Interview
DFS prepares its best recipes from a 60-year cookbook for Yalong Bay
Earlier this month DFS Group revealed plans to open what it called the first world-class, seven-star luxury retail and entertainment destination in Yalong Bay, Sanya on Hainan island by 2026.
DFS Yalong Bay involves an “unprecedented” investment in a 128,000sq m site, attracting over 1,000 luxury brands including a promised line-up of ‘iconic’ maisons from the retailer’s majority owner LVMH Group once fully operational.
DFS Yalong Bay will become Sanya’s premier destination for luxury shopping, world-class accommodation, dining, and entertainment, serving international and domestic tourists with innovative, renowned luxury brands and experiences, the company pledged.
DFS Chairman and CEO Benjamin Vuchot spoke to Martin Moodie about the project during the recent TFWA World Exhibition in Cannes.
“The project in Hainan is transformational for DFS. Of course, there is a scale element which we’re very excited about. But the ambition is not to do the biggest project in Hainan, it’s to do the best. And to achieve that, it’s going to require us to bring the best recipes we’ve had in our books for over 60 years.”
The cookbook analogy from DFS Group Chairman & CEO Benjamin Vuchot sums up not only the excitement the travel retailer feels about its just-announced mega project in Yalong Bay but the real sense of mission underpinning it.
Vuchot, chatting to The Moodie Davitt Report over coffee at the Majestic Hotel during the TFWA World Exhibition in Cannes in early October, pledges the development will be very different from anything the island province has seen.
“We’re also going to have to bring an element of disruption and innovation,” Vuchot adds. “I think the Sense of Place is also going to be very important for Hainan, which is a very new destination from a tourism perspective. It started with great hotels and now it’s increasingly about retail.
“But what we really want to bring is what we call the 7-star luxury and entertainment approach. It’s through this differentiation that we will offer something not yet available in Hainan and that size doesn’t buy.
“I think there’s a race for size in the industry in lots of places. But we are going to make it the way we think DFS can do it best,” Vuchot continues. “We’re going to do it in partnership with all the maisons, all the brands, all the stakeholders who have been with us on so many journeys and who recognise the savoir-faire and the know-how of DFS.
Benjamin Vuchot: “Creating a destination within a destination means you have to sell beyond product”
“You have known us for so many years. It’s never really been about market share for market share’s sake. It’s been about doing the right thing for the customer and that’s our passion.”
While Vuchot can’t yet reveal the brand line-up, all subject to further announcements, he promises that DFS will have very strong support from some of the world’s top brands. “Quite honestly the project itself commands the interest of all the maisons and that’s very exciting.”
The project has been in the planning for more than four years, Vuchot notes, ranging from initial discussions to the preliminary studies then the realisation and various subsequent iterations. And he’s quick to praise the critical role played by the local authorities.
“It’s really important to acknowledge the amazing work that the Hainan government is doing in making sure that people coming with the intention to further elevate the island are being heard,” he comments.
“We feel there is a good collaboration with the government about elevating the infrastructures and ensuring this island is going to be a game changer for China as well. That’s very reassuring and we’re happy to be supportive.”
The development will open in the second half of 2026 from June onwards. By which time (the end of 2025) the island province will have seen full implementation of a zero-tariff programme applied to import duties, import VAT and consumption tax.
“The Free Trade Port programme is a very important element of the success of Hainan and something I always share with our brand partners,” Vuchot comments. “The Free Trade Port is a much bigger story than the duty free story.
“The vision of the central government and the government of Hainan in creating this new window for China in Hainan goes beyond purely a resort destination. It’s about industries. It’s about healthcare. It’s about so many other components that will make Hainan a long-lasting true destination, and we’re very happy to be playing a piece of that through a luxury retail proposition.”
And beyond pure retail. As revealed in the initial announcement, DFS is also moving into entertainment and food & beverage in a hugely ambitious way, in essence becoming a travel ecosystem player.
“I always use this destination within a destination concept,” Vuchot comments. “Hainan is an incredible destination, and the visitor numbers that the Chinese government is suggesting for 2030 are over 80 million, which is extraordinary.
How the DFS Yalong Bay Luxury Boulevard entrance is expected to look
“How do you translate an experience that is communicating this sense of place and sense of luxury to 80 million people? You’re going to have to make choices, and creating a destination within a destination means you have to sell beyond product. You have to create a place where people want to come visit, bring their family and want to visit a couple of times during their stay.”
The current average stay in Hainan is between two and a half to three and a half nights. Vuchot says that fact gives DFS confidence based on other key properties where the company has been operating for years as the anchor destination for luxury shopping. Many visitors visit the stores every day and often multiple times during the day in locations such as Macau, he says.
“In order to achieve that in Hainan, you have to have the right F&B offer, the right level of other services and you have to cater to the multi-generational customer base that is prevalent on the island. Travellers often come with their parents and bring their children as a very happy and joyful kind of family unit. So we want to also make sure that they feel comfortable in our shopping experience.”
Hainan’s bright future
While Chinese outbound travel is steadily accelerating in the wake of the pandemic, Hainan’s man-made and natural attractions linked to the island’s proximity to the Mainland and the rapid improvement in tourism infrastructure, will ensure it grows in popularity as a holiday destination.
Add in the fact that only 13-15% of the country’s 1.4 billion citizens have passports, plus the commitment of central and local government to the Free Trade Port programme and the province’s future looks particularly rosy.
“I believe the government will also invite big hotel groups to further reinvest into their properties and to creating a really unbelievable destination,” Vuchot observes.
The Central River Valley Walk will form an integral part of what DFS pledges will be Sanya’s premier destination for luxury shopping, world-class accommodation, dining, and entertainment
Measured China outbound travel recovery
Like all his travel retail peers, Vuchot is realistic about the measured rather than rocketing rebound of Chinese outbound travel and related spending on shopping. But he’s also sanguine about the fact.
“We believe we’ll benefit from this gradual recovery of outbound travel from China. I think everybody realises it’s taking longer than expected. But it doesn’t mean that we’re not ready to welcome the Chinese travellers wherever they go and however they travel. We’re seeing some very positive signs, for example, even during this Golden Week [the interview was conducted in the middle of the holiday period -Ed].
“I get sound bites from the teams and whether it’s in our North American airports on the West Coast, in Japan or in Paris, we’re seeing there is a continued interest in travelling and in DFS as this flagpole that people recognise as a place of authenticity of trust and relationships.
“This step towards establishing ourselves in a significant way in Hainan is very important but it no way diminishes the focus and the support we’re going to give to all the other operations we have around the world.”
The conversation turns to some of those operations, notably in the DFS stronghold of Macau and its fellow SAR in Hong Kong which suffered so terribly from the pandemic. While visitor numbers to Macau this year have been encouraging, many luxury brands have reported softening spend over recent months. Hong Kong is coming back, albeit slower than some might have expected. How does DFS read the situation?
“We’ve been in those markets for so long, Hong Kong in particular, where we see this amazing resilience. One should never give up on Hong Kong and this ability to reinvent itself,” Vuchot replies.
“I think the footprint and the quality of the teams that we have both in Hong Kong and in Macau means we can weather the storms.” DFS’s combination of resilience and agility sees the company in a good place, despite the inconsistency of the spending recovery, he believes, the strong Golden Week numbers further fuelling that conviction.
“There’s no doubt that the sentiment in China’s economy probably dampens customer confidence a little, and therefore their choices may be slightly different to what they were planning in the past. But nevertheless, particularly with the limited options to travel outbound from China because of a lack of airline capacity and high prices, and some friction over securing passports and visas, destinations like Hong Kong and Macau are a very natural and organic choice.”
This rendering shows the DFS Yalong Bay DFS Circle Members’ Lounge
Multi-channel presence
The Yalong Bay project and the company’s recent luxury store openings at Chongqing Jiangbei International Airport underline an interesting diversification of DFS’s retail footprint which by 2026 will embrace offshore travel retail, Chinese domestic airport shopping, downtown locations in multiple locations, a resurgent airport business and a fast-growing online business. That’s a well-balanced spread, I suggest.
“I think while we are well spread, we’re also very focused,” Vuchot responds. “We don’t want to spread ourselves too thin because we like to do things well. That promise of quality, of excellence that you see in the execution of our projects and in the execution of our customer experience cannot be compromised by trying to do too many things.
“There’s also a lot of competition, a lot of new players if you compare to maybe ten years ago. But that doesn’t mean we need to compromise on what we think is right for DFS, for our customers and partners. That community that we have with the brands, the landlord communities and our customers is something that we take very, very seriously with a lot of passion.”
As our conversation draws to a close, we return to Yalong Bay. How does the company approach a development on this scale? DFS is hardly a stranger to mega projects – witness Samaritaine Paris and T Fondaco dei Tedeschi by DFS in Venice – but this surely ranks as one of its biggest and most complex challenges.
“I would refer to the DFS pioneering spirit. When [DFS Co-Founder] Bob Miller put the flag on Hawaii [in 1962], there were not a lot of people behind him at the time. And then the company continued to grow and to go to sometimes quite remote locations, such as Saipan and Okinawa. So you have to think big and bring people around you, and that reflects a lot of credit on the DFS spirit.
“We have an amazing team, and it’s a team that will put on their backpack and just take the first flight to go and support the vision of the company. That’s something I’m very proud of, and I’m very grateful to our team because that’s how we’re going to win – through our people.
“People are sometimes not familiar with the history. But what DFS achieved with the government of Okinawa over 20 years ago was the inspiration for the offshore duty free that we see now in Hainan.
An architect’s impression of the majestic DFS Yalong Bay property
“DFS has been in Hainan for 15 years in different ways and forms, and that’s why we’re so passionate about it. And while we’ve never done something of this scale before in Hainan, I think there is a very strong bond that we have there.
“The proximity of our headquarters and the strongholds that we have within Hong Kong and Macau gives us a lot of confidence that we’ll be able to redeploy a lot of energy, and a lot of talent investing in China for China.”
Vuchot praises the role of DFS China President Nancy Liu in driving the company’s presence there. “She’s a wonderful addition to the team and she’s been working incredibly hard with the rest of the players in making this deal in Hainan possible.
“So like everything, this development is an evolution rather than a revolution for DFS because we have proven in the past that we can be successful in a big way and that complexity is something that we like to tackle. We want to create that seamless customer experience and strengthen our partnerships in advance.”
The company’s accelerated digital advancement is key to that seamless experience, Vuchot adds. “That’s the point of innovation that I was referring to. There’s innovation in categories and innovation in experience. But the journey of the customer today starts in the palm of their hands.
“If you’re not visible and if you’re not communicating your vision and who you are at the beginning of that journey, it’s very difficult to reconnect later if you’re not consistent and engaging them. So digital is a new muscle that we’ve built over the years and I think being more present in China will give us even more opportunities to continue developing that.”
Our time is up as we both have a busy trade show to visit. So, as we close out 2023 and look to 2024, is DFS in a good place, I ask.
“DFS is always in a good place,” Vuchot responds with a smile. “We have this fighting spirit and we don’t give up.”
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