DFS wins first China contract

John Rimmer

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The retailer makes its keenly-awaited move into China through a 10-year master retail concession at Hainan Meilan airport

DFS Group has won the 10-year contract to run retail at Hainan Meilan International airport. Under the terms of the master retail concession, which will be phased in next year, DFS will add branded beauty, fashion and watch outlets to the existing retail mix. It is the group's first retail contract in China, a market the retailer has monitored closely since it moved its corporate headquarters to Hong Kong earlier this year.
 
DFS chairman and CEO Ed Brennan said: "Our objective is to make [Hainan] retail a world-class operation, featuring top brands, exquisite stores, and an appeal that suits the Hainan Island destination. We are deeply committed to developing our business in the People's Republic of China and we intend to make this airport the retail showpiece for all of China."
 
Brennan continued: "We are proud that Hainan has welcomed us by awarding DFS this master concession. It is an important first step in what we intend to be a long and productive series of partnerships for both DFS and the Chinese airports with which we hope to do business. We believe that our product offerings, wide selection of brands, pricing strategies that offer significant value and deep knowledge of effective travel-retail strategies make us well positioned in this market. In addition, we expect that our unique worldwide guarantee by which a product purchased at one of our stores can be returned to any of our stores if the customer is not satisfied will be well received by tourists travelling to and from Hainan. We have recently added after-sales service centres in Shanghai and Beijing in addition to the after-sales services centres we have had in Tokyo and Seoul for many years."
 
DFS merchandising president Michael Schriver added that the retailer's Hainan stores would feature brands that are popular with Chinese travellers, including Biotherm, Christian Dior, Lancôme, Cartier, Omega, Rado, Tissot and various fashion brands.
 
Hainan Meilan Airport Co executive director of business development Kristian Bjorneboe told TRW the airport had considered several business models for retail. "The deal is pretty standard, and more of a concession agreement than a partnership," he said. Fees payable to the airport will be linked to turnover generated, he added
 
Despite last year's SARS outbreak, Bjorneboe said traffic at Hainan grew by 8% to 6m in 2003 and  was on target to reach 7.5m this year. International traffic accounts for only 2-3% of this total.
 
TRW understands the DFS win comes after a semi-tendering process during which the airport heard proposals from several international operators, including The Nuance Group, which came close to signing an agreement but withdrew at a late stage. 
 
Hainan island, described as "China's Hawaii", is an increasingly popular tourist resort in the South China Sea. Its airport opened five years ago.