On location • Heathrow Airport

Dufry’s latest offspring joins the ‘New Generation’

On 17 September Dufry unveiled its fifth ‘New Generation’ store, this time through World Duty Free at Heathrow Airport Terminal 3. As with its predecessors – in Adolfo Suárez Madrid-Barajas, Melbourne, Cancún International and Zürich airports – the latest incarnation majors on digital engagement, personalisation, multi-lingual communication and exclusivities. Martin Moodie and Kevin Rozario were on location for the big event. We begin their extensive pictorial feature with the views of the men at the top – Dufry’s and Heathrow Airport’s respective CEOs Julián Díaz and John Holland-Kaye. For a comprehensive round-up and analysis of the new store, see the latest edition of The Moodie Davitt e-Zine.

Usually World Duty Free is associated with Beefeater gin but here Dufry Group CEO Julián Díaz (left) and Heathrow Airport CEO John Holland-Kaye are flanked by what looks like the real thing

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Dufry’s so-called ‘New Generation’ is growing up fast. Trial and error in the ever-evolving human and commercial laboratory that is airport retail has seen the company fine-tune the concept through successive expressions, culminating in September’s opening of the Heathrow Airport Terminal 3 store.

T3 has never been the easiest from a retailer’s perspective. The ceilings are generally low, the space sometimes awkward and the transition from central security to shopping zone abrupt.

The store’s long-established walk-through concept had, of course, guaranteed 100% footfall but penetration is the indicator that really matters.

The New Generation concept was borne out of a desire not only to grow penetration (and thus sales) but also to create additional value by providing enhanced customer experience and generating greater efficiency. Digital technology lies at the heart of the concept, designed to change three key parameters: how it communicates with customers; how it sells to them; and how it organises both processes and the value chain. Critical elements include nurturing a Sense of Place and building strong in-store digital components. These allow Dufry to talk to customers in their own language and to adapt its messaging and promotions to the nationalities and customer profiles present in the shop at different times during the day. Other key components of the approach include a much greater focus on exclusivity (after all, Amazon or Alibaba cannot undercut a product that they cannot sell), service and personalisation.

Big bold and open: Dufry’s latest New Generation store raises the bar on consumer engagement at Terminal 3

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All of this and more are on show at T3. So how has the fifth edition of the concept been realised? According to Heathrow Airport CEO John Holland-Kaye, very well indeed. “What I love about the new World Duty Free store at Heathrow Terminal 3 is that it has really taken retailing up a notch, and this is a time where for many airports and around the world, retail is under pressure,” he says. “It’s a hugely important part of an airport’s income. It helps us at Heathrow to keep the landing charges low for passengers, and that’s why it’s so important that if people want to shop, we give them a chance to do so, and this is a fantastic offer.

“It flows very nicely. We’ve got some really fantastic, exclusive products here that won’t be found at any other airport in the world, and of course World Duty Free is one of the best airport retailers in the world. They really know what passengers need and they’re very good at serving them and doing so quickly and efficiently. This is a stunning retail space – with great use of digital. I think we’re going to see more of that in airport retail to really engage with passengers, bring products to mind, but also using digital before they come to the airport.

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Digital media isn’t just sales and promotional messages. It can also convey Sense of Place.

“We’re doing a lot of work with World Duty Free to make it as easy as possible for people to plan their journey and to order things in advance, so they get absolutely what they want as quickly as possible and they can get on their way.”

Dufry Group CEO Julián Díaz was equally upbeat on the day, admitting that he was delighted to be in a retail location that was booming even before the make-over and is likely to get a whole lot better now, especially with the British Pound Sterling still in the Brexit-driven doldrums.

“The most important moment in the life of any retail operation is when you open the door and the customers go through,” he says. “The important thing is when you see the faces of the customer here in your shop, crossing from one side to the other, stopping and buying something. This is the test… has the penetration rate increased significantly, and the spend per passenger increased significantly?”

Díaz says the key to the company’s digital emphasis is engagement. “The main thing is how to engage with the customers and engagement has different aspects. One is communication and the best communication method that we have found to really engage with the new [generation of] customers is the digital screen. Here we have 45 different standalone digital screens and the messages on those screens is obviously the most relevant thing. This store is alive. This store communicates depending on the nationality and the time of the day and the time of the week and the time of the year in a different way to the customers than any other store has done.”

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Julián Díaz on Dufry's latest generation

Heathrow Airport CEO John Holland-Kaye talks world-class shopping

Heathrow's Retail & Service Proposition Director Chris Annetts

The partnership between Dufry/World Duty Free is borne out of common goals, says Holland-Kaye. “We’re here to serve our passengers and World Duty Free is a very passenger-centric organisation,” he says. “So, our interests are entirely aligned, and we work hard to encourage people to come to the airport, to think about shopping while they’re at the airport. We aren’t a retailer; we’re an airport. We’re here to serve passengers and get them on their way, but retail is an important part of our economics. It helps us to fund the world-class terminals that we’ve been building here at Heathrow and make it one of the best airports in the world.”

Meeting of minds: Julián Díaz and John Holland-Kaye are both delighted with the commercial performance at Heathrow Airport this year

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Heathrow’s numbers this year speak for themselves. For the first six months, retail revenue per passenger rose +2.2% to £8.62 and retail revenue surged +4.8% to £328 million, outstripping a +2.5% passenger increase.

“Heathrow has been doing extraordinarily well over the last few years,” says Holland-Kaye. “Now of course we’re planning for expansion [notably the new third runway -Ed] and significant growth will come with that, but of course we have to pay for that expansion. It will be privately funded. So, having a very successful business model, as we have, is really important. Encouraging passengers who want to spend money with us is a critical way of keeping us competitive through that expansion phase, and that’s why we’re delighted to have partners like Dufry who do such an outstanding job of serving passengers.”

Díaz, buoyed further by the likely return of duty free sales to EU-bound passengers from 29 March, 2019, is in upbeat mood but says much remains to be done to maximise the opportunities. “This store is a significant improvement compared with the original ideas we had [for the New Generation concept]. But, in my view, there are still a lot of things to do. And the most important is always to really learn about the customers. We are making a tremendous effort worldwide in understanding the change that is happening very fast in passenger profiles and about passengers’ motivations for buying in travel retail.

“But I am confident, because travel retail is a very healthy business from the customer point of view. The number of customers will grow by around +6% a year in the next three years. That’s hundreds of millions of people. And not many retail activities can really say [so confidently] that customers will grow. But what we need is to really understand these customers better for improving the penetration rate, the spend per ticket, and, finally, the spend per passenger.”

Judging by the smile on his face though as he wanders through the vast World Duty Free walk-through store, the New Generation concept will play a big role in delivering that understanding. 

Blue spells airport exclusivity at World Duty Free and the retailer’s acclaimed World of Whiskies store (pictured)

The Moodie Davitt Report • The Online Magazine • October 2018