By  on June 6, 2007

SINGAPORE — When it comes to duty free sales aimed at Chinese consumers, beauty companies are coming together on a strategy: Go deeper.

Developing a presence in the country's major airports of Beijing, Shanghai and Hong Kong is no longer enough to capture the booming China travel retail business, said beauty exhibitors at this year's Tax Free World Association Asia Pacific conference, which was held here last month. To reach the 34 million — and counting — Chinese traveling abroad, it is becoming increas­ingly impor­tant to establish a presence in the country's secondary airports, such as Dalian, Guangzhou and Shenyang.

"There are now around 20 international airports in China," said Terry Chua, the director of travel retail in Asia/Pacific for Coty Prestige. "Their infrastructure is developing very quickly. There is a lot of activity, and a lot of opportunities."

To tap into the growth, Coty opened new counters in Dalian and Guangzhou in February, and is now looking at expanding into airports in Qingdao and Shenyang.

"I think we can expect to see an even bigger increase in business [in secondary airports] as the Olympics approach," Chua noted. "More people are coming in to Beijing and Shanghai, and are taking time to see surrounding cities as well. There will be a halo effect with the secondary cities."

Coty, one of 55 beauty exhibitors at this year's event, was promoting its newest fragrance, CK in2u, which had just been launched in Asia the week before. The number of participating beauty companies at the event was up from 49 last year with 19 new exhibitors, including Estée Lauder Travel Retail, Beauté Prestige International and Procter & Gamble Prestige Products.

Perhaps the biggest buzz among brands was over several duty free developments in Macau, expected to be unveiled next year. Macau, a former Portuguese colony near Hong Kong that is now part of China, is the casino capital of Asia, currently attracting 22 million visitors per year — nearly half of whom are from Mainland China. The upcoming airport and downtown duty free locations — coupled with the ongoing arrival of major new casinos like the Venetian Macau, set to open this summer — promise a lot of potential for travel retail sales."Macau is exciting by itself, with or without duty free," said Damien Tonneau, travel retail regional director for Asia/Pacific for Groupe Clarins. "There are new hotels, new casinos, a lot of energy. If you add duty free development along with that, it's a lot to be excited about."

The mood at TFWA was overwhelmingly positive, despite the ongoing challenges the travel retail industry has faced in the past year due to security limitations on carry-on gels and liquids. At first, Asian airports were largely unaffected by the restrictions imposed in the U.S. and Europe after the London terrorist threats last October, but many — such as Singapore's Changi Airport, a major regional hub — have begun to impose such restrictions.

"There was a delay before the Asian airports adopted the same restrictions [as U.S. and European airports], and we're just starting to see the effects," said Chua of Coty.

Despite the new restrictions, most companies view the Asia duty free market as unstoppable. Several recent major airport developments have recently been unveiled, such as Tokyo's Narita 5th Avenue, Hong Kong's Skyplaza and Bangkok's new Suvarnabhumi Airport, and more are under way in much-watched hubs like Seoul, New Delhi, Beijing and Shanghai.

"There are so many projects going on in the region," said Jean-Charles Viti, regional director for Shiseido Travel Retail Asia/Pacific. "It's one after the other, and it has made the region even more exciting. And everything is a huge project; there is nothing happening that is small."

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