Innovation key to boosting travel retail, TFWA boss says

Innovation, new tech to engage customers and overcoming the perception of poor value are key to attracting customers back to travel retail, the Tax Free World Association (TFWA) president has claimed.

Speaking to db, this week, TFWA president Erik Juul-Mortensen said innovation and the high level of promotion had already boosted the wine and spirits category in what he described as a “difficult year” for travel retail – and would be key in building sales in future.

“While 2016 was undoubtedly a tough year, there are plenty of reasons for cautious optimism in the medium- to long-term as more and more people take to the skies and seas,” Juul-Mortensen said. He pointed to opportunities unique to the travel retail sector, including high levels of innovation and the ability to offer travellers something different to the domestic market.

“Our industry has shown resilience in the past thanks to these two drivers and now more than ever, they remain key opportunities for duty free and travel retail,” he said.

But penetration remains key, Juul-Mortensen argued, and it is important for the sector to focus on how it can “turn the bored traveller into the spending shopper”, through providing travel retail exclusives, new technology to communicate effectively, and engaging promotions.”

He also warned that the wine and spirit sector needs to improve the perception of value for money in the eyes of the consumer, citing a recent studio by Counter Intelligence Retail which found 18% of people who didn’t buy alcohol at the airport believed prices at the airport were higher than on the domestic airport.

Although around half had said lower prices would boost the chances they would buy, Juul-Mortensen warned against just using prices as a lever.

“We need to remember that shopping at the airport or on a cruise is about much more than a hunt for a bargain,” he argued. “We need to create excitement, providing a retail experience that offers something beyond what is available on the high street.”

The most recent figures showed that although sales of wines and spirit sales had dipped in 2015, affected by currency volatility and the global economy, as well as customers’ willingness to travel fuelled by geo-political tensions and terrorism, the category had been less badly affected than all other categories other than fragrances and cosmetics, which makes up 31.9% of the sector’s sales.

Data from specialist research company Generation Research for 2015 showed growth had slowed across the travel retail industry, with wine and spirits down 2.7% during 2015, compared to fashion and accessories (-3%), confectionery and fine foods (-4%), tobacco goods (-7%), and watches and jewellery, which fell by 10.1%.

Wines and spirits remain the second largest category, with sales of around USD $10.15 billion, and account for 16.5% of sales in the sector.

Around 40.8% of duty free and travel retail sales in 2015 came from sales in Asia, with six of the top best performing countries coming from the region. It was also the only region in growth, up 2.3% on 2014. As a result, Asia’s growing middle classes was likely to continue to boost the travel retail sector, he said, as the region continued to dominate the sector, Juul-Mortensen said.

“There is no doubt that Asia will have maintained its dominant position in 2016. We know that in 2016, we have seen a decline in spending among Asian travellers, however, in the long term, we believe that the middle classes in Asia, the Middle East and Africa will be the key drivers of growth for global duty free and travel retail,” he said.