CANNES, France — Poised on a new era of growth, the travel-retail industry is struggling to redefine itself.
The theme of this year's Tax Free World Association trade show here, which opened Monday and ran through today, was "Brand the World." It quickly became apparent that the phrase was more than a slogan as cosmetics executives and airport retail operators debated strategies for transforming their business from one driven by discounts to another featuring the allure of brands.
The fragrance and cosmetics business in travel retail has grown substantially, according to tracking firm Generation. The beauty business amounted to $6.75 billion, or 27 percent of the global travel-retail business in 2004. In 1979, beauty generated only 10 percent of the worldwide total.
Preliminary attendance figures for the TFWA show showed a 5 percent increase to 5,400 people, said Andrew Ford, chief executive officer of TFWA. Attendees from Africa and Asia had a particularly strong turnout compared with previous years. The American attendance was flat and Europe's was up. Among the exhibitors, Ford said that the number was unchanged from last year, and that cosmetics has become the largest block at 29 percent.
Erik Juul-Mortensen, president of TFWA and of Maxium Global Travel Retail, said the industry is emerging from five years of "virtual stagnation" — caused by the fallout from terrorism, SARS and the war in Iraq — to approach what he described as a "tipping point" into a new period of prosperity. This would soon be ignited by the emergence of rising and powerful markets, namely China, India, Russia and Brazil, he said.
Juul-Mortensen outlined how the industry has put itself through an ordeal of self-examination to prepare for what he hopes will be growth. But he and other executives said the industry must make basic changes, such as modifying the fundamental premise from one of offering discounts on products to creatively merchandising brands.
Juul-Mortensen warned that even though airports enjoy a level of footfall that malls "would die for," the ability of travel-retail stores to steer traffic into shops remains "poor."
In terms of penetration, only 30 percent of passengers walk into an airport shop, a cosmetics industry executive said. And of those, only one in 10 actually buys something.
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