PARIS — Travel retail is deep in the doldrums, yet again.
First, there was the steep drop in air-passenger traffic worldwide because of the terrorist attacks Sept. 11, 2001. The industry recovered, only to be hit hard once more by the war in Iraq. And, most recently, there’s the SARS outbreak. The disease’s latest casualty was the TFWA Asia-Pacific travel retail show, which was scheduled to take place in Singapore next month but was canceled on Wednesday.
"SARS did what the war didn’t do," said Leon Falic, a principal at travel-retailer operator Falic Group. Namely, it stopped people from traveling to and from the Far East.
"The commercial repercussions are alarming," noted The Moodie Report, a travel-retail newsletter published jointly by Moodie International and Generation Group, in its latest edition. "Major retailers in this business are talking of calendar year sales being halved or more, with some markets such as Hong Kong reporting decreases as high as 80 percent since the SARS virus really took hold."
Arno Sticher, La Prairie’s general manager for Asia, characterizes the SARS situation in the region as "catastrophic. You can already feel the effects in the numbers. It’s devastating."
He explained La Prairie’s travel-retail business in Asia had been booming — registering high-double-digit increases during the first three months of this year. "But since the end of March, there have been massive declines. The airports are empty and there’s no end in sight," he said.
As a result, La Prairie pushed back its launch and promotional schedule in Asian and Middle Eastern travel-retail locations. "We hope the business bounces back in the second half, but [the recovery] doesn’t lie in our hands," he said.
Other company executives, such as Maurer + Wirtz’s international sales director Gottgried Weiergraber, maintain it’s too early to gauge the fallout from the SARS scare.
"First, there’s sell-in, then sell-out, [so] if there’s an effect, it’ll be felt later," said a Beiersdorf spokesman, who added: "There’s been no visible change in our Asian business.""But from a longer standpoint, the crisis could affect turnover figures," said a spokeswoman from Cosmopolitan Cosmetics, Wella’s fragrance and cosmetics arm.
Under atypical market conditions, companies are reacting as best they can, with many canceling avoidable executive travel to keep risk levels at a minimum.
"We’ve asked all our employees not to go to the Far East," said Christian Courtin, Groupe Clarins’ president and chief executive officer. "If it’s not absolutely necessary, you can always postpone a trip."
At L’Oréal, a similar policy’s been instituted, a company spokesman said.
In fact, so few companies’ executives would travel to Singapore that it seemed certain to many observers that theMay travel retail show would be canceled. When it finally was called off, beauty executives praised the move.
"It’s not an easy decision, but for both economic and health reasons, it was a reasonable decision to make," said Fabrice Weber, vice president and general manager, travel retailing worldwide, for the Estée Lauder Cos. "In this economic climate, it’s difficult to justify the value of investing in an overseas trade show…and there are also significant concerns about SARS."
Many beauty firms, such as Micys, ArtDeco and Morris, had pulled out of the TFWA show before its cancellation.
Numerous factors played a role in the decision. "Of course, there was the risk you would get ill, but then once you have gone to one of the ‘at-risk’ countries and have it on your passport, it makes it a big hassle to visit other countries," said Martin Trout, export manager at Morris for the Middle East, Far East and Latin America. He explained that in returning to home countries, there could be problems, too. "You could get hassled in passport control, and I know a lot of companies that have told their employees to stay away from the office for 10 days after returning from a country considered at risk."
However, beauty executives concur the TFWA Asia Pacific cancellation is a loss.
"It would have been important for us to be in Singapore," explained a spokeswoman for ArtDeco. "Asia has strong potential, and it’s the next market where we can really expand."She added the brand’s expansion there hasn’t been shelved, but pushed back. "We’ll take care of our [Asian] contacts from here, though it’s important to be on site," the spokeswoman said.
Overall, executives remain bullish for the future. "Travel retailing is definitely seeing unexpected challenges, but the reality is the industry historically has the ability to rebound quickly from difficult market conditions," said Lauder’s Weber. "We came out of the 9/11 challenges in great shape, and we are extremely confident that the market will come back soon."
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