indicate one s place in the pecking order. Asian women will buy entire outfits copied straight from a magazine, including bags and shoes, and store them together so they know what fits with what item. The point is: we need to understand the consumer as we have never done before. The Moodie Report 7

8 May 2007 CATEGORY INSIGHT Fashion & Luxury Exceptions to the rule: DFS Galleria Okinawa (left) and King Power s Bangkok downtown duty free complex (right) are more than a match for the best in high street retailing, says Martha Rosas From TFWA s excellent research into the Japanese traveller in 2006 it s becoming clear that these shoppers are increasingly doing their shopping at home. They no longer regard saving money as a key driver of buying in duty free shops. They place a high premium on excellent personal service and being addressed by name, as well as finding a guarantee of the authenticity and workmanship of the brand they are buying. These same customers seek the very highest standards when they travel. It s interesting that downtown duty free shops account for the majority of duty free sales of clothing and leathergoods, reflecting again the importance of environment in the purchasing decision. We must therefore ensure that our staff are trained to the highest standards. We need to make the experience so good that customers enjoy spending their money. Consumers are driven by different motivations: the latest fashions, perhaps saving money, certainly buying items they can t buy at home plus of course buying gifts, and treating themselves. Each sector of the market needs to better understand the customer s travel mood. We can t only rely on shopping patterns in domestic markets for guidance. For many people airport shops are more accessible than Bond Street or the Champs Elysées. Airports can provide an avenue for them to experience luxury brands that would otherwise be closed. So, for each of the members of the Trinity, I have a question. First, for suppliers: are we giving the right tools and information to our clients to excel in luxury product management? Are we really working to become true partners, so our clients achieve the results they want? Are we providing the right products for travel retail? Airports: are you dedicating the right space and environments to luxury products? Are we giving you adequate information on which to base those decisions? Retailers: do you really have the products your customer requires? Are you creating a pleasant and appropriate shopping experience for your clients? Do you have enough consumer insight to make those buying decisions that much easier? This industry has a marvellous array of luxury brands to sell. The Trinity needs to ensure that the consumer has an experience that is second to none, and that embraces everything from environment, atmosphere and service to the merchandising and product offer. Allow luxury brands to express themselves in travel retail: we will all enjoy the results! 8 The Moodie Report

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10 CATEGORY INSIGHT Fashion & Luxury May 2007 The airport viewpoint

11 May 2007 CATEGORY INSIGHT Fashion & Luxury A showcase for brands: Frankfurt Airport prides itself on its fashion and luxury portfolio (facing page and right) In the second part of this special feature, airports and retailers respond to the challenge laid down by Luxottica Group s Martha Rosas addressing the critical issues of space, environment and range for fashion and luxury goods. Far from being a black hole for luxury goods as argued by Luxottica Group Worldwide Duty Free Manager Martha Rosas (pages 6 8) many airports insist their retail environments stack up well against any in the world as showcases for brands and drivers of penetration and spend. Not only that: fashion and luxury will play an increasingly important role at many of the world s major airports in the future. That s the overwhelming view of airport authorities we spoke to following the ACI Airport Business & Trinity Forum, at which Rosas called on all stakeholders airports, retailers and brand owners to give luxury goods the time, effort, space and merchandising they deserve. Not surprisingly, many airports claim that their commitment to the business is strong. But they back up this assertion perhaps more surprisingly by insisting that the luxury goods offer helps to establish an airport s credentials in the minds of travellers. In short, it is part of the airport s identity. German hub Frankfurt is one such airport. Fraport Senior Retail & Properties Manager Christian Sültemeyer says: Fashion and accessories have a big impact on Frankfurt Airport s image as a retail location. It s also an integral part of the commercial revenue that is generated at our airport. The current retail space is about 3,600sq m (including corners within duty free stores for luxury accessories, luggage, jewellery, watches and sunglasses). This space is dwarfed by that devoted to other categories, but it illustrates the potential to increase the space available for fashion and Frankfurt Airport has firm plans to do just that. At Frankfurt total retail and F&B space will increase by some +50% by 2008, to 33,550sq m, with generous space allocated to fashion. But it s not just a question of adding space. It s basically about more space in the right location, says Sültemeyer. The airport has shown its fashion credentials by developing fashion-led marketplaces in its Shopping Avenue and Shopping Boulevard, both of which opened in Now it s preparing to take the next step forward. We re working with interior design architects to give our marketplaces a more combined, unique and friendly appearance, he says. The first results are the new Shopping Avenue and Shopping Boulevard, and the next results will be visible in Terminal Two in We are trying to create a more segmented concept mix, to give brands the environment they need and avoid culture clashes wherever possible. Frankfurt differs from many other airports in that it prizes its strong landside offer, which attracts visitors from the city and region as well as travellers. It already boasts brands such as Hugo Boss, Tumi, Montblanc, Porsche Design and H Stern among others; future landside stores will include a new stand-alone Porsche Design outlet, Burberry and a new Montblanc store. The Moodie Report 11

12 CATEGORY INSIGHT Fashion & Luxury May 2007 Celebrating diversity: high-end fashion is crucial to the mix at Singapore Changi, and to retailers such as King Power, but mid-priced brands play an important role too At Singapore Changi Airport the focus on fashion is traditionally strong, but it s not limited to luxury or global brands. Civil Aviation Authority of Singapore Director (Commercial) Lim Peck Hoon says: Our passengers are well travelled so it s important that we don t just offer them what they find everywhere else around the world. We want to introduce local brand names and unique concepts that you won t see commonly outside Singapore. For example we have Raoul menswear, Charles & Keith ladies shoes and Chomel jewellery. These are all homegrown concepts you don t find elsewhere. for S$10, says Lim. The wide range of souvenirs, gift items and fashion accessories has proved to be extremely popular with our growing numbers of foreign passengers, especially Filipinos, Thais and Vietnamese. The mix of mid-priced brands and luxury are part of Changi s pledge to cater to a range of tastes, and it s also central to the airport s commercial identity. In terms of price points we offer luxury brands such as Hermès, Gucci and others. Plus we cater to the midpriced range with brands like Giordano and Levi s. The same mix will prove a critical element in the new T3, which opens in early 2008, and where fashion is expected to act a big drawcard for passengers. Changi s Budget Terminal carries a fashion element, too, carefully tailored to the passenger profile. We recently introduced a Gifts and Accessories shop, which has a strong value proposition with, for example, three items Luxury Ventures new Changi T2 store epitomises the high-end look that appeals to Asian passengers 12 The Moodie Report

13 series: fairy wings model: liv tyler shopfinder:

14 CATEGORY INSIGHT Fashion & Luxury May 2007 Identity is also important at Zürich Airport s Airside Center, where The Nuance Group is the key tenant. Unique Zürich Airport Chief Commercial Officer Marketing & Real Estate Peter Eriksson says: The fashion category is extremely important at Zürich. It generates commercial revenue for all stakeholders, but even more important is that it improves the shopping experience for our consumers. It s an opportunity to differentiate the retail environment from the domestic market, he says. And the strategy appears to be working: fashion has been the fastest-growing category at Zürich for the past two years. That s partly because the airport encourages both retailer and brand to shout about their offer not just in the stores, but as the passengers begin their journeys. We have a strong promotional strategy to use the power of the brands to entertain passengers through promotions, as well as to increase sales, says Eriksson. But our publicity strategy offers a platform for special promotions at travel agencies and at check-in too. It s a key point and one echoed at the Trinity Forum, not only by Martha Rosas, but also by other suppliers. Communicating with the passengers before they reach the terminal completing the travel chain should be as much a part of the sales strategy as in-store promotions. It s a message airports are beginning to take on board. Many airports insist they are addressing the space issue, too. Fashion s place at Changi Airport T3 is crucial; Frankfurt is pledging more retail space from next year; and both terminals at Hong Kong International Airport offer a diverse and impressive range of brands and stores. Zürich Airport plans to add a further 4,000sq m of space landside for fashion, with additional space to be confirmed airside. Zürich Airport plans to add to its already impressive fashion offer with a further 4,000sq m landside, with yet more planned airside 14 The Moodie Report

15 May 2007 CATEGORY INSIGHT Fashion & Luxury Hong Kong highlights: Nuance- Watson (Hong Kong) boasts an enviable fashion and luxury goods range at Hong Kong International, trading from boutiques (pictured are Bags Unlimited, Calvin Klein and Bally) and The Atrium duty free store At Athens International, too, fashion and luxury goods are part of the fabric of the commercial offer, and are demanding a great share of space. Athens International Airport Consumers Unit Director George Eleftherakos says the sector s attraction is confirmed by its popularity in the many shopping surveys the airport undertakes. In 2006 fashion accounted for 15% of total retail sales (including duty free) at the airport. And that share is set to rise. We are currently in discussions with the respective concessionaires about some concept and brand changes and upgrades that will make the fashion offer in our airport even more attractive, says Eleftherakos. Further to that, we re examining the expansion of the commercial space of our airport in the medium term. Although it s still at a preliminary stage, we are already considering allocating a good share of the incremental space to the fashion category. Although the commitment of these airports is clear, how each one approaches the retailing and presentation of fashion differs often widely. Yet all recognise the value that the brands bring to the airport as a global meeting point. The product brand should be the brand of the store, says Fraport s Sültemeyer, words that will be music to the ears of many a brand owner. We don t agree with the generic approach of other airports. The clear message here is brand before category with the exception of the duty free stores where luxury accessories are in branded corners or shelves under one roof, and benefit from the penetration of the core duty free categories. Brand owners also have a welcome variety of options in The Moodie Report 15

16 R The Moodie Report BRIC Edition In-depth analysis of the world s most exciting travel retail markets - Brazil, Russia, India, China DEM E P OG RES Published: September 2007 For further information contact Martin@TheMoodieReport.com

17 May 2007 CATEGORY INSIGHT Fashion & Luxury Frankfurt s premium fashion space. There are the traditional shelves or corners within the general merchandise store, but brands can also find a home at the many multibrand fashion outlets dotted around the airport. They can also work through a stand-alone franchise with an airport retailer, or they can operate the stores themselves. The trend, says Sültemeyer, is increasingly towards this final option with brands deciding the best way to maximise their presence is to retail the space themselves. But whether the space is self-operated or managed by a concessionaire, where is the market heading, and what challenges do airports see ahead? High-end luxury will be vital, say most, but if there s one word that sums up the vision for fashion of airport commercial managers we spoke to, it s diversity. The luxury and mid-market brands are growing steadily, says Eriksson. Sunglasses is a never-ending success story. I also believe that the sportswear market as well as low-priced fashion has great growth potential and these are still not given enough attention from brands, retailers and airports. Accessories at high, medium and low prices offer another segment for growth. Basically the whole category (except perhaps children s fashion) can and will grow. And a focus on merchandise from the local/national market will give airports their own identity. Above: Sunglasses is a never-ending success story, says Zürich Airport s Peter Eriksson, exemplified by Nuance s Suncatcher outlet; Below: Fashion is demanding a great share of space at Athens Airport, says Consumers Unit Director George Eleftherakos The increasing affluence of the passenger profile is another key issue, adds Frankfurt s Sültemeyer. It s a premium audience that we see departing from major airports, and that clear trend leads us to develop the premium and luxury segment, he says. On the other hand we always have to find an accurate offer for all passengers. Fashion and accessories are not as price-driven as other segments of the market, which is why we don t work with discounts other than the tax free savings at our airport. Changi Airport wants brand owners and retailers to deliver the wow factor when demanding space. We re looking for something special, says Peck Hoon Lim, something different in terms of shop design, distinctive features or valued-added elements especially for the new T3. We want world-class brands, new retailers and new concepts, particularly brands that are not currently represented in airports, but which share our vision, to join us. The airport as a brand building arena is second to none, argue the airports in our survey. Our airport is a shop window to the world, says Sültemeyer. Frankfurt has more than 50% transfer passengers, meaning that we connect the world in the truest sense of the word. Not only is an airport like Frankfurt a significant turnover driver for big brand names, it is also a stage to perform and show your product lines. We strongly believe that airport shops create brand awareness and brand value. Eriksson agrees, but asks some probing questions of brand owners too. I d like to see a more proactive stand from the brands to the airports, he says. Of course we airports must be more active and talk to brand owners but I d like to see more initiatives from suppliers. To suppliers I say this: we can offer you a great platform to present your offer come and challenge us! The Moodie Report 17

18 CATEGORY INSIGHT Fashion & Luxury May 2007 Tailoring the mix By contrast with the boutique approach of many Asian and European airports, fashion and accessories still have to fight for every inch of space in the world s fastest-growing duty free market, the Middle East. The Moodie Report spoke to Dubai Duty Free and Abu Dhabi Duty Free about their attitudes to fashion, which is a small but increasingly important part of the sales mix. By Dermot Davitt. The spectacular growth of Middle East duty free has been one of the industry s defining trends of recent years. It s a phenomenon that has largely been built on the product categories of beauty, liquor and confectionery, with a healthy contribution from gold and electronics. Fashion, though, has featured only fitfully in the great Middle East success story. At Dubai Duty Free (DDF), ladies fashion and accessories, men s fashion and accessories and handbags and leathergoods were each less than 1% of the sales mix in At Abu Dhabi Duty Free (ADDF), fashion represents just 3 4% of sales. But although fashion and its various sub-categories are still small in revenue terms, they are growing in importance to both retailers. At DDF, ladies and men s fashion and accessories have grown by +55% and +77% in the first quarter of 2007 compared to 2006, a result hailed by DDF Purchasing and Research Manager Sharon Beecham as a great result, exceeding passenger numbers, shop trends and budgets. Leathergoods has grown by a tremendous +108% in the same period, while sunglasses now with its own store has surged by +28%. Dedicated areas for Hermès and Swarovski continue to generate double-digit sales increases, adds Beecham. Hugo Boss sales grew by +141% in Q1 and both Lacoste and Paul Smith have doubled sales in the same period. Leathergoods are thriving, with exceptional sales of Ferragamo, one of our newest brand partners. The brand is trading well beyond our expectations in the first seven months. This all follows the refurbishment of the 395sq m main fashion area at DDF in 2006, and precedes the even more exciting opening of Concourse Two at Dubai International Airport later this year. That will present new opportunities for fashion, leathergoods and sunglasses, says Beecham. We have completed the initial planning stages and we re looking forward to expanding the ladies and gents fashion and accessories offer in terms of brand mix and range. The space devoted to sunglasses will allow further development for the category, with new brand introductions and a concentration on designer brands. ADDF has been placing greater emphasis on fashion since it introduced its own brand Vespucci last year. But that s only the start of a drive to grow the business, says General Manager Niveen Ibrahim. Our fashion department will undergo a massive 18 The Moodie Report

19 May 2007 CATEGORY INSIGHT Fashion & Luxury Future core category? Fashion is still a tiny part of the sales mix at Dubai Duty Free, but sub-categories such as ladies and men s fashion and leathergoods are showing phenomenal growth refurbishment in three months from now, she says. We have grouped new fashion brands in a concept that is new and fresh, not only for the Middle East but for travel retail in general. We will group the best of the best in this category, and present them in a very elegant and exclusive concept. Full details will emerge shortly, but Ibrahim says that innovation was the watchword when planning the new space. It s important that passengers don t get bored of seeing the same brands everywhere in the same environment. The challenge is to create a truly different environment, and that s what we plan to do soon. Space though will always be a major issue for fashion at Middle East airports. The comments of Luxottica Group Worldwide Duty Free Manager Martha Rosas at the Trinity Forum in March (pages 6 8) struck a chord with Niveen Ibrahim. She says: What Martha said is 100% right. Fashion is one of the most difficult categories to present in the right environment at airports, and it needs special understanding from retailers and the brands themselves. Luxury brands should be present but retailers have got to be honest with themselves, and base the space they dedicate to fashion according to the percentage of customers who are interested in those brands. It s a difficult equation, trying to tailor the correct offer to the customer profile. It requires an understanding from brands that they are represented in a different way in every airport. In a country like Japan with a population of 127 million people, and with 30 million passengers a year it s acceptable that the brands insist on space for their boutiques at Tokyo Narita. At Abu Dhabi Airport we had 5.5 million passengers in We simply can t offer high-end fashion brands the same space. ADDF has a proud track record of retailing fashion brands beginning in 1994 it introduced names such as Hermès, Bally, Ferragamo, Gucci, Hanro, Hugo Boss and Givenchy to regional duty free, and it also established corners for Versace, Nina Ricci and others. Yet the environment didn t suit all of those brands, nor did all fit neatly with the airport s customer profile. Of those, just Hugo Boss, Salvatore Ferragamo and Givenchy survive at Abu Dhabi, while Burberry and Bvlgari have since established themselves as key brands. Crucially the nature of the consumer in the Middle East differs from other regions. Martha said in her presentation that 94% of Tokyo women own a Louis Vuitton handbag, says Ibrahim. This percentage would probably be only 10% in the UAE for instance. Not every woman wants, or can afford, to buy luxury brands. Our aim is to cater to the needs of all our customers, whether they want to buy [powdered drink] Nido or Bvlgari, whether they travel economy or business class. So if only 10% of our customers are interested in highend fashion, we ll cater to their needs without allocating The Moodie Report 19

20 CATEGORY INSIGHT Fashion & Luxury May 2007 half our space to brands whose strategy is to retail through boutiques. So how do these leading regional retailers see the future of fashion at their airports? DDF, says Beecham, recognises a lot of potential in high-end leather brands and mid to highend ladies fashion and accessories. She adds: We plan to add to the portfolio of men s fashion brands, and sales of Akaru, our own brand, are evolving successfully since its launch some years ago. The range includes pashminas, men s suits, ties, cufflinks, jewellery, sunglasses and seasonal ladies fashion ranges. Owned-brand fashion retailing is also one of the platforms on which ADDF plans to raise the profile of the category. The retailer s fashion and lifestyle brand Vespucci, launched in 2006, is already the best-selling fashion brand, with 20% of sales at the Gifts International store. Turnover in year one is estimated to hit AED2.5 million (US$680,000 at current exchange rates), with US$1 million budgeted for year two. The only fashion brand to achieve even half of these sales levels is Bvlgari. Niveen Ibrahim (far left) and Sharon Beecham both believe fashion can play a bigger role in Middle East duty free It s a remarkable success story, and one that is still in its first chapter. We ll soon be revealing the new Vespucci boutique design from Portland at ADDF, says Ibrahim, which will be a new start for the brand. It will be state of the art. Once it s introduced we will be ready to roll it out in travel retail and in domestic markets. European travellers are Vespucci s biggest customers but there s interest among Arabs, Indians, Americans and Asians too, says Ibrahim. We have had interest from department stores in Saudi Arabia and the UAE, and another major European retailer is also interested. But Vespucci is not the only growth area in ADDF s fashion department. Mid-market fashion brands are growing very fast in travel retail, especially those like Mango and Zara, says Ibrahim. Those brands have got huge potential in travel retail, and they should be encouraged. Although sportswear isn t a large sector, sports shoes are a popular purchase at ADDF, while children s fashion is essential, adds the retailer. We have just introduced a children s fashion range it s doing well and growing very fast, says Ibrahim. We have major plans for this department, which will be revealed when we announce shortly our final plans for Terminal Three. Fashion therefore has a firm place in the future of Middle East airport retailing, yet the message from retailers is clear: brand owners need to temper their expectations for additional space, given the current demands and purchasing habits of the region s travelling consumers. Vespucci's voyage: Abu Dhabi Duty Free s house brand is already the retailer's best-selling fashion brand, with 20% of sales at the Gifts International store Importantly, though, the business is generating huge growth at some key airports from relatively limited space, and retailers are giving fashion a firm commitment for the future. It may not be long before fashion becomes much more than a niche category in Middle East travel retail. 20 The Moodie Report

21 May 2007 CATEGORY INSIGHT Fashion & Luxury Sunglasses retailing takes off with Runway In preparing this special report into the fashion and luxury goods market, we canvassed supplier opinion about the retailers who stand for travel retail excellence. In a poll of sunglasses suppliers, Aer Rianta International s Runway Sunglasses outlet scored highly as an example of best practice. Mary Jane Pittilla finds out why. Location, location, location. That mantra, so beloved of the property industry, holds just as true in retailing. It is certainly the case for the Runway Sunglasses duty free outlet at Moscow Domodedovo Airport, which emerged as an example of retailing excellence in a straw poll of selected sunglasses suppliers carried out by The Moodie Report. The store caters to a hard core of Russian passengers hungry for the latest fashions and who think nothing of buying three or four pairs of sunglasses each year. But it s not just location in a fashion hotspot that matters, of course. There are many other elements in the mix that make for a great store not least the knowledge and expertise of its buyers and sales staff. So far this year the Runway business has doubled its sales compared with It has just celebrated one of its busiest periods ever, selling 2,000 pairs of sunglasses in April alone an all-time monthly record for the retailer. The Moodie Report spoke to Aer Rianta International Regional General Manager John Moriarty about why and how the store has achieved the ultimate retail accolade a store that shines out in its merchandising display, product selection and, critically, turnover. What is the location and size of the Runway Sunglasses store in Moscow Domodedovo? The store is 22sq m in size in the main Gallery area of the airport s International Terminal. Along this Gallery there are eight airbridges leading to an area of two floors (a third will open within a month) where there are a further The Moodie Report 21

22 CATEGORY INSIGHT Fashion & Luxury May airbridges and gates. Most passengers have to walk through the Gallery to get to their gates. Who is the main buyer for this store? Maria Rastvorova is our specialist buyer for sunglasses here in Domodedovo, and she is helped by Alan Magan, our Retail Manager, and John Kilmartin, our Operations Manager. At the Aer Rianta International head office in Ireland Martin Waldron is the Group Buyer for sunglasses, so there is a strong team looking after this important category for us. I d guess that, between the four of them, they have about 45 years of expertise in sunglasses buying. How many members of staff does it have? What are the opening hours? The store is open 24 hours a day, with three sales staff on each of the four shifts. What do you think are the highlights of the store? The store is very striking and is really in your face. It is laid out as a six-metre back wall unit with two floor units in front. It is open from all sides, is bright and has a large variety of sunglasses on display. Considering that the store is on a wall that is against the passenger flow it is actually behind you as you walk through to the gates we are extremely happy with the actual penetration and sales from this store. Furthermore, I also have to say that one of the highlights has to be the staff we have trained staff giving quality customer service, and they actually love what they do. Who are your core customers, and how do you target them? Our core customers are definitely Russian nationals. This comes from their desire for branded products and accessories. Both men and women are very fashion-conscious here, though probably women buy more. Our customers are those who see sunglasses as a fashion item and will regularly buy three to four pairs per year. We began targeting these customers last year with a sunglasses billboard placed about 400m from the airport, followed by a large lightbox after security, followed by three small lightboxes on the actual store frame, all featuring the same generic image of a woman wearing sunglasses. We definitely believe that this led not just to the image being recognisable for passengers but also encouraged them into the store and helped to drive sales. Furthermore the price saving as compared to domestic Moscow prices is about 30 35%. John Moriarty (right): The store is striking, open and bright it is really in your face 22 The Moodie Report

23 May 2007 CATEGORY INSIGHT Fashion & Luxury Captured by the glare: ARI has heavily promoted the Runway store, using the same generic image of a woman wearing sunglasses around the airport; and the results show that it s paying off Do you have specific branded areas? What visual merchandising techniques do you employ? Late last year we developed a new back wall unit for the store with Umdasch of Austria. This unit has the product displayed on lockable rods with pull-out vertical drawers of 500mm each that also give good storage space behind each drawer. Each brand is allocated a minimum of one rod, which holds 17 models. We use lockable rods as an anti-theft device, as the store is quite open. The sales girls move around the store and ensure everyone is served. What are the best-selling brands in the store? The best-selling brands so far this year are Gucci, Givenchy and Dolce & Gabbana. In total we offer 24 brands and about 408 models. We would love to have Chanel sunglasses but they are not available for the duty free market. It s a big pity as we are constantly being asked for them. Do you offer any travel retail exclusive products that are not available in any domestic market? Most brands have the same ranges for both domestic and duty free, but De Rigo does have specific products for travel retail and we do carry a large percentage of those products. [De Rigo is the sunglasses manufacturer for major fashion brands including Givenchy, Escada, Police, Guess, Loewe, Gant and Jean Paul Gaultier.] Do you give staff training in selling sunglasses? Training for sunglasses is given by the suppliers once, sometimes twice, each year. The training consists of the main selling techniques based on face shape, caring for The Moodie Report 23

24 CATEGORY INSIGHT Fashion & Luxury May 2007 Secrets of success: good buying, getting stocks early and, above all, excellent staff are paramount the sunglasses, and the differences between and benefits of alternative lenses. We ourselves also do in-house training, covering sales skills and customer service, which is a must for selling products such as sunglasses. We incentivise the sales girls and give them specific targets they get a bonus for reaching the target, and they do reach it, even when it s a high number. We have a very strong sales force. Do you have an aftersales service? Should a passenger/customer have a problem with their sunglasses we will always do what we can to remedy any difficulty. Service before or after the sale, it doesn t matter, making and keeping the customer happy is what counts. That is what will bring them back time and again. Please tell me about any promotions you have run. Were they successful? What worked well? The only supplier promotion was a free T-shirt (left) with every pair of Police sunglasses and we saw a +300% increase in sales. We held the promotion in autumn 2006 for two months. The sales girls played a huge role in the success of this promotion. We also had a showcard by the cash register explaining the offer. I keep saying to suppliers that it s great to have gwps, and we d like to do more promotions. We also run internal promotions/incentives with the staff where we give them specific sales target to achieve, and I m happy to say that they nearly always break the targets. One supplier told The Moodie Report that the 24 The Moodie Report

25 May 2007 CATEGORY INSIGHT Fashion & Luxury Runway Sunglasses fact file Outlet size: 22sq m Number of staff: three staff on each of four shifts Opening hours: 24 hours a day Store buyers: Specialist sunglasses buyer Maria Rastvorova, assisted by Retail Manager Alan Magan, Operations Manager John Kilmartin and Group Buyer for sunglasses Martin Waldron Brands sold: About 24, including best-selling brands Gucci, Givenchy and Dolce & Gabbana, plus Police, Escada, Silhouette, Emporio Armani, Chopard, Zegna, Christian Dior, Loewe, Adidas, Roberto Cavalli, Hugo Boss, Giorgio Armani, Oakley, Moschino, Ray-Ban, Swarovski, D&G, Prada, Versace, Polo Ralph Lauren, Bvlgari, Killer Loop, DKNY, Tom Ford, Burberry, Diesel, Prada Sport and Miu Miu Runway Sunglasses complements ARI s strong portfolio of Runway shops at Moscow Domodedovo Runway store does huge business. Can you quantify that further? We will sell on average about 1,100 1,200 pairs of sunglasses each month this year. That s over the course of a year, so you will appreciate that, in the peak months, the figure is a lot higher. We have three peak times, starting with the New Year holidays. Russians leave for their holidays just before the New Year, on 28/29 December, or just after, on 2/3 January. They go to the ski resorts and need sunglasses to wear. Secondly, the May holidays: this year 1 and 9 May are holiday dates, so Russians might take one or two weeks holiday over this time. Thirdly, we have the summer holidays in July and August, when we get a lot of families with kids. We offer a few children s sunglasses. Another good time for us is September, when the kids have gone back to school and we get people with more disposable income. Why do you think it is so successful? There are a number of reasons good buying for a start, getting the product early in the season (before some of it may arrive on the domestic market) and, after that, it really does come down to the staff. Remember that the product is on lockable rods, so the staff have to open them for the customer this gives them the initial opportunity to start their sales pitch. Sunglasses, whilst being a fashion item, are very personal for Russians and it is important that the customer gets good and correct help and feedback when trying them on and making a decision to buy. Having quality staff certainly makes the difference. What are the keys to successful sunglasses retailing in your opinion? Having a good rotation of models and holding a wide variety of colours for each, experienced staff, and a store with a simple but effective layout. And we change the styles on display frequently. Can you give me some examples of how you work well with suppliers? All our suppliers receive their respective sales (by reference/sku) on a monthly basis. Regular discussions are also held with them concerning order fill rates and on the sales and ranking for each brand. Obviously we discuss all aspects of the sales and development of our sunglasses business as a whole when they visit the store. De Rigo and Silhouette are among the great suppliers to work with, for their proactiveness in all aspects of developing the business. As a general comment, the suppliers need to give some thought to what the customers want, and then the retailer should develop the business by incentivising staff. The Moodie Report 25

26 APRIL 07 FAST, FACTUAL, FREE A partnership between Hosted by Platinum sponsors Gold sponsors Lunch sponsors Sponsors Official carrier WEDNESDAY 8 MARCH 2006 FAST, FACTUAL, FREE PERSONALITIES OF THE WEEK This week s edition comes from Abu Dhabi, home of ACI s Airport Service Quality conference. It was a good conference built around an important and too often overlooked theme. Jaehee Lee, President & CEO, Incheon International Airport But the highlight of the event was the annual AETRA awards, a consumer-voted scheme COLM MCLOUGHLIN: THE DUBAI Corp: No wonder that asks passengers to assess airports via a range of criteria including staff courtesy, airport DUTY FREE MANcleanliness, clear directional signage, ground transportation and parking. Others include AGING Mr Lee DIRECTOR looked service offerings such as shopping, dining, telecommunications and computer services. THIS happy WEEK on Monday ANNOUNCED night. His airport A Too many of the award schemes in this industry are little more than an excuse for the NEW had just DAILY won SALES every organisers to make money. One retailer told me this week he had been presured to buy RECORD accolade OF going in an advertisement simply for being nominated for an award an abhorrent practice. Our US$4.9 ACI s annual MILLION, advice? Just say no. But the AETRA awards are different they re run with impeccable POSTED AETRA awards ON THE neutrality and sound methodology on a RETAILER S including Best 22ND Airport ANNIVERSARY. Worldwide. Deserved A PERFORMANCE recognition for SOME INSIDE THE MOODIE REPORT non-commercialised basis and, most WHAT More than money at Sharm El Sheikh... 7 importantly, are voted by that most +57% an airport AHEAD that OF puts THE itsprevious The AETRA results in full... 9,10 critical of judges, the consumer. 24-HOUR customers RECORD. first every time. Find those Irishmen Stop Press: DFS in major Macau deal It was no surprise then that Asian airports Halifax International Airport swept the board, taking the top four President and CEO Eleanor places in the Best Airport Worldwide category. And at the top of that league was Seoul Humphries: Humble Halifax no Incheon Airport, the outstanding South Korean gateway that is such an impressive contrast to its much-maligned predecessor Kimpo. The Korean contingent were understandably ecstatic but the most popular winner was Canada s Halifax International Airport, a Scotia, Canada air- longer. The Novia minnow that swam with the big fish in the Americas and left them all trailing in its wake. port headed off all its rivals, big and This year s passenger survey is the last under the AETRA name. Since January 2006, small, in the Americas as well as being ACI has offered a revamped programme under the name Airport Service Quality (ASQ). ACI expects to reach 100 participants by year end. It s an ambitious scheme and a laudable one. We think ASQ is set to become a crucial acronym in this business. voted Best Airport Worldwide With Less Than Five Million Passengers at the AETRA awards. THE MOODIE REPORT DATA ROOM TRAFFIC NEWS of China (CAAC). The total number of passengers using the country s airports rose by +17.5% to million. Aircraft movements grew +14.7% to 3.1 million last year. Airports in three major cities Beijing, Shanghai and Guangzhou handled 37.3% of total air passengers. And here s a telling statistic the number of airports with annual passenger traffic of over a million stood at 42, three more than a year earlier. China has 135 airports in 133 mainland cities (excluding Hong Kong and Macao). By 2010 that figure is set to soar to 186. In related news, Chinese airlines carried 138 million passengers (including domestic) in 2005, up +15.5% year-on-year, according to the CAAC. It expects passenger traffic to grow at an average of +14% a year through 2010, and then slow to +11% annually from 2011 to Talking to the Wall Street Journal Asia, a CAAC official said he hoped that at least three Chinese airlines would break into the ranks of the world s ten largest carriers by China s largest airline in terms of passengers carried, China Southern Airlines, ranked 11th worldwide in 2004, according to IATA. China s next two The Moodie Report is published by Moodie International. All rights reserved. Please send any comments or stories to martin@moodie-international.com Page 1 Ed Brennan. Most who have seen the DFS Galleria Okinawa rank it as the pinnacle of DFS and industry achievement to date. But just as we were set to go to press, news broke of the retailer s most ambitious store development ever, in Macau, China. It s a classic case of Hold the front page so we did. Chairman Brennan and his team are understood to be hugely excited about this latest opportunity. Travel Retail Intelligence Editor s introduction: This project has transformed Aldeasa and will continue to transform Aldeasa, says Aldeasa National Commercial Sales Manager Lorenzo de Benito proudly. He s talking about the Spanish travel retailer s elegantly impressive offer at Madrid Barajas New Airport Terminal Four, a facility that has revolutionised the look, capacity and performance of the Spanish capital s hitherto overcrowded gateway. It s a stunning new building, bright, open and airy. Sunlight is an integral element, a natural feature reinforced by the canary yellow colours that dominate the airport and which are mirrored in Aldeasa s vibrant new logo. ISSUE 19 MARCH 2006 Glass walls open the terminal to the runways outside, offering splendid views of the waiting aircraft and the hills beyond. High above the passenger walkways the undersides of the roofs are lined spectacularly with Business commentary and analysis of key developments in bamboo slats a beautiful and wholly unexpected touch. the global duty free and travel The 6.2 billion project will allow Barajas to become Europe s second-busiest retail industry for readers of airport after London Heathrow and the tenth busiest in the world. Having The Moodie Report faced chronic capacity pressures for years, T4 doubles the passenger volume that can be handled at Barajas from 35 million to 70 million, with aircraft able to operate from any of the four runways. It features 470,261sq m of The Moodie Report PLUS is space divided into six levels three above ground and three below. published by Moodie International T4 comprises a main terminal and a satellite building. The latter connects Please direct any comments to to the main facility through a shuttle transport system capable of moving Martin Moodie by 13,000 passengers per hour. Around 11 million passengers a year will use Martin@TheMoodieReport.com the main terminal initially, with a further three million moving through the satellite. Back issues can be found at For Aldeasa, Barajas duty free and travel retailer for the past 30 years, the new terminal offers vastly expanded shopping space. This has allowed the company to develop what it claims to be the widest and most competitive offer amongst all Spanish airports. So let s examine that claim in detail. How it all began...2 The key retail principles...3 The purchasing triangle...4 The Shop...4 Fashion & Fun...5 Les Boutiques...5 Thinking España...6 Spanish pride...7 Published by The Moodie Report I read it in The Moodie Report THE OFFICIAL Workbook DUBAI, MARCH 2007 AIRPORT COMMERCIAL REVENUES - THE BIG PICTURE TALKING TRINITY WELCOME to The Moodie Report. CHINA. International passenger traffic at China s mainland airports climbed +14.1% to reach 30.6 million in 2005, according to the General Administration of Civil Aviation inside this issue Y mucho más Aldeasa brings much more to Barajas Airport s new T4 The WORLD ROVERS The story of the Irish influence on the global duty free industry How it all began: the Shannon story The great East European adventure Changing the face of Middle East airports The retailing pioneers TORONTO PARTNERSHIP EZEIZA ELEGANCE ASQ AWARDS The most respected and widely-read media in the travel retail industry Fast Factual Free

27 May 2007 CATEGORY INSIGHT Fashion & Luxury Ezeiza equals elegance InterBaires new shop at Ezeiza Airport s Terminal A is among the most elegant in the airport retail world. Little wonder it s the brainchild of one of the industry s most innovative retailers, CEO Enrique Urioste. And integral to the development is a focus on fashion all done with inimitable Latin flair. Martin Moodie reports. Passenger numbers may be growing solidly at Buenos Aires Ezeiza Airport, up +12.0% year-onyear for the first two months of this year, but retail sales are spectacularly outpacing those numbers. And what Enrique Urioste, CEO of airport retailer Inter- Baires, describes as an amazing +31.3% increase in turnover is largely being driven by a big push into fashion local and international. InterBaires added some 1,000sq m of space to its flagship outlet, and opened up the entrance so that passengers queuing at immigration can see the shop and then have to walk through it to get to their gates. Then it revamped and increased the offer, particularly by extending the fashion and accessories sector across a range of price points. InterBaires added 1,000sq m of space to its main Ezeiza outlet with fashion and accessories to the fore The Moodie Report 27

28 CATEGORY INSIGHT Fashion & Luxury May 2007 Variety, entertainment, service, contrast: InterBaires fashion range offers something for everyone We were able to enlarge the whole fashion category by dividing the offer very neatly, Urioste says. On the left hand side of the shop you find all the highend brands, including newcomers like Emporio Armani, the Bvlgari full concept shop, Tumi, Montblanc, TAG, Hermès, Ferragamo and Zegna. And on the right hand side you have the mid-priced brands such as Lacoste, Tommy Hilfiger and Colombia. You will see the high-end passenger go to the Armani or the Bvlgari or the Hermès areas, while the other side will be packed with the mass of travellers, Urioste adds. And it s paying off richly. We ve brought additional volume to the shop without damaging the projections of the existing brands. For instance we re targeting US$100,000 of additional business from Armani, without affecting one single dollar of Hermès, Ferragamo or Zegna. And instead of paying lip service to destination merchandise arguably one of the industry s most abused terms InterBaires showcases and sells the best this great, diverse country can offer. And does it with style. A high-end section called Made in Argentina features five types of fashion-driven company, Urioste says, with ticket prices starting at US$80. They are really upscale goods that sell in the likes of Nieman Marcus and Barneys in New York, notes Urioste. 28 The Moodie Report

29 May 2007 CATEGORY INSIGHT Fashion & Luxury Variety, entertainment, service, contrast InterBaires offers something for everyone. We ve been able to create the space and the quality of space that each category and each brand deserves, says Urioste with enthusiasm. What we have achieved is to bring to the airport a real sense of product availability, luxury and temptation. We like to surprise people, enthuse people and bring a touch of Disneyland to people. We like to make them belong to us. With a penetration rate of 34% and rising, more and more of Ezeiza s travellers do indeed belong to InterBaires. The Moodie Report 29

30 CATEGORY INSIGHT Fashion & Luxury May 2007 Narita s fashionable flair Fifteen years ago Narita s airport offer was all about liquor, tobacco and cosmetics. Fashion didn t get a look in. But today it s all change as Narita International Airport Corporation accelerates a concerted drive to grow commercial revenues and at the airport s splendid new Narita 5th Avenue retail mall in Terminal Two, high-end luxury and fashion retailing is taking centre stage. Martin Moodie reports Narita Nakamise: bringing the world s great fashion and luxury goods names to Tokyo Airport T1 30 The Moodie Report

31 May 2007 CATEGORY INSIGHT Fashion & Luxury Roll-call of brands: eight luxury boutiques form the epicentre of 5th Avenue, the stunning new retail complex at Narita Airport Any roll-call of airport fashion retailing now has to include a location that would not have rated a mention five years ago Tokyo Narita Airport. As we detail in our main edition accompanying this Category Insight, the new Narita 5th Avenue embraces the luxury sector in a manner unprecedented in Japanese airport retailing. Eight boutiques Bvlgari, Burberry, Cartier, Coach, Gucci, Hermès, Salvatore Ferragamo and Tiffany & Co form the elegant epicentre of this stunning new addition to Narita s retail offer. Narita Nakamise, opened in Terminal One last year, brought great luxury and fashion brands to the Tokyo gateway; but 5th Avenue does much more. The secret besides well-crafted boutiques is the soft, sweeping curves of the floor layout. Combined with lush carpets and extremely wide aisles, this lends a leisurely ambience to the consumer experience, perfectly in keeping with the brands on offer. NAA Retailing the joint venture between Narita Airport Authority and JATCO runs all the boutiques except Gucci (JATCO) and Bvlgari (NADF a partnership between NAA and ANA Duty Free Corporation). What s also striking about the boutiques is their space and accessibility. None is smaller than 100sq m, and in the case of Bvlgari, Cartier and Hermès they stretch to 160sq m. Several stores have more than one entrance. None would be out of place in the most upscale shopping street anywhere in the world. Nakamise has a very different feel one of a long (very long) shopping strip but once again the quality of the names and the in-store executions lifts the overall impact. From a consumer perspective 5th Avenue is clearly the more relaxing and visually enticing experience. But, even though it s very early days for 5th Avenue from a commercial perspective, both retail offers appear to be flourishing. That s good news not just for the brands, the retailers and the airport but also for Japanese consumers. The Moodie Report 31

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33 May 2007 CATEGORY INSIGHT Fashion & Luxury SkyPlaza focuses on fashion concepts Airport Authority of Hong Kong put fashion first in its planning for the extraordinary new SkyPlaza retail-to-entertainment centre at Hong Kong International Airport. So much so that the 35,000sq m mall includes almost 40 fashion concept stores. Martin Moodie reports. (A full report on SkyPlaza features in our main issue, page 62.) With some 39 fashion concept stores, SkyPlaza has something for everyone. The offer runs from Calvin Klein underwear or jeans to Bijoux Terner s single price fashion and accessories concept; from Louis Quatorze leathergoods to that perennial Asian casual wear favourite Giordano. With the landside area complex targeting the local community and meeters and greeters as well as travellers (including a significant weighting from Mainland China), the thrust of the offer is on accessibly priced lines), bolstered by some premium offers, such as Austrian company Frey Wille s superb decorative art jewellery. It must rank among the most diverse consumer offers in the airport world and it will be intriguing to see which prove to be the big hits among a still evolving passenger base in an unproven location. Airport Authority Hong Kong Commercial Director Hans Bakker and his team plan to monitor progress closely. They ll also be promoting SkyPlaza intensively, ensuring this eclectic, vibrant mix of brands, concepts and services gets the exposure it deserves. Fashion Concept Stores at Hong Kong SkyPlaza adidas: Adidas sports concept AIGLE: Fashionable outdoor sport wear DG Lifestyle Store: Apple products plus lifestyle products Carlo Rino: Ladies handbags, shoes, accessories IZE OPTICAL: Eyewear speciality shop Laosmiddle: Trendy bags and accessories Riccini: Scarves, shawls and umbrella speciality store Super Horse: Stylish stainless steel fashion jewellery Calvin Klein Underwear: Quality undergarments Calvin Klein Jeans: Fashionable casual wear speciality store Ceu & KI*LA*RA: Fashionable casual wear from Japan G2000: Fashionable business and casual wear Gentle: English style casual wear speciality shop Giordano Ladies: Stylish modern office wear for women Giordano Concepts: Dedicated men's and women's casual wear concept Himalaya: Ladies and men s cashmere collection Inbase: Comfort and natural casual wear Kaltendin: Stylish business wear, causal wear and golf wear and accessories for men and women Levi s Store: Super-premium and premium Levi s apparel and accessories Mango/Segue: European style fashion from Spain Munsingwear: Golf apparel store Private Shop: Lingerie concept combined with party dress and night wear Pro Cam-Fis: Outdoor wear shop Futbol Trend: Football apparel concept store Chow Sang Sang: Prominent local jewellery chain s concept store Cyma: Single Swiss watch brand boutique Damas: Fine jewellery brand from the Middle East ENZO: Fine and fashion jewellery Frey Wille: Decorative art jewellery from Austria Solvil et Titus: Single brand Swiss watch brand boutique Swatch: Single brand Swiss fashion watch boutique Bags Unlimited: Multi-brand leathergoods concept Bonia: Leathergoods speciality store Hidesign: Quality leather bags and accessories popular in Europe and US Louis Quatorze: French leathergoods speciality store new to Hong Kong Arnold Palmer SBPRC: Fashion accessories Bijoux Terner: Single price fashion accessories concept KINJI: Stylish casual and evening wear and accessories for men and women SKAP: Casual shoes, belts, handbags and accessories concept The Moodie Report 33

34 CATEGORY INSIGHT Fashion & Luxury May 2007 Tender analysis This edition of Category Insight repeatedly underlines the opportunity that fashion represents in airport retailing. But how much is that opportunity worth to retailers and brands? The answer depends on the airport, the location, the passenger profile and the level of competition. Martin Moodie examines three recent fashion-related bids at Singapore Changi Airport. TENDER A BRAND NAME/CONCEPT SHOP CONCESSIONS (3) Location: Terminal Two Term: Three years from 30 April 2007 Result: Civil Aviation Authority of Singapore (CAAS) awarded these important brand name/concept shop concessions at Singapore Changi Airport Terminal Two to DFS Venture Singapore (DFS Group); Luxury Ventures (Valiram) and King Power International (Hong Kong) respectively. Bidding levels Concession A: DFS will run a Tumi store over 86sq m in space currently held by Luxury Ventures Mercedes Benz outlet. The retailer was the highest bidder for Concession A, offering 30% of Tumi s total monthly gross sales or a minimum monthly guaranteed payment of S$78,000, whichever is higher. Its nearest rival was King Power, representing La Perla, which offered 30% of the total monthly gross sales or a minimum monthly guaranteed payment of: Year 1: S$48,000 Year 2: S$52,800 Tie Rack: a staple of the Changi fashion offer Year 3: S$58,080, whichever is higher. Next highest was Luxury Ventures followed by five other bidders. Concession B: Luxury Ventures was awarded this concession (covering 60sq m), for Mercedes Benz, although interestingly it was not the highest bidder. The highly rated Valiram-owned company offered 22% of total monthly gross sales or a minimum monthly guaranteed payment of S$38,000, whichever is higher. Considerably higher bids were posted by DFS, again with Tumi (30% of total monthly gross sales or a minimum monthly guaranteed payment of S$62,000, whichever is higher), and The Marketing Company (25% of total monthly gross sales or a minimum monthly guaranteed payment of S$45,000, whichever is higher). Then followed nine other bidders. Luxury Ventures also offers Tumi in its anchor fashion store and the award may have been something of a trade-off for allowing DFS to also run a stand-alone Tumi outlet in the same terminal. Concession C: King Power International Singapore was awarded the concession to run a 41sq m Tie Rack outlet in T2. The company, a subsidiary of the King Power Group, Hong Kong, won the specialist brand name/concept shop contract ahead of hot competition from ten other bidders (see financial offers below). King Power offered 30% of total monthly gross sales or a minimum monthly guaranteed payment of: Year 1: S$40,000 Year 2: S$45,000 Year 3: S$50,000, whichever is higher. Its nearest rivals were The Marketing Company, which offered 25% of total monthly gross sales or a minimum monthly guaranteed payment of S$45,000, whichever is higher; and Luxury Ventures, which offered 22% of total monthly gross sales or a minimum monthly guaranteed payment of S$38,000, whichever is higher. 34 The Moodie Report

35 May 2007 CATEGORY INSIGHT Fashion & Luxury TENDER B BRAND NAME/CONCEPT SHOP CONCESSION Location: Terminal One Term: Three years from 1 March Result: The Timberland Company (Asia Pacific) won the three-year contract for a mid-price brand name fashion concession at Changi T1, Departure/Transit Lounge West. Bidding levels: Timberland was the highest bidder of four companies who competed for the business. It offered either 15% of the total monthly gross sales; or a minimum monthly guaranteed payment of S$30,000, whichever is higher. The other bidders were Active World, Jay Gee Enterprises and Market One. TENDER C FASHIONWEAR CONCESSION Location: Terminal Two Term: Three years from 1 January 2007 Result: Luxury Ventures (Valiram Group) was awarded the hotly contested Changi T2 fashion wear concession, heading off strong competition from incumbent DFS Group and Nuance-Watson (Singapore). Bidding levels: Luxury Ventures offered 30% of total monthly gross sales for all non-sale merchandise, excluding watches and jewellery sold within the individual branded boutiques; 10% of total monthly gross sales for all watches and jewellery sold within the individual branded boutique; 10% of total monthly gross sales for all sale merchandise; [ non-sale merchandise is defined as any merchandise sold at full tag price and below a -20% discount; sale merchandise is defined as any merchandise with a -20% or higher discount on the tag price] or a minimum monthly guaranteed payment as follows: Year 1 S$1,200,000; Year 2 S$1,250,000 Year 3 S$1,300,026 whichever is higher. DFS Venture Singapore offered 35% of the total monthly gross sales or a minimum monthly guaranteed payment of S$980,000 per month (US$624,000 at current exchange rates) whichever is higher. Nuance-Watson (Singapore) offered 30% of the total monthly gross sales or a minimum monthly guaranteed payment of S$760,000 plus 15% on incremental monthly gross sales in excess of S$2.8 million for Year 1, Year 2 and Year 3, plus 10% on incremental monthly gross sales in excess of S$2.1 million but less than or equal to S$2.8 million for Year 2 and Year 3 only, whichever is higher. Luxury Ventures beat stiff competition to win in T2 Category Insight Tobacco Products To be published with the October issue of The Moodie Report Print Edition The Moodie Report 35

36 CATEGORY INSIGHT Fashion & Luxury May 2007 Suppliers speak out on travel store initiatives In the spirit of the Trinity partnership, we asked suppliers of fashion apparel, accessories and sunglasses to list the three things they would like to see travel retailers and airport authorities doing more of. Here is a selection of their replies. Munday: branded displays MCM Spring/Summer tote Heubel: concept stores GERRY MUNDAY, GLOBAL TRAVEL RETAIL DIRECTOR, MCM Overall, I consider that airport retailers are doing a very credible job in selling fashion, given the constraints there are on space and the many other product categories that are vying for the same square footage. In terms of improving the offer, there are a number of possibilities. In my experience, branded areas within fashion retail outlets always perform better than where leathergoods, accessories etc are sold within generic areas. Brand recognition is important for the customer and personalised areas give the brand-owner the opportunity to portray a specific image and story. Generic areas can be confusing to the customer with no clear product differential. So, if there is the opportunity to created branded displays, then we would always recommend this. Lifestyle displays, incorporating one, two or more brands, may work very well in product showcases within the airport, but outside the actual retail shop. More and more, consumers are mixing designer labels with lower-priced finds in one single outfit to create their own lifestyle look. Perhaps airports could think about creating special displays to promote specific looks which may then entice more customers into the shops. If space allows, perhaps airports, possibly in partnership with retailers and brands, could create more interest in the fashion offer by linking into the spring/summer, autumn/winter fashion shows by showing televised highlights or photographic exhibitions of the latest trends. Another idea maybe to link with local fashion colleges and showcase the designs of students. Travelling businesswomen are a massively important part of the passenger mix. They are often trying to juggle very busy lives with work and families, and they are looking more and more for practical solutions. Perhaps retailers could consider creating a section of their store aimed at the busy travelling woman, offering lightweight luggage, crease-free clothes, travel-sized skincare and cosmetics, foldable shoes etc. NADINE HEUBEL, HEAD OF TRAVEL RETAIL, HUGO BOSS More valuable space should be dedicated to fashion. While I understand that the revenue drivers are still the classical duty free products, unfortunately I feel that the fashion category sometimes receives the left-over spaces. Fashion should be a main category to be considered when doing the masterplanning for an airport/ terminal or shop. There need to be more initiatives to build special and exciting concept 36 The Moodie Report

37 May 2007 CATEGORY INSIGHT Fashion & Luxury stores. Although I do strongly believe that monobrand stores are an important part of an airport environment, not all fashion brands can have their own dedicated stores. With special concept stores (like Corso Como in Milan and Colette in Paris) airports can really differentiate themselves from other airports. Knowing that the risks might be higher for such concepts (higher seasonality, higher investments in furniture, design, etc) all parties of the Trinity need to play an important part in risk sharing! ROSS BROWNLEE, COMMERCIAL DIRECTOR, SAFILO Sunglasses today are among the most dynamic categories in the travel retail channel. One of the main drivers of this dynamism is the increased value of the product, in terms of product richness and design synergy with other product categories from the fashion houses. Product richness and associated higher retail positioning makes a qualitative presentation an even more compelling need. The photographs (right) show a more upgraded presentation environment essential if a consumer is to feel part of the branded world that brings with it the willingness to pay. (The pictures depict Safilo s recent luxury wall in South Korea s Walker Hill store and a merchandised space highlighting the Gucci Flora seasonal campaign.) In order to stress these synergies it is increasingly relevant to have more space to visually merchandise a specific story of a campaign. This need not be permanent space but could be a rotating promotional corner where the key concepts of a given collection can be illustrated visually so the consumer s interest levels can be aroused above that of a generic sunglasses wall (see picture showing a merchandised space highlighting the Gucci Flora seasonal campaign). In a bid to manage a complex fashion accessory business, which is very skuintensive, there is even greater need to manage the sell-in and sell-out across thousands of skus. Only through attention to such detail can the category be developed to reach its potential. Very often the responsibilities of buyers cross multiple product categories, where tracking detail is an impossibility. The supplier can only support the retailer to the extent there is transparency in data sharing. This is actively practised by many leading retailers to support growth but there is still much room for closer sharing of information. DAVID DAYAN, INTERNATIONAL SALES DIRECTOR, LACOSTE ACCESSOIRES TRAVEL RETAIL Today luxury brands invest a lot in advertising worldwide which is a huge benefit and help for duty free operators. Therefore it s really important [for retailers] to then respect at point of sale the image of the brand. Most of the time, it s really difficult to obtain good merchandising on-site. We organise training sessions and provide documents to help the sales teams. Respecting merchandising rules remains the key to fit the image of the brand, succeed and reach a good turnover. Experience has shown that brand visibility is essential. It aims to attract customers to discover their environment and concept. For this reason, we can only think about personalised corners or exclusive boutiques for these brands. For example, regarding Lacoste, we have proved that when we launch Lacoste products within their own universe, and within the Lacoste concept, we can observe very quickly a +30% increase in turnover. It s just because our furniture reflects the Brownlee: seasonal stories Gucci Flora visual display Walker Hill s luxury wall Lacoste Spring/ Summer bag The Moodie Report 37

38 CATEGORY INSIGHT Fashion & Luxury May 2007 Della Croce: special promotions Grisvard: flagship openings Sand Fall/Winter collection Kipling Fall/Winter Leopold bag brand, its image and appeals to customers as they know it already, thanks to advertising and all the retail networks we have developed downtown all over the world. MARCO DELLA CROCE ALFREDO PRIA SCARVES Promotions: I feel that more travel retailers should follow the visual merchandising and promotional techniques that the domestic market employs. More special events or promotions related to local tourism (anniversaries, exhibitions, sports events, etc.) should be put in place. Lifestyle: I feel that rather than offering the very well-known international brands (they are the same in every airport, with the same product assortment and visuals) an offer by lifestyle would be much more attractive. More communication/information from the retailers to the vendors is always welcome, as it enables a better understanding of sell-out to improve results. Displays/fixtures: I feel that more efforts on visual merchandising would help. The airports are usually very nicely designed, but too often rely too much on the standard images of the top brands. THOMAS GRISVARD, AREA EXPORT MANAGER, LANCEL At French leathergoods supplier Lancel, Thomas Grisvard s wish-list spans a greater focus overall on luxury handbags and luggage, in addition to special launch events, flagship store openings, new corner and shopin-shop openings, new product launches, new branded corner concepts, along with sales statistics by customer, brand and airport. THOMAS HENNINGSEN, TRAVEL RETAIL MANAGER, SAND I would welcome initiatives in which fashion and accessories brands would come together with retailers and landlords to design and execute holistic promotions aimed at optimising penetration and conversion rates. By using our combined experience and know-how, these holistic promotions would create a bigger bang at the airports. In our experience, travelling customers crave new and unique branded concepts which complement the existing fashion portfolio at airports. Increasing lifestyle fashion and accessories areas might further engage the travelling customer. Basically we would find the same fashion and accessories brands [in these areas] but these would be put together in new and more complementary ways. Shopping malls in high streets and a handful of international airports are doing an outstanding job at this already. In terms of data-sharing, the extremely short life cycle of each collection demands transparency in terms of sharing statistics relating to the shops retail performance. The more transparency we get, the faster we can act in optimising revenue performance. LORIS BELLARMI, TRAVEL RETAIL MARKETING MANAGER, ERMENEGILDO ZEGNA I would like to see dedicated windows (free of rental charges) in hightraffic areas and/or near seating areas, to highlight the latest fashion trends. Overall, I think there is poor communication from retailers when it comes to sharing sales figures. Figures should be more specific by product breakdown, e.g. ready-to-wear (separated out into men s and women s lines) and leather accessories. Regarding product merchandising, we design our own fixtures and fittings and therefore we are focused on providing a better display. 38 The Moodie Report

39 May 2007 CATEGORY INSIGHT Fashion & Luxury CAROLINE RONDOZ, DUTY FREE SALES MANAGER, KIPLING One of Kipling s priorities these past few seasons has been for travel retailers to invest and to support branded corners. That s why Kipling has developed a fantastic SIS fixture programme a worldwide, consistent concept that is easy to realise and can be adapted to any specific offer by region or shop, such as travel items, small accessories, etc. In a market where Kipling is already known, our brand makes the sales [happen]. A branded corner attracts consumers who are familiar with the brand. On a market where Kipling has been freshly launched, the sales make the brand. And what could be better for selling than a perfect merchandising concept to attract consumers and to give a good brand image? GERARD MURRAY, DIRECTOR DUTY FREE & TRAVEL RETAIL, SAMSONITE EUROPE I would urge travel retailers to give fashion the branded, personalised space the category needs. Promotions are not a priority, however. The consumer wants new and exciting products that are properly presented as well as good, knowledgeable staff. In my opinion there are two challenges at the airport: space and customer service. You ve got to tell people why they are going to spend 650 on a travel bag, for example. In Latin America we are starting to put our own staff into Samsonite stores. We have our own sales promoter and several of our own staff at Buenos Aires Ezeiza Airport. ALEXANDRE GRANOTIER, MANAGING DIRECTOR, LONGCHAMP USA I would like to see more personalised boutique concepts in the airport. Because of the price point we are positioned in we need to have the right environment for our products. Duty free operators want that as well InterBaires at Buenos Aires Ezeiza is a good example. They have completely rebuilt their retail space. MIMMO MARIOTTINI, GLOBAL TRAVEL RETAIL DIRECTOR, BALLY Airport stores are for people who have no time to shop, so the airport retail environment should be like a shopping centre, not an airport it should feel very comfortable to shop in. Nuance-Watson and Valiram are two key operators who are bringing downtown retailing principles into the airport. People feel comfortable in their shops and, importantly, there is a good variety of things to choose from. Consumers want to shop at the airport instead of downtown because they don t have enough time to visit high street shops. They aren t interested in the price saving any more; it s all about convenience. Branding and personalisation is also very important. We need to bring what s successful in the high street to the airport. YIM TAM, DIRECTOR, MOSAIC & CO It would be an ideal shopping environment if there were more lifestyle brands in travel retail. For product categories such as bags and gifts, the stores are very much lacking in terms of number of brands as well as proper displays. And it s always the same traditional brands not much newness. I am looking forward to bringing the Sanrio brand to travel retail: it s a lifestyle brand offering everything from stationery to handbags. Also, we are the Americas travel retail agent for a niche fashion brand called Harajuku Lovers, the new line by Gwen Stefani, one of the most popular rock musicians in the US. Ermenegildo Zegna Rondoz: fantastic fixtures Granotier: right environment Mariottini: downtown principles The Moodie Report 39

40 CATEGORY INSIGHT Fashion & Luxury May 2007 Inside the fashion consumer s mind Horizon Research Corp s survey takes in data among fashion consumers at (clockwise from top left) Hong Kong International, Incheon International, Singapore Changi and Bangkok International airports Fashion and accessories are central elements of the sales mix at most major Asian airports, and any analysis of the category is incomplete without an insight into the purchasing habits and motivations of Asia s key travelling consumers. And that s what we bring you in this special section, through the excellent data produced by Horizon Research Corporation. Fashion and fashion accessories are more than just niche categories at Asia Pacific airports at between 8% and 16% of revenues depending on the location, they re very much part of the core offer. Through its extensive on-airport research into the world s leading travelling nationalities, Horizon Research Corporation provides an unrivalled insight into the purchasing habits and motivations of travel retail consumers including those in Asia. Horizon s research finds that fashion stores at Asian airports are categorised by low levels of penetration and conversion to spend, but high sales per invoice, reflecting the strong share of luxury brands within the fashion segment. But no two airports are alike, and each reflects different cultures and purchasing motivations among consumers. In Horizon s sample, taken from four major airports in the region Incheon International, Hong Kong International, Singapore Changi and Bangkok International, the figures for penetration, conversion and spend vary widely. With a 23% conversion rate, Hong Kong s strong emphasis on luxury boutiques stands up relatively well against its 40 The Moodie Report

41 May 2007 CATEGORY INSIGHT Fashion & Luxury rivals, although its average spend on clothing of US$57 lags behind the Singapore Changi figure of US$76. But with a 35% conversion-to-spend rate and average sales of US$124 in clothing, Incheon International dominates its rivals. With this in mind, expect some highly competitive bids for the two lucrative fashion licences on offer in the Incheon duty free tender, launched in April. Average spend among the leading regional airports is more even when it comes to accessories (bags, wallets, purses and brief cases), reflecting the strength of the merchandising and boutique approach at all the regional hub airports. Most travellers purchase clothing for themselves (56%) but an almost equally high proportion also buy as a gift (52%). The figure is consistent with the traditional emphasis on gift purchases among Asian travellers compared to those from other regions. Children or spouses tend to fare best if clothing is purchased as a gift, and curiously parents-in-law among travellers Footfall, penetration and spending at Asian airports Source: Horizon Research Corporation; The Moodie Report Seoul Hong Kong Singapore Bangkok Total Full base: travellers 1, ,787 1,588 5,887 Clothing (men s, women s, children s) Footfall 8% 13% 11% 9% 10% Penetration 3% 3% 2% 1% 2% Conversion 35% 23% 14% 11% 22% Average spending US$124 US$57 US$76 US$36 US$84 Share of total airport spending 6% 5% 3% 2% 4% Bags, handbags, briefcases, wallets, purses Footfall 10% 15% 13% 16% 13% Penetration 2% 4% 3% 3% 3% Conversion 20% 26% 22% 18% 21% Average spending US$149 US$154 US$122 US$71 US$105 Share of total airport spending 7% 11% 5% 8% 6% For whom did you buy clothing (men s, women s, children s)? Seoul Hong Kong Singapore Bangkok Total Valid base: buyers of clothing Self 53% 66% 62% 38% 56% Net gift* 47% 47% 57% 70% 52% Friends 8% 10% 29% 33% 16% Children 12% 19% 15% 5% 13% Parents or parents-in-law 17% 1% 2% 13% 10% Spouse 9% 13% 2% 8% 9% Other relatives 8% 5% 7% 13% 8% Partner 0% 0% 7% 7% 2% Co-workers 0% 0% 0% 3% 1% Source: Horizon Research Corporation; The Moodie Report *Net gift is the percentage of all shoppers who buy a gift. The Moodie Report 41

42 CATEGORY INSIGHT Fashion & Luxury May 2007 at Bangkok (18%) do so too when it comes to accessories. For those who argue that price is well down the list as a motivating factor for fashion buyers, the figures detailed below combining data from all four airports paint a different picture. More than a third of buyers of clothing and of accessories name price as their major reason for purchasing. Packaging and product quality also play a role, as does securing a memento of the trip reflecting the increasing importance of destination merchandise within the fashion offer. Horizon Research Corporation is a consulting firm that specialises in solving marketing problems. Headquartered in Los Angeles, the company has offices in Australia, Singapore and the UK. Horizon has a strong track record in the airports world, and counts some of the industry s leading retailers and brand owners among its clients. To find out more about what Horizon can do for you contact: Dr Miri Hardy, Vice President & Head of Europe Tel: +44 (0) miri@market-research.com For whom did you buy bags, handbags, briefcases, wallets, purses? Seoul Hong Kong Singapore Bangkok Total Valid base: buyers of bags etc Self 53% 64% 53% 46% 53% Net gift* 51% 36% 55% 61% 52% Spouse 29% 20% 16% 12% 21% Friends 5% 0% 15% 12% 8% Parents or parents-in-law 0% 3% 5% 18% 6% Children 9% 4% 9% 2% 6% Other relatives 4% 0% 6% 12% 6% Boss or superior at work 4% 1% 0% 4% 3% Partner 1% 11% 3% 0% 3% Brother or sister 0% 0% 0% 4% 1% Co-workers 0% 1% 0% 1% 1% Source: Horizon Research Corporation; The Moodie Report *Net gift is the percentage of all shoppers who buy a gift. Why did you buy bags, handbags, briefcases, wallets, purses? Source: Horizon Research Corporation; The Moodie Report Total Valid base: buyers of bags etc. 92 Price 35.1% Product quality 30.3% Packaging 10.2% Good reminder of my trip 8.7% Convenience 8.7% Can t get it at home 4.6% Special offer 4.4% Other 5.1% Don t know 1.3% Why did you buy clothing (men s, women s, children s)? Source: Horizon Research Corporation; The Moodie Report Total Valid base: buyers of clothing 44 Price 33% Good reminder of my trip 24% Packaging 15% Product quality 13% Special offer 10% Can t get it at home 8% Convenience 5% Other 3% Don t know 3% 42 The Moodie Report

43 Helping others gives success true meaning. Katherine Jenkins, the young opera star, is the ambassador of Montblanc's cultural donation projects like the Philharmonia of the Nations. One of the various Montblanc initiatives to support arts and culture in society. Katherine Jenkins is wearing the Montblanc Jewellery Collection in 925 sterling silver. Visit Montblanc F or further information on Montblanc in Travel Retail please contact us at travelretail@montblanc.de

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