Retailer interview


Dubai Duty Free strives for growth amid trading headwinds

Dubai Duty Free Executive Vice Chairman & CEO Colm McLoughlin tells Dermot Davitt how the world’s leading travel retailer at a single airport is investing to overcome external challenges to the business. [This is an edited version of a feature that appears in our Cannes Print Magazine, out at TFWA World Exhibition next week.]

Dubai Duty Free hit a new sales high in 2018, breaking the US$2 billion barrier for the first time, and maintaining its prominent top ten position in The Moodie Davitt Report’s annual Top Travel Retailer rankings.

By comparison, 2019 has been a year of challenges, according to Executive Vice Chairman and CEO Colm McLoughlin, although he remains hopeful that the business can come close to last year’s US$2 billion turnover mark.

“Sales to the end of August (year to date) were US$1.295 billion, which is slightly down (-2%) on the same period last year,” he says. Within that eight-month performance, the contribution from departures was 89.19% (US$1.15 billion), and arrivals and other areas contributed the remaining 10.81%.

Perfumes, liquor and cigarettes are the top three selling categories. Sales of perfumes reached over US$196 million from January to August and contributed 15% towards total sales. Another strong performer, cosmetics, increased by +9% against the same period last year (to US$143 million), and represented 11% of the eight-month total.

Colm McLoughlin: Striving to repeat the US$2 billion sales high the company hit in 2018

All that glitters: Gold remains a popular staple of the Dubai Duty Free offer

McLoughlin is hopeful of a strong end to 2019, but acknowledges the trading headwinds to date.

“There are a number of factors, including lower than expected passenger numbers and a runway closure (at DXB) for 45 days, which had an impact on sales, but we are looking forward to a good last quarter.”

“We are still affected by the luggage restrictions levied by many carriers [limiting the weight of carry-on purchases -Ed]. These restrictions have led to customers returning items, mainly food items, for which they are refunded, but overall it’s a negative experience. Our team is in talks with Emirates to see how we can address this issue on their flights and we hope that we can find a solution soon.”

The addition of VAT and excise duty on products continues to have a big impact on sales in arrivals, particularly on tobacco. Also, the recent introduction of the Digital Tax Stamp on cigarettes has resulted in a (short-term) shortage of popular brands in arrivals.

On the flip side, Dubai Duty Free is investing for sales growth, and McLoughlin points to some positive factors influencing the operation.

“Key drivers for us have been the expansion and refurbishment of the retail environment, which has continued for the past year; the strengthening of partnerships and the investment we have made in digitalisation.”

“Over the past eight months we have rolledout 4,500 promotions across DXB/Dubai International and Al Maktoum International Airport.”

Major store upgrades include a full refurbishment of Concourse C, which is now more “attractive, accessible and shopper-friendly”, says McLoughlin. Other big projects have centred around fashion, with the relocation of Salvatore Ferragamo and the opening of new Gucci and Chanel shops in Concourse B. “We have seen how impactful the fashion area in Concourse A has been and we wanted to recreate that in B,” he says.

Further projects at DXB have improved the retail offer and customer experience, he adds.

“In Terminal 3, work has commenced on one of the arrivals shops which will ultimately improve visibility for arriving passengers, while a special concept shop with a unique identity will also be ready early next year.”

Phase Two of the Concourse B refurbishment, including an overhaul of the two Food Plus shops in Concourse B East and West, should be completed by December. The Concourse B Food Plus Shop and Gifts from Dubai will be merged while Gifts from Dubai in the Central spine will be removed. Also, in Concourse B, the new Maison Christian Dior shop located at the West Side of the concourse opened in September.

In another move, Dubai Duty Free will this year open a Concierge Shopping Service at two locations at the Emirates Business Class Lounge (Terminal 3). The company is also at an advanced stage of concept design for a new-look Gold Shop in Concourse B, to be completed in 2020.

Another factor McLoughlin cites as an important sales driver is enhanced partnerships, and not only with brands.

“An example is our partnership with Emirates Skywards which allows its members to buy using their Skywards miles. This has been very well received, resulting in over 1 billion air miles (January to August) being redeemed this year, with a value of US$4.65 million, which we believe is incremental spend.”

He adds: “We have also continued to work closely with our suppliers on many targeted promotions. Over the past eight months we have rolled out 4,500 promotions across DXB/Dubai International and Al Maktoum International Airport.”

Crucially, such campaigns help to push purchase values above the average. “Categories such as liquor, perfumes, confectionery and electronics respond very well to these promotions.

"We have run several Perfume Bonanza weekend promotions and Watches Weekend Bonanza offers, which deliver immediate sales results.

Refurbishments in Concourse C have lifted some of the oldest parts of the Dubai Duty Free retail estate to new heights

“In categories such as liquor we have been focusing on promotions with premium products such as Cognac and high-end whiskies to drive average transaction value upwards. We ran a Liquor Mania promotion with -30% off selected liquor and we had -10% off the full allowance at Dubai Duty Free in arrivals.”

In June and July, Dubai Duty Free ran a promotion targeting Chinese passengers with -8% off on all XO Cognac purchases. During this two-month period, the retailer sold 1,339 bottles of XO Cognac valued at a combined US$344,000. The success of this promotion prompted the company to repeat it from 12 to 19 September, offering -20% off on XO Cognac and above.

Dubai Duty Free aims to further lift penetration and ATV through an updated digital marketing and customer engagement programme that will be in place by year-end, and with a range of training, recognition and award schemes for staff.

Beyond the impact of store investment, partnerships and campaigns, McLoughlin anticipates a bounce in business from Expo 2020, hosted by the emirate of Dubai for six months from October next year.

Dubai Duty Free will open an Irish Village close to the Ireland Pavilion at the exhibition, which should present opportunities for collaboration.

“We are all very excited about Expo 2020,” says McLoughlin. “Having visited the site recently, I can say that it really is going to be a fantastic event. It will bring an estimated 25 million people to Dubai.

“Obviously, these kinds of inbound figures provide us with a fantastic opportunity to reach a global audience and we are working with Expo on merchandising opportunities as well as other areas.”

The retailer is seeking a strong final quarter to overcome the impact of external trading pressures that it faced earlier in 2019

Parners message

The Moodie Davitt eZine

Issue 268 | 26 September 2019

The Moodie Davitt eZine is published 20 times per year by The Moodie Davitt Report (Moodie International Ltd).


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