Alain Maingreaud: The future of travel retail

Alain Maingreaud, president of Tax Free World Association (TFWA), spoke at TFWA China Reborn virtual event on the opportunities in China and the future of the duty-free and travel retail business.

Held from 1-3 December, the TFWA China Reborn virtual event was unveiled after TFWA President Alain Maingreaud’s opening speech.

First, Maingreaud highlighted the importance of coming together as an industry, as the business adapts to what he described as a “changed world”.

He said, “virtual meetings have been a lifeline for many, enabling businesses to continue and families to stay in touch. They have allowed our industry to overcome the communication challenges posed by COVID-19, but we know that direct human contact is the basis on which our business is built and prospers.”

As he recounted, sales of duty-free and travel retail continued to grow in recent years until the outbreak of Covid-19.

“It seems an age ago, but 2019 finished on a positive note for duty-free and travel retail, with total global sales reaching US$86.4bn based on the latest data from Generation Research. That represents an uplift of +9.9% versus 2018,” he said.

However, this growth swiftly turned negative as coronavirus spread at the start of the year, with few predicting a fast recovery following weaker demand for air travel in August and September.

Maingreaud continued, “the extent to which our world has changed would have been unimaginable 12 months ago. The disruption to international travel brought by the pandemic has already been covered extensively in the trade press, and the resulting impact on our industry is something we have all faced directly since March of this year.

“The International Air Transport Association recently revised downwards its passenger traffic forecast for this year, predicting a drop of 66% versus 2019. That seems entirely possible based on the Airports Council International assessment that international passenger traffic fell by 64.5% year on year during the first half of 2020.

Maingreaud quoted the prediction of US aircraft maker Boeing’s vice president of commercial marketing that they think it will take five years or longer to recover to the long-term trend, as airlines around the world cut their fleets and bring forward the retirement of other planes.

In the meanwhile, he reckoned there were new possibilities emerging in the duty-free and travel retail sector. He highlighted new developments in China, which has seen the fastest economic recovery of all global regions since the start of the pandemic.

“China’s duty-free and travel retail market is a prime example of what can be achieved when stakeholders proactively embrace change in a supportive, regulatory environment,” he said.

“The Chinese government’s success in bringing the pandemic under control and the strength of the subsequent economic recovery has helped fuel the substantial rise of sales to Chinese travellers in off-shore and downtown duty-free stores.

“The surge in domestic tourism has increased footfall at these outlets. But it is the government’s new duty-free policy for Hainan island, added to the development of new free trade ports, that is playing a decisive role. In July, the annual shopper allowance was more than tripled to around US$14,000 for purchases made on the island. The range of goods available there has also been expanded to include wines & spirits and tobacco, along with smartphones, laptops and other high-demand items.

“In addition to these changes, the award of three new duty operating licenses this year, two of them for Hainan, is encouraging an element of competition among operators. The results have been impressive. In the four months ending 31st October, more than 1.7 million people visited Hainan’s duty-free stores, a rise of 59% on the previous year. Total duty-free sales were over three times the 2019 figure at US$1.81bn.”

Maingreaud highlighted the success of China Duty-Free Group as further proof of China’s economic resurgence, with CDFG becoming the world’s largest travel retailer by revenue for the first six months of 2020. He added that the group’s CDF Mall in Sanya had benefited from several high-profile summer activations by prominent luxury and duty brands which had used strong digital elements to amplify their effect.

With the pandemic bringing e-commerce to the fore in markets around the world, he said China will be at the epicentre of the next stage of development within duty-free and travel retail. However, while online and digital would be “crucial” to the industry’s short- and long-term development, Maingreaud said bricks-and-mortar will continue to play a vital role. Over recent weeks, a number of leading brands have chosen to open new boutiques in Sanya, clearly seeing the benefit of a physical retail presence at high traffic destinations like the CDF Mall.

A similar blend of physical and digital elements will likely be the formula for future TFWA events, including the forthcoming TFWA Asia Pacific Exhibition & Conference taking place from 9-13 May next year.

He said: “Given the present uncertainty affecting international travel, we are keeping an open mind about the format of this event. We will take into account the wishes of our own members and the wider industry, as well as local conditions throughout the region as we make our plans. Yet Asia Pacific’s importance to duty-free and travel retail makes a regionally focused event essential, whatever shape it takes.

“More than ever at this difficult time, TFWA’s role is to bring our industry together, whether in person or virtually, as part of our mission to provide the business with the platform for growth.”

While the pandemic is having a devastating impact on duty-free and travel retail business, Maingreaud hoped operators would continue to adapt and “not retreat from the progress made over the last decade” in order to prosper when traveling is back to normal.

“Once seen as a channel only capable of selling a limited selection of high rotation products at a saving to domestic markets, our industry has in recent years managed to build vibrant retail environments that can rival the best on the high street. Our stores now offer an eclectic mix of brands. The increasing use of technology is creating a more engaging shopper experience.

“Our appeal to travellers when international traffic resumes depends on our ability to generate excitement in store. We must harness that ability to emerge stronger than ever from the pandemic.”

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