2004 in focus: the retailers' view

Print Article E-Mail Article

DFNI and travelretailworld.com reveals the results of its survey of leading retailers, assessing their hopes and fears for 2004 and the factors that will define the business this year

DFNI and travelretailworld.com recently undertook a survey of leading retailers, to assess their hopes and fears for 2004. We asked them what key factors would define the business in 2004, and what concerns they have for the trade in the months ahead. Here's how they responded.

To register your opinion or to react, email ddavitt@travelretailworld.com

Q1. What key factors will define how your business performs in 2004?

(CHINA) Beijing Capital International Airport deputy manager purchasing department Foster Fu:

?The relaxation of travel restrictions and increase in visa allocation for Chinese nationals in certain areas such as Beijing, Shanghai and Guangzhou will help us increasingly, though not much yet. We already have a new arrangement in place with Singapore to make travel there easier for Chinese nationals and we expect more such agreements with other countries soon.

?Specific to our Beijing duty-free operation, key will be the introduction of more leading brands, a wider selection of wines and the new humidor which will allow us to extend our cigar range. The humidor and wines will occupy the existing Hermes shop that is planned to move to its new site nearer passport control later this year.?

(INDIA) An India Tourism Development Corp spokesperson:

"We have decided to start pricing in Euros at all our shops, because of the wild fluctuations in the dollar and pound. This will allow us to maintain greater control over the real sales value, and means that we will not make the currency exchange losses we have suffered recently. For example the pound has risen 15-20% against the rupee in the past two months. We will implement the strategy within a month.

"SARS was a terrible situation for Asia/Pacific retailers, but tourism to India thrived during that time. Passenger numbers were up 10-15% year-on-year. So if the situation recurs I do not think ITDC will be affected negatively.

"Regarding our dispute with the Airports Authority of India, their minister [of aviation] and ours [of tourism] met early this month. It was decided that we would not press charges for the authority barring us from tenders, and we are paying back the rent we owe. But we still have no interest in the current tenders?the space is not significant enough for the investment."

(HONG KONG) King Power Group general manager merchandising and operations Sunil Tuli:

?The main thing will be how much China opens up to FITs. It depends on how many more regions they lift the overseas travel restrictions. And of course there's SARS. Fears of its return in winter kept visitors to China and Hong Kong down, especially groups who book three to four months ahead. But the cold weather has only brought two or three isolated cases so that concern should now disappear.?

(BULGARIA) Sofia airport duty-free director Galina Trolieva:

?The airport is continuing with its development plans for a new terminal building and the expected operational date is now August 2005.  This means that we are faced with another year in the current facility and all the challenges associated with it. That said, the duty-free facilities within the existing terminal continue to perform well.

?Fortunately as we start 2004 there are no specific issues that are adversely affecting out shops.  In fact, the issuing of new licences for a three-year period at the start of the year was the only major outstanding issue.?

(UAE) Dubai Duty Free managing director Colm McLoughlin:

?One of the key factors that will contribute towards sales success in 2004 includes our continuing review of the retail area. In 2003, the relocation and new design of the sunglasses shop resulted in a huge increase in sales over the previous year (51%). The newly designed and centrally located gold shop, which opened in September, helped contribute towards the 17% increase in gold sales over 2002. Our plans for 2004 include the opening of a new Watch Shop in the central area of Sheikh Rashid Terminal, and a new centrally-located area retailing Gifts from Dubai.

?2003 was a fantastic year for Dubai Duty Free with sales reaching $380m, a 24% increase over the previous year. Sales were strong in all categories and we expect this trend to continue in 2004.?

(FRANCE) SeaFrance director onboard services Stuart Rourke:

?Passenger volumes will be key to our success this year. 2003 proved better than expected but this year much will depend on UK interest rates and the strength of the euro. These forces will affect plans for holiday destinations in the UK market. We want to maximise our onboard sales and have been cutting costs over the last year in the areas of stock control and manpower.?

(ICELAND) Icemart managing director Logi Ulfarsson:

"The US economy will be crucial to the success of our Keflavik stores. US passengers are a significant and high-spending visitor segment, and since September 11 2001 Icelandair has reduced its capacity on US flights. But there are plans to add more flights this year, and that should boost Icemart. The return of those passengers will be dependent on a peaceful and healthy year: if there are more terrorist attacks, or another SARS outbreak, the recovery will stall. Also significant is the press coverage that the country generates. Recently it has been very positive and I hope that continues.?

(FRANCE) Aelia director Ambroise Fondeur:

"Our main priority is to drive penetration rates. Over the past 18 months we have noticed that passengers are less and less inclined to enter stores due to airport security and longer queues . To overcome that will be a challenge this year."

(UAE) Abu Dhabi Duty Free deputy managing director Dan Cappell:

?The key factors will be a peaceful 12 months in the region, no further terrorist attacks or another SARS outbreak, the forecast increase in passenger numbers being met, economic and exchange rate stability, plus innovations in our promotional campaigns to drive conversion to purchase and increase average spend.?

(BAHRAIN) Aer Rianta International-Middle East managing director John Sutcliffe:

?We'd like to see the situation in Iraq stabilise, but the key issue for the region is the Israeli/Palestinian issue. The Middle East has huge potential for tourism, as Dubai is showing but all you need is an unforeseen terrorist attack for everything to change overnight.

?Overall, I'm optimistic. We had a fantastic year in 2003 despite the tough start. In 2004 our aim is to consolidate our existing businesses, especially our three long-term contracts in Bahrain, Beirut and Oman. But we're also looking at new business. We're still looking at opening a shop on the Saudi causeway, we're waiting for developments in the Saudi airport market and we're already extending our trading business into Iraq, an area we want to build on.?

(SWEDEN) SAS Trading area manager for Sweden and Denmark Annelie Nassen:

"In these times, we need to learn our customers needs and wants and make sure we cater to them. This is one of our main goals for 2004. Our customers are so important to us and we need to focus on communicating more with them."

(NETHERLANDS) KLM Tax Free Services director airport retail Ico Smid:

?The forecast traffic growth of 4-5% at Amsterdam Schiphol will be crucial, as will maintaining the high levels of customer service among sales staff. But a fresh outbreak of SARS or renewed terrorism attacks could affect the business.?

(UK) Virgin Atlantic Airways retail business manager Richard Carr:

?This year we'll be focusing more on training crew and ensuring they are invited to be more hands-on when it comes to retail and product development. I expect the business to grow more towards the second half of the year, after the inflight retail contract passes to Tourvest.?

(DENMARK) MyTravel Airways purchasing manager Lars Hjartbo:

?Key factors will be whether there will be any more terrorist attacks, ether in our destinations or elsewhere. The weather also plays a part. We don't want any more hot summers in Scandinavia! We have a great logistics system and our passengers are very willing to spend money at the moment. So if we can just make them fly we'll be very successful in duty-free this year.?

Q2. What are your main concerns for the trade in 2004?

(BAHRAIN) Aer Rianta International-Middle East managing director John Sutcliffe:

?The weak dollar is a problem. One concern is in supply, where we deal with suppliers who are dollar-based, are feeling the crunch and they are trying to push price increases on us, which is unacceptable. For many years they benefited from the stronger dollar, whereas we suffered because the price of goods was more expensive.

?Second, we have suppliers who operate in euro, sterling, Swiss franc and other non-dollar based currencies. These are all very strong versus the dollar, which has depreciated 25-30% in recent months and had a serious impact on our margins. So we're now talking to suppliers about this and we intend to be strong with them, although it may be a source of friction. Our advice is that the dollar will remain weak this year and maybe even get weaker in the first half of 2004. It makes products more attractive to outsiders, but that has a limited effect, as the bulk of our business is from within the region.?

(UAE) Dubai Duty Free managing director Colm McLoughlin:

?By industry standards, last year was a difficult year and yet our turnover reached record heights. We do have not major concerns as far as our business is concerned and are looking forward to another record year.?

(CHINA) Beijing Capital International Airport deputy manager purchasing department Foster Fu:

?It has to be the possible return of SARS. Should SARS reappear that will of course affect our business but we are taking every precaution such as taking the temperature of all passengers at Beijing airport.?

(NETHERLANDS) KLM Tax Free Services director airport retail Ico Smid:

?We're concerned about sales progress in general as a result of the strong euro and the decrease of travellers' spending money owing to economic developments. Also, the expansion of the European Union will have a negative effect on non-EU sales, and only a small portion of those sales will return as EU business.?

(FRANCE) Aelia director Ambroise Fondeur:

"Passenger traffic decreased by 3% in France last year, and we hope those numbers will come back this year. Tobacco sales are also a worry after the recent excise increases, which make the category less appealing to intra-EU travellers. Concerns over airline and airport security will continue to affect us."

(UAE) Abu Dhabi Duty Free deputy managing director Dan Cappell:

?On the basis that this is a trouble-free year without war or terror, then the exchange rate and the impact of the US dollar has to be the major concern.?

(FRANCE) SeaFrance director onboard services Stuart Rourke:

?Our main concerns are the changing patterns of travel in the short-sea market, as well as the spending habits among passengers.?

(DENMARK) MyTravel Airways purchasing manager Lars Hjartbo:

?Aside from the weather factor and fears over future terrorist attacks, I'm concerned about the prospect of arrivals shopping at Scandinavian airports, plus I have concerns over the lack of innovation from suppliers.?

Q3. By how much do you expect your business to rise or fall this year?

(NETHERLANDS) KLM Tax Free Services director airport retail Ico Smid:

?We forecast sales to remain stable in 2004, or to show modest growth of 1-2%.?

(HONG KONG) King Power Group general manager merchandising and operations Sunil Tuli:

?We think business will grow, certainly compared to 2003 which was rock-bottom.?

(BULGARIA) Sofia airport duty-free director Galina Trolieva:

?2003 was the best year ever for duty free sales at Sofia Airport where sales topped ?7.2m ($9.1m).  This represented an increase of over 16% on 2002. The sales forecast for 2004, based on the expected passenger increases, is a little under ?8m ($10.1m).?

(UAE) Dubai Duty Free managing director Colm McLoughlin:

?We expect our business to grow by around 10% in 2004. So far, in the opening weeks, our sales are 28% above last year, which is a great start to the year.?

(CHINA) Beijing Capital International Airport deputy manager purchasing department Foster Fu:

?We look forward to very strong growth in the cosmetics category in particular after we doubled the space in November 2003. We expect our business to be 50% up this year. Sales over Christmas were very encouraging. We are very excited about the new brands we have introduced including Biotherm, Clarins and Davidoff.?

(ICELAND) Icemart managing director Logi Ulfarsson:

?If the year is an ?uneventful' one, we are expecting to improve revenues by around 10%."

(FRANCE) Aelia director Ambroise Fondeur:

"We project business to grow 5% in 2004."

(UAE) Abu Dhabi Duty Free deputy managing director Dan Cappell:

?We're predicting a minimum of 12% growth but are looking for nearer to 15% if possible.?

(DENMARK) MyTravel Airways purchasing manager Lars Hjartbo:

?We expect the spend per passenger to increase by 3-5%.?