PARIS — Leather goods are set for takeoff in the travel retail sector, traditionally known for sales of perfume, liquor and tobacco.
Airport retailers and brand executives said that even though they are weighed down by luggage, travelers are still willing to splurge on that extra bag, regardless of the price tag.
And airport operators are zoning in.
For example, last November, British Airports Authority introduced its first concept area for fashion accessories, the World Duty Free Collection, in Gatwick North Airport in London.
The shop measures 900 square feet. "We decided that we needed an edgy concept that mixed the leather goods offer with jewelry and watches, but with tax-free prices," said Beta Palizban, a luxury buyer for the area.
The leather goods brands offered range from midlevel players such as Diesel and Tabitha to high-fashion labels including Chloé and Mulberry. "Roughly 80 percent of sales…comes from leather goods, but sunglasses also drive a lot of business," said Palizban.
"The leather goods category is thriving for a number of reasons: It offers a variety of price points, targets both men and women and generates good margins for retailers," commented travel retail specialist Martin Moodie, editor of The Moodie Report. "More retailers are giving both standalone and generic space to the category, a trend that is sure to accelerate in the future."
Moodie points to the "stunning" new Narita 5th Avenue shopping mall in Tokyo Narita Airport as an example. As host to 32 shops including Gucci and Burberry, its leather goods area, he said, has dwarfed space formerly used by liquor vendors, a longtime staple of Japanese duty free. "Everywhere in travel retail, the transition from traditional to more fashion-driven categories is an important dynamic — nowhere more so than Asia," said Moodie.
Though figures for 2006 have not yet been released, total sales for luxury goods in the travel retail sector in 2005 represented an estimated $9.8 billion, according to Generation Data Bank. Of this, $1.2 billion was generated from leather goods — a 40 percent increase from 2003. "I would expect an increase of around 50 percent for leather goods in the next three to four years," said Peter Williams, chief executive officer of Alpha Airports Group, a provider of catering and retailing services to airlines and airports in 17 countries. "Leather goods are definitely increasing at a faster rate than traditional travel retail."With luxury brands wielding global identities, people expect access to them wherever they go — in a new city or an airport, he added. "Travelers now expect a shopping mall environment from airports."
With the ever-escalating number of travelers, notably from new markets such as Russia, India and China, Williams predicts the macro economy for growth is better for brands in airports than in city centers. "Travelers are often in a carefree mind-set where all of those rules about spending go out of the window," he said.
And brands are gearing up to cash in.
"Airports are the windows of the world. It"s an extremely dynamic channel for maximizing revenue consolidation and creating brand awareness," commented Clemente Hernandez, commercial director for Spain"s Loewe, which has 50 travel retail sales points, either as shops-in-shops or standalone boutiques. Seven more are planned for 2007.
Executives at French leather goods brand Longchamp, which has travel retail points in nearly all of the 80 cities where it is present, see the sector as strategic for lassoing new customers who would not necessarily go to its stores in the respective domestic markets.
"The [travel retail] sector fulfills two kinds of demand: a practical one for passengers who need a last-minute bag, as well as access for those who may have come into contact with campaigns on the domestic markets, but not necessarily the product," said Jean Cassegrain, general director of Longchamp, citing an ambitious plan to double the company"s airport business over the next few years.
Mulberry is also stepping up its presence in the sector. The brand has even developed a mobile gadget designed to ease pre-flight purchases from the comfort of the airport lounge. A leather-clad computer screen on a stand will feature a touch-screen ordering system that"s linked to the airport store via Intranet. "It will facilitate product to be delivered from the terminal store to the customer in the lounge or at the departure gate," said Lisa Montague, chief operating officer of the brand. Other options will include collection upon return flight or home delivery.
Mulberry is mulling international expansion into the busiest airport hubs via its own retail and franchise network, according to Montague. It is the first luxury brand to sign with BAA on a new site at Heathrow"s Terminal 5 that will open in March, for example. Counting three airport stores to date in three of Heathrow"s terminals, Mulberry also opened a store in Stansted Airport in June and is testing a boutique at the World Duty Free"s new accessories area in Gatwick Airport.Since airport retail is a volatile sector sensitive to economic and sociopolitical factors, flexibility is key, according to Montague, to accommodate shifting market trends.
"Mulberry"s leather goods business [in travel retail] could climb from 7 to 15 percent of total sales, but that figure hinges on air-travel passenger numbers continuing to increase," she said.
Mirroring general buying trends, it is entry-level and luxury leather goods brands that do best in travel retail, retailers and brand executives concurred.
"The midprice ranges clearly lose out compared to very cheap and very exclusive products," said Ulrike Janett-Bachner, manager of corporate communications for the Nuance Group, the giant airport retailer. "There is an overwhelming demand for luxury goods in every area at this moment, be it leather goods, sunglasses or watches."
Small leather goods, she added, were particularly popular, given their lower price point compared with bags or luggage, making them affordable for a wide range of customers who are willing to spend on luxury. "At Zurich, one of our most important locations, small leather goods from the Bally, Burberry and Emporio Armani boutiques are particularly popular," she said. Emporio Armani recently opened its second airport shop in Zurich.
"Creating sophisticated retail experiences for traveling fashion consumers continues to be a top priority for the Armani Group," said John Hooks, group commercial director of Giorgio Armani. "We are very pleased with the positive performance and results of the Emporio Armani brand in the travel retail sector." Following openings in Buenos Aires" Ezeiza Airport in November, as well as at airports in Bangkok and Milan this year, its most recent addition was in Paris" Charles de Gaulle Airport in June.
Still, there are brands that are hesitant to enter the sector. Many attribute lofty rents and lack of sophisticated environments as factors behind the tardy arrival of certain high-profile luxury brands in airports, and many labels are sticking to standalone boutiques in strategic airports, namely in Asia.
Chanel, for example, operates only six boutiques in the travel retail space, primarily in Asia, that house ready-to-wear and leather goods. But the brand is looking to expand. "Travel retail gives us the opportunity to reach new customers, with people traveling more and more," said Bruno Pavlovsky, president of Chanel"s fashion activities."Just as certain brands will choose to be situated on Bond Street or Rue Saint Honoré, say, they"re very concerned about store environments and who they"re going to be positioned next to," explained Williams, who has recruited design consultant HMKM to create a new 20,000-square-foot store in Manchester Airport in England. The firm has previously worked with high-profile fashion stores such as Harrods and Selfridges. "We"re not yet actively targeting luxury brands, but we don"t rule it out for the near future," said Williams.
Certain travel retailers are aggressively targeting leather goods brands, however, aiming to go head to head with department stores.
"Most luxury brands, with the exception of Louis Vuitton which does not distribute in any travel retail outlet, for now are distributing to at least one strategic airport across the world," commented Mathieu Daubert, manager of retail goods for Aéroports de Paris, which operates stores in both Charles de Gaulle and Orly airports.
Daubert was formerly a buyer of luxury goods for French department stores Le Bon Marche and Printemps. It"s a retail phenomenon, he predicts, that is about to change.
"Our perfume sales outdo those of any [Parisian] department store and we believe we have the potential to achieve the same with leather goods," said Daubert.
Besides Hermès, its current main leather goods breadwinner, Ferragamo and Burberry are among the few luxury brands currently distributed by the firm. But there are plans to open two "major" accessories-only boutiques in both the Charles de Gaulle and Orly airports in 2008, and Daubert said he was angling to lure brands rarely seen in the travel context. "The stores will be multibrand but will stick to the corner logic," said Daubert. "With luxury brands having gone so far to establish an identity, we have a vocation to respect that."
Communication will focus on the sector"s tax-free benefits. In terms of productivity, luxury, according to Daubert, will hold a slightly more important position. Targeting a limited offer of niche brands, such as Balenciaga, is also part of the strategy.
"It is important to cater to all types of customers, though I don"t think it"s the role of an airport to be a prescriber of trends," said Daubert, adding that he will nonetheless be seeking ways to stand out from competitors.The firm also plans to have ultra-luxe goods at the ready.
"[Customer behavior] in other travel retail sectors has proved that there are no limits when it comes to spending in airports," said Maubert, citing a recent Chinese client who bought $30,000 worth of wine in one of the firm"s boutiques.
"We are experiencing a rising number of travellers who have the means and the desire to splash out on exceptional goods."
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