Charles Chen: “This is the future direction for China Duty Free. We want to build our stores as unique, something different from the others. I want our reputation to be that if you really want to find unique products, you go to the CDF store to buy.”

China Duty Free Group (CDFG) President Charles Chen is in upbeat mood as he chats to The Moodie Davitt Report at the Four Seasons Hotel about the importance of the CDF-Sunrise Duty Free luxury beauty offer at Beijing Capital International Airport (BCIA).

The Grand Opening earlier in the day and the evening’s spectacular after party have all gone without a hitch and for once the CDFG leader can kick back from a relentless schedule to enjoy a relaxed dinner with selected team members and brand partners to celebrate a unique collaboration. He’s particularly happy about the support CDF-Sunrise has received from BCIA and beauty brand partners.

Charles Chen and Beijing Capital International Airport Co Vice President Du Qiang meet Javier Simon (left) and Israel Assa from The Estée Lauder Companies (Estée Lauder Re-Nutriv and La Mer)

Charles Chen and Beijing Capital International Airport Co Vice President Du Qiang tour the new boutiques

Chen pays warm tribute to Beijing Capital International Airport (BCIA) for the way its management have assisted CDF-Sunrise Duty Free, since the contract began. That support has found various expressions, including shared VIP information and flexibility over granting promotional space. “It’s very, very important that we get the support from the airport,” he says. “Actually last year they used some of their revenues in supporting us. They do a lot of promotions and they realise that if our sales are up, then their revenues are up.

“You can see how the brands’ top management have come here,” Chen says proudly of the supplier attendance at the day’s celebrations. “I have this feeling, especially this year, that there is a deep respect among the brands for the way we do the duty free business.”

He contrasts the retailer’s approach with developments in South Korea, where the daigou-driven shopping frenzy might be driving huge volumes but in a way that does little for the wider perception of the business. “I tell the suppliers that such business is really not good for the image of your brands. And it badly affects your duty paid market in China.

“I say very clearly that such business is for the short term only,” Chen continues. “But the duty free business by CDF is really normal business. We do everything in very proper ways. I always say to my staff, ‘Never do any one piece of daigou.’ We could do it, but I always say ‘Never, never do that.’ Reputation is the most important factor for a company. So, more and more, the brands trust us and support us. That’s why they provide unique products to us here.

“These concept stores are very personalised and unique. It’s an exclusive new concept, which is really good,” Chen continues.

“This opening is very important. If you think about the new Chinese customers, they are very complex. We talk a lot about Generation Z and the Millennial generation. We need to be offering them unique and exclusive products. That is very important… because they can find ordinary products on Alibaba, Tmall and everywhere. So this new concept is very important for all the parties and everyone is happy… us, the consumers, the brands and the airport as we are improving the image of the airport, definitely.

“So this is the future direction for China Duty Free. We want to build our stores as unique, something different from the others. They are not just simply a place to do the shopping. I want our reputation to be that if you really want to find unique products, you go to the CDF store to buy.

“This afternoon, I was passing on your articles [from the BCIA opening on The Moodie Davitt Report.com] to my friends. And they all asked, ‘Where can I buy?’ And I replied, ‘At Terminal 2.’ You know, some of the people are so well-off that they don’t really care about the price – they are looking for something unique. You can see some of the girls sitting downstairs at the party. They are looking for the best specialty products. If we can build that reputation, people will say, ‘I’m going abroad, and when I return, I’ll buy in the CDF store. That is the future. I want to build CDF with a high-end reputation.”

Chen is confident of CDFG’s future in the airport business despite the high cost of entry. “Yes, the concession fees are very high. But I also try to be very fair to the brands and this is why I get a lot of support from them. It’s not simply about getting a high margin from the supply partner. I always say, ‘The sales are the most important thing. If we reach a certain level of sales, then give me some extra incentives.’ And the brands are happy with that approach. We don’t want to just be an organisation that is always asking for something. No way, it’s not fair to the brands.”

Nonetheless, Chen makes it clear that CDFG will work most closely with the brands that embrace a true spirit of partnership. “Now it’s also time for the operator to choose the right partner. It’s not just a case of you choose us,” he says.

With a host of openings happening this year, including the recent inauguration of a 513sq m downtown duty free store in Beijing at the Blue Harbor shopping centre; the unveiling of a refurbished 500sq m downtown shop in Dalian; and new stores in Xiamen and Qingdao; CDFG is riding a wave. With its offshore duty free business booming in Hainan, the retailer is on track to hit revenues of RMB45 billion (US$6.5 billion), up from RMB34.5 billion (just under US$5 billion) last year, itself an increase of 27.3% over 2016. When Chen assumed the President’s role in 2016, group turnover was just RMB10 billion (less than US$1.5 billion).

That represents extraordinary progress. And one suspects that a lot more lies ahead. The new look Beijing beauty offer not only aids that momentum but also establishes a new qualitative benchmark.

THE MOODIE DAVITT REPORT • JUNE 2019