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SINGAPORE — The high-flying world of travel retail has spotted the future over the horizon, and it is the Chinese consumer.
For the second year, the Tax Free World Association commissioned a study by ACNielsen on the shopping habits of Chinese travelers. There also was an analysis on Indian consumers. Both studies stoked an already buoyant mood at TFWA’s Asia-Pacific exhibition here in May.
“The future is bright,” said Alain Cadet, operational marketing director of travel retailing for Christian Dior Parfums. “If you look at the prospects of the demographics traveling in Asia, especially the Chinese, the potential is great.”
“This is the fastest-growing region in the world [for travel retail],” said Andrew Ford, chief executive officer of TFWA. “One main reason is an increase in travel: While the global increase is about 4.7 percent, in Asia it’s above 8 percent annually. There are also rising income levels.”
Chinese travelers are estimated to number 36 million this year, and this figure is expected to jump to more than 100 million by 2020, according to the World Tourism Organization. Already, customers are spending an average of $928 per person when they travel, and nearly half are buying cosmetics products, according to the ACNielsen study.
“China will be [a significant demographic], just from the sheer number of travelers,” said Art Miller, managing director for global travel retail and Asia-Pacific distributor markets for Revlon. “It’s just a matter of time — whether it’s the short or medium term, but certainly not the long term — before the primary force in travelers throughout the Asia-Pacific region, and maybe further abroad than that, will be the Chinese consumer.”
Beauty exhibitors agreed that Asia’s duty free and domestic markets are the industry’s main focus at the moment. According to the TFWA, consumers spent an estimated $7.56 billion on perfumes and cosmetics in duty free and travel retail outlets worldwide in 2005, and shoppers in Asia and Oceania accounted for $2.2 billion of those sales. In addition, new travel retail prospects — including an airport in Bangkok scheduled to open later this year, and airport developments in hubs like Hong Kong, Singapore, Beijing and New Delhi that are now in the works — have made the region ripe for progress.
“There are a lot of new opportunities here,” said Markus Stauss, operational marketing director for travel retail worldwide at Coty Prestige, which holds the fragrance licenses for brands like Calvin Klein, Marc Jacobs and Vera Wang. “Big changes are happening all the time. Europe is a strong market and it does very well, but there’s not an increase in business like there is here.”
Coty Prestige hopes to bank on this growth with the fragrance Calvin Klein Euphoria Blossom, which just recently rolled out. Euphoria Blossom — a lighter, more floral fragrance than Calvin Klein Euphoria — was developed to suit Asian tastes. The company is also focusing on increasing the presence of its Lancaster skin care line in Asia, which it is building in domestic markets like Singapore, Thailand and China.
The airports are also offering brands more retail opportunities, starting with Singapore’s own Changi International, which saw nearly $630 million in retail and dining sales last year. “The way they do the airports here is so different from Europe, and they’re doing an excellent job,” said Frédéric Garcia-Pelayo, director general for Inter Parfums, which holds the licenses for brands like Burberry and Lanvin. “There’s a lot to be learned from this region. They’re very retail- and service-minded, which is something that can be missing in other parts of the world. Everything is done here to keep the consumer happy.”
Coty Prestige and Inter Parfums are not the only fragrance-focused companies looking to make inroads in the Asia-Pacific market. Traditionally, fragrance sales have been much weaker in Asia than the rest of the world, but brand executives say that is beginning to change.
“Fragrances are progressing a lot in Asia,” said Luc Delfosse, vice president of international sales for Selective Beauty, whose scents include Agent Provocateur and Sonia Rykiel. “There’s a big difference between even a few years ago and today. One main reason is gifting. People might not be using large amounts of fragrances like in the Middle East, but more and more they are buying fragrances as gifts, particularly if it’s a prestigious name.”
Fragrance companies said that, in general, Asian consumers prefer lighter floral or fruit scents to the heavy, musky smells that are popular elsewhere.
The importance of the Asian market has led many beauty companies to develop more products with those consumer preferences in mind. YSL Beauté is launching its first Asia-focused fragrance this fall. The fragrance will appear in domestic markets in September and in travel retail outlets in October, according to a YSL spokesman. Ferragamo Parfums, riding the success of its Asia-focused fragrance Incanto Dream, which launched last year, and this year’s Incanto Charms, considers Asia a key market for its new signature fragrance, F by Ferragamo, which will make its debut in September.
“Our involvement and investment here are absolutely increasing,” said Paolo Bevegni, export director for the company. “In particular, we are going to do a very big advertising investment in Asia for the first time this year. That will include, for example, TV advertising in Korea for the first time for the launch of F by Ferragamo.”
Christian Dior Parfums expects its travel retail exclusive fragrance, Forever and Ever Dior, which launched last month, to be very popular in Asia. The brand is also introducing Asia-specific products, including a lipstick line called DiorAddict Ultra-Shine 2, which also made its debut in July. The lipstick is the first product created in collaboration with the company’s Asia Innovation Center, a research and development unit that opened last year in Tokyo, according to Cadet.
Claudio Tenan of Euroitalia, which holds the fragrance licenses for Versace and Moschino, said he is also concentrating on Asia this year. The company is focusing on two Versace scents: the new Versace Man Eau Fraiche, and Versace Bright Crystal, which will roll out in the region in September.
“When we took over the Versace brand a year ago, [Asia-Pacific] was one of the key weaknesses of the brand,” said Tenan. “There is a huge focus on Versace in Asia this year for us. We are aiming to more than double the business in Asia compared to last year.”
“China is one of our biggest focus areas this year,” said Jessie Teng, assistant marketing manager for Shiseido. “The past two years have involved a lot of planning and development for us, and we’re expecting to move into travel retail in the country very soon. There are so many more Chinese travelers than ever before.”
As competition increases, companies say a strong domestic presence in China is necessary to get the attention of the Chinese when they’re abroad. And even those who are still developing a presence in the market are finding that Chinese travelers are rising on their radar.
“We do have a domestic presence in China, but it’s not fully developed,” said Caroline Cheung, president of Escale, the worldwide duty free agent for Jurlique. “With that in mind, it’s mind-boggling how quickly the Chinese are learning about the brand and the products. In the late Eighties and early Nineties, we’d see Japanese tourists coming to shop with a long list of products to buy; now we’re having that same experience with Chinese consumers.”
Confirmed Paul Tager, travel retail manager for Europe and Asia for Kenzo Parfums: “Wherever the Chinese are going, we’re seeing growth.”
But some brands said their Asia focus remains on developing markets like Korea, Thailand, India and Taiwan. One reason is that China’s high product registration costs and lengthy process still make it difficult for brands, particularly smaller ones, to consider entering the market.
Smashbox Cosmetics, which has expanded to nearly 50 new countries in four years, is one company that is skipping China for the moment. Instead, Smashbox is looking to finalize distribution deals for Thailand and Taiwan, with Indonesia, Malaysia and Singapore coming up next. The company is also growing its presence in markets like Korea and Hong Kong, where the first Smashbox stand-alone store worldwide opened in the fall.
One major new market for the company this year could be India, where it sees more immediate potential than China. “Personally, we don’t believe that the spending power to buy products is there yet [in China],” said Norm Barsky, vice president, international, for Smashbox. “All the big companies are there and the stores are beautiful, but they’re also empty. We think the money it would cost to register in China could be better used to develop our products, image and awareness where we can be sold right away, and I believe that India is one of those places.”
To be sure, India holds a lot of potential for beauty companies. Its burgeoning middle class now numbers about 300 million, and Indian international travelers amount to about seven million and are expected to grow by 10 percent per year, according to industry reports.
The TFWA study by ACNielsen found that Indian travelers spend an average of $900 per trip, with 84 percent buying fragrances and 46 percent buying cosmetics.