Dufry underlines role of Asia and digitalisation in next phase of evolution
As it revealed its annual results last week, Dufry described 2020 as “the toughest year in the history of travel retail and of Dufry”. Speaking to the investment community, CEO Julián Díaz looked ahead and homed in on the importance of expansion in Asia and of its digitalisation strategy as key platforms for recovery.
“Are we making a significant move in Asia? Yes. And the first step is clear: it is China, online and offline.” Speaking to investors last week as Dufry revealed its full-year results for 2020, CEO Julián Díaz outlined several key planks on which the future of the company will be built. Asia – traditionally a market in which Dufry has been under-represented – will be a target for expansion, a strategy that will go hand-in-hand with the further digitalisation of the company, with vital input from shareholder and joint-venture partner Alibaba Group. There was strong interest among the investment community in how Dufry’s Asia strategy would take shape, and the role that will be played by Alibaba, after the partners struck a JV last October. Díaz said: “What we want to do is not just develop retail but also online retail in Asia. For this, Alibaba is the best possible partner.
Julián Díaz: Laying the foundations “upon which we will emerge as a stronger company”
“We are expanding in China, where we are trying to connect all the platforms to reach the consumer. If we can create in China a good example of how to operate both online and offline, it would be a good start. It can then have an impact in other countries because once everything is normalised, the Chinese will still play a relevant role in expanding travel retail, especially in Asia.” Díaz said that the three-way partnership between Dufry, Alibaba and Hainan Development Holdings to open at Mova Mall, Haikou in late January, offered positive signals about how the business could develop. As reported, with further openings between Q3 2021 and Q1 2022 the project will ultimately span 38,920sq m of space, offering around 350 brands across categories. Speaking last week (a further interview about the HDH partnership appears below), Díaz noted: “This is one of the most successful openings I have seen, with long queues and strong sales. We are partnering with HDH and Alibaba to enhance the customer experience. Online is also very relevant, with 25-30% of sales through these new shops being made online.” He noted that online sales channels already in place at the new complex include Reserve & Collect, home delivery, WeChat Mini Programs plus promotions via Alipay and Fliggy.
Dufry 2021 priorities
Preparing the organisation to re-initiate profitable growth, with Asia and digitalisation high on the agenda
Explaining the three-way partnership further to investors, he added: “We cannot invest in duty free in China as Dufry ourselves. So we provide services to the operation and [revenue comes from] inter-company charges, management fees and income from the joint-venture company with Alibaba. From the commercial point of view we are all together. Most brands know Dufry so it is relevant for us to lead the external communications.” On driving digitalisation with Alibaba, Díaz said: “We are developing joint initiatives. First we are undertaking an assessment about the digital capabilities in our IT set-up. This is a starting point. “We want to be in the digital market, using data to understand passenger evolution and target customers before they travel. You need to be engaged. Our digital moves are about data collected by our organisations, all addressed towards increasing spend per pax and spend per ticket. Also, we are looking at how to step forward in the digitalisation of the ‘smart shop’. This is a reality already; using technology to attract the passenger into the shop and to drive penetration. It’s the idea that the shop can promote directly to the passenger with offers [using] our database.”
Snapshot from a tough year: Dufry turnover and organic growth by region in 2020
Welcoming the Hainan alliance
Dufry CEO Julián Díaz spoke to The Moodie Davitt Report Chairman Martin Moodie about the late January store opening with respected provincial government-owned entity Hainan Development Holdings (HDH), and how the partners aim to develop opportunities in the booming travel retail market of Hainan.
The Moodie Davitt Report: Julián, this partnership represents Dufry’s debut in the key Hainan market. Talk us through the significance please.
The common understanding with Hainan Development Holdings to develop opportunities in the Chinese travel retail market is a key step as it allows combining the skills of two distinctive market players.
Dufry contributes its global experience in customer profiles, procurement network and access to brands, as well as shop design and marketing. Together with the strong positioning of our local partner Hainan Development Holdings, this creates a powerful offer and an array of great omnichannel shopping experiences for customers in China, Hainan and other Asian countries.
The Hainan market has seen tremendous growth over recent years, particularly so since the new offshore duty free policy was introduced on 1 July last year. How transformative for Dufry – particularly in Asia – is this development?
Hainan is a very interesting market not only for its growth potential, but also for the specific customer profile and shopping habits of its visitors.
I think that our worldwide procurement network and the access to famous global brands within the major categories such as luxury products and watches, as well as perfume & cosmetics and spirits, is a major asset, which will contribute to the development of this market.
On the other hand, I also expect to transfer to other parts of our business the learnings which we will make in Hainan and China with respect to the in-depth use of digital technologies to engage with customers along their complete travel journey. As Hainan will be a major destination for several Asian countries and nationalities, this know-how also positively impacts our other operations in Asia and the engagement with Chinese travellers around the world.
The Hainan offshore duty free will be particularly competitive from early 2021 on, with multiple new operations in place. How confident are you of growth prospects for your partnership in Haikou with Hainan Development Holdings?
Hainan Development Holdings is a well-known and established player in Hainan, already holding a respected retailing position on the island and in its capital city Haikou.
This is important, as the shopping destination itself is already a strong attraction for Chinese customers. The increasing wealth in China and Southeast Asia provides an immense potential for new customers over many years to come, thus allowing us to further develop our presence in Hainan and China. Moreover, as Dufry is present not only in Hainan but also in connecting destinations, this is a double opportunity to serve these customers on departure and arrival on both ends of their journey.
Bright outlook: The Global Duty Free (GDF) Plaza run by Hainan Development Holdings with support partnership from Dufry at the Mova Mall in Haikou
Any other message for the travel retail sector after the toughest year in Dufry’s and the travel retail sector’s history?
2020 has clearly shown that the key to success for our industry is the tight cooperation and the close relationship we have with our landlords and suppliers. This collaboration needs to be further intensified through new forms of collaboration adapted to the new environment.
The need to find common new solutions to overcome the 2020 crisis has shown the additional potential we have to evolve the offering and the customer access of our industry. But to be successful in serving the customer in a profitable way for all players, we need to reform the contractual relationships and increase the flexibility of the forms of collaboration.
This is ultimately a great opportunity to take key learnings out of the 2020 experience and use them to develop new win-win collaborative approaches for the future.
This panel originally featured as a story in our February Magazine and Hainan Special Report. Click here to access.
The Moodie Davitt eZine Issue 292 | 15 March 2021
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