Duty free promos spur growth of gold, perfumes

Duty free special promotions and traveller' packs are offering a massive opportunity for large FMCG producers and luxury goods brands in the region.

This is especially evident in the first quarter of 2010 as the Dubai Duty Free (DDF) braced itself to brave the global economic downturn in the midst of its 25th anniversary celebrations.

In April, the DDF reported a substantial 21 per cent rise in sales in the first quarter of 2010 to Dh1.1 billion. Perfumes and gold continued to be among the top-selling categories at the DDF in the first quarter, with perfume sales rising by 23 per cent to more than Dh150 million and gold sales rising by 22 per cent to Dh123m.

George Horan, Deputy Managing Director of Dubai Duty Free, told Emirates Business that "the reasons behind the increase are numerous. Of course, the increase in traffic has contributed towards the increase in sales, but it is not the only factor. Coupled with this return of confidence, Dubai Duty Free has worked very closely with suppliers on a continual basis to provide an extremely attractive retail offer on a range of products".

"Towards the second half of last year, we had seen a turnaround in our sales and in fact ended the year with an overall sales increase of 3.76 per cent with sales reaching $1.1bn. In early 2010, we felt a distinct return in consumer confidence resulting in an increase in passenger spending, particularly in sectors perceived as 'luxury goods', be those perfumes, cosmetics, gold, jewellery and electronics among others," said Horan.

"In the course of the first quarter, there have been literally hundreds of promotions and these were attractive to passengers. Based on our experience gained in 2009, we recognise that although passengers are now willing to spend, they are still looking for added value and we are trying to accommodate that by working with suppliers and in-house."

Horan said: "We have used all our promotional areas to full effect in Terminals 1, 2 and 3. And the introduction of relatively new promotional areas since the opening of Terminal 3 has boosted the visual impact particularly of those related to perfumes and cosmetics offers.

"In addition, the past few months have seen numerous seasonal promotions. For instance, a dedicated promotional area was set up to coincide with the Chinese New Year, as we identified the steady growth in Chinese passengers. The products featured were mainlygift items, including confectionary, beverages and Chinese tobacco products that are extremely popular. Similarly for Valentine's Day, we featured displays to appeal to the impulse buyers."

Case study

In order to study the growth of duty free sales, including promotional travellers' packs, Emirates Business looks at the sale of Beiersdorf products.

Earlier in February, Beiersdorf said its travel retail sales had increased, indicating that promotions in duty free outlets were opening up to new sales opportunities that would boost overall results in the region's markets.

Robert Taylor-Hughes, Managing Director, Beiersdorf Middle East and West Asia, spoke to this newspaper about the potential of travel retail and duty free promotions and direct in-store marketing.

Nivea, a product of Beiersdorf, was set in an assortment promotional pack that made a success across duty free markets in the region, raising expectations of a 15 per cent growth in the next three years.

In the results announced last February, you said that the travel retail (TR) sales in the region in 2009 showed a 19.5 per cent increase versus 2008. How much does travel retail contribute to your overall operations in the region?

Our FMCG business in the region is enormous, with our general skincare market share in some countries as high as 40 per cent. Our travel retail business is actually less than one per cent of our total sales but offers massive opportunity for growth.

What are the reasons for this increase?

The increase can be attributed to a greater visibility in outlets with the implementation of new display walls. We successfully completed the refurbishment of Nivea display stands in several major regional airports including Dubai Terminal 1 and Dubai Terminal 3, Abu Dhabi Duty Free and at Muscat. We also have further expanded into other countries, namely Iraq and Cyprus. We have expanded our travel retail operation to Iraq [Baghdad International], with island stands in Arrival and Departure areas of Terminal C&D in Baghdad from November 1, with a full Nivea assortment, including our popular Travel Exclusive packs. In addition, we have also entered Cyprus, with Nivea Care and Nivea Body Product stands present in the new Larnaca Zenon Terminal, which officially opened on November 17.

We have further increased our travel retail FTE headcount by 20 per cent to put more beauty advisors in touch with our consumers.

What is the expected growth of TR in the next three years?

Organically, we expect to grow by 15 per cent, but exponential growth will come from moving into other countries within our region, we expect soon to be present in Syria Duty Free, for example. Our plan is to be present in all 17 countries for which we are currently responsible.

How different is your marketing strategy in travel retail from marketing through other outlets?

In terms of our offering, we conduct category management analysis to ensure the assortment matches the needs of the passenger mix per airport. However, we see that the larger size packs are more popular with travellers as they are perfect gift items. We also offer an increasingly popular range of 'Travel Exclusive' packs that cover an assortment of beauty and make-up ranges discounted exclusively for our travellers.

How do consumers behave in terms of travel shopping, and who is your main target audience in travel retail?

Passengers looking for gift items and and self-indulgent buyers constitute majority of our consumers. We are after all competing with tobacco, beverages and confectionary for passenger retail spend.

Our key target audience caters to adult males and females with new category launches to come in the 'teens' sectors.

Is the growth in travel retail unique to this region, or is it witnessing a similar growth across different markets? Why?

The Middle East has seen an increase in passenger traffic earlier than other regions and, therefore, we can expect our growth to be ahead of the curve.

Also, we are expanding quickly in the region to meet the market dynamics but I am sure we can expect excellent growth to come from Europe as our TR division expands and starts to benefit from listing a trusted brand that everyone wants to buy and can easily afford.

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