The event in Cannes, France, which ran from Oct. 2 to 6, was the second to be held following a two-year hiatus due to the coronavirus pandemic. Trade show organizers aptly branded the session this year “New World.”
Travel retail really is a new world today, as the industry welcomes people back into their stores after the business ground to a screeching halt shortly after the health crisis started in early 2020. There’s a lot to contend with these days — from a changed consumer to deep geopolitical, economic and supply chain issues, to disruptions at airports, among other woes.
Yet, despite this, business is picking up.
“There’s definitely a good momentum in the industry, which is nice after so many months of uncertainty,” said Benjamin Vuchot, chairman and chief executive officer of DFS. “The consensus is things are coming back.
“There’s a sense of optimism,” he continued. “We’re guarded, of course, with the headwinds that we know are present, when it comes to inflation or supply chain issues that are still prevalent.”
All the big beauty players returned to the trade show this year, including the major U.S. corporations that were absent in 2021. There still remained a notable lack of attendees from Asia, however, especially from China, due to ongoing COVID-19-related restrictions there.
The coastal city of Cannes and its sprawling Palais des Congrès convention center were busy again, although with less fanfare than in past years. No longer did dozens of massive billboards flank the buildings and boardwalk on the Croisette. But the Estée Lauder Cos. decked the Hôtel Barrière Le Majestic with pink ribbon-adorned posters to honor the 30th anniversaries of the company’s Breast Cancer Campaign and its travel-retail division.
“We have a lot of optimism in terms of the future of the channel,” said Israel Assa, global president, travel retail worldwide at the Estée Lauder Cos. “We know that it has always been resilient and will continue to be, and we see a lot of incredible growth opportunities. There’s a lot of bright spots.”
“The market is really strong,” agreed Stanislas Archambault, executive vice president international sales and digital at Interparfums SA.
“If we look at our numbers globally, we are far over where we have ever been,” added Frédéric Garcia Pelayo, a director and executive vice president at that company.
This session of TFWA drew 5,983 visitors, up 77 percent versus the level at the prior year’s event. By comparison, in 2019, the trade show registered 7,215 people entering its doors.
In 2022, there were 387 exhibitors, as opposed to 262 stands from 272 exhibitors in 2021 and 504 exhibitors in 2019.
How quickly people start traveling broadly and buying in travel-retail shops again will have a major impact on the business of companies selling luxury fragrance and cosmetics, which remains the channel’s number-one product category. Pre-crisis, it could generate up to one-quarter of a beauty group’s overall sales.
The travel-retail market in 2021registered sales of $56 billion globally, representing a 25 percent gain versus 2020 and a 65 percent recovery against 2019. Of that, perfume and cosmetics sales came to $32.3 billion, up 19 percent on-year and an 86 percent rebound against 2019, according to Generation Research, which tracks the duty-free and travel-retail markets.
Passenger traffic is rebounding in many parts of the world, particularly in Europe, the Middle East and Americas, and in certain geographies the level is the highest ever.
Generation numbers show that in 2021 that the Asia-Pacific region fully attained pre-pandemic sales, while Africa and the Middle East registered a 50 percent recovery, and the Americas and Europe each had a 45 percent rebound.
During the trade show’s opening conference, Erik Juul-Mortensen, president of TFWA, cited Airports Council International’s forecast that global passenger traffic is expected return to more than three-quarters of its 2019 level by year-end. That, mechanically, should translate into higher travel-retail sales.
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Already, some beauty companies, such as Shiseido, have sped past 2019 revenue levels. Its travel-retail sales in the first half of 2022 rose 15 percent against the comparable period in 2021 and 18 percent versus first-half 2019.
“For Heinemann, we believe that we could [this year] be back or close to 2019 levels, and beauty at least should be in line or overperform,” said Britta Hoffmann, director of purchasing for perfumes and cosmetics at Gebr. Heinemann, which operates travel-retail stores. “We are really optimistic that at least 80 percent of 2019 is possible — even more than that. It depends if we get the products.”
Travel retail’s shape-shifting comes as no surprise.
“After two years that threatened duty free and travel retail’s mere existence, it was inevitable the pandemic would bring change,” Juul-Mortensen said. “Traveler expectations have evolved rapidly from pre-COVID-19 times.
“We are seeing a new desire among travelers to engage with brands — especially those that share our values and focus on sustainability — as well as the heightened interest in immersive actions,” he continued.
Juul-Mortensen noted travelers’ nationality mix has shifted, with almost no outbound Chinese passengers yet and fewer Asians taking trips in general. At the same time, there has been a surge of Indians traveling abroad and of Americans flying to Europe.
“The variable is really when the Chinese will come back traveling out of greater China,” said Jean-Christophe Babin, CEO of Bulgari, adding that’s not widely expected before late 2023 or early 2024.
Meanwhile, traveling shoppers are skewing younger, with the proportion of Generation Xers, Zers and Millennials who purchase in duty free and travel retail rising from 19 percent pre-pandemic to about 30 percent in 2021 and 2022, according to Juul-Mortensen, citing data from travel research specialist M1nd-set.
“So it’s getting more important for us to understand the customers — who they are, which is different according to the region; what they want, and how they purchase,” said Guilhem Souche, senior vice president global travel retail and managing director China at Coty Inc.
Coty, for instance, has a partnership with Alipay in Asia to help glean such insights.
M1nd-set has tracked some other behavioral shifts over the past five years, including people moving from gifting to buying for their own consumption, a stronger preference for planned shopping versus impulse purchases and a new willingness to engage with sales staff.
“What you see is the category mix is coming back a little different, because the Chinese are not traveling,” said Peter Jueptner, president international at the Estée Lauder Cos. “So it’s a much higher mix of fragrances, versus what used to be more skin care. And makeup is recovering nicely, as well. Then, clearly, there will be more opportunity for hair care.”
The ever-changing traveler corridors have informed what’s stocked on Lagardère Travel Retail store shelves. Since its European locations today have high passenger footfall from the Schengen Area, the operator has adopted its beauty assortment accordingly and allotted more space to European skin care brands, such as Caudalie, Nuxe and L’Occitane.
“We will continue until the Asian [passengers] come back,” said Carla Troadec-Morishita, head of makeup and skin care at Lagardère.
Another notable trend is the polarization of consumers’ appetites between high-end and accessibly priced beauty products.
On the luxury side, La Prairie’s business is growing from strength to strength.
“In 2021, we gained market shares,” said Sabine Fagan, business development director global travel retail at La Prairie Group. She added that for this year, “we are almost at 2019 level and even above [that] in travel retail Asia.”
La Prairie now owns 2.5 percent market share in skin care, even though its distribution was reduced by 10 percent. It is a top 10 skin care brand globally, with 250 travel-retail doors.
“What we have done is to be more selective where we are and much more focused on our high-value clients,” said Noelle Goris, vice present travel retail at La Prairie Group.
That includes offering elevated skin care services, ranging from 10 to 90 minutes, such as facials in a highly selective number of private areas, mostly in downtown duty-free stores. The menu of treatments there is customized for the channel.
On the other end of the beauty spectrum, L’Oréal Paris is in high demand.
The brand’s parent company L’Oréal conducted a study this July, interviewing 700 beauty shoppers in Paris and Dubai airports. They were asked which brand had motivated them to enter a travel-retail store’s perfume and cosmetics department. L’Oréal Paris came in the first position, with 13 percent of respondents.
“Clearly, we are recruiting new travelers to the P&C. And more than that, we are increasing the basket size, because 68 percent of them brought another [prestige] product on top of L’Oréal Paris,” said Karina Behar-Lecuiller, general manager of the Consumer Products Division Travel Retail Worldwide at L’Oréal. “So we are also a complementary offer to luxury brands.”
Consumers said they were drawn to L’Oréal Paris products for convenience, exclusive offers and impulse buying — especially for makeup. To up the brand’s visibility, new L’Oréal Paris gondolas are being rolled out.
According to Stéphanie Garnier, head of category management, animations and merchandising for fragrances and cosmetics, duty free global at Lagardère, consumers “are looking for good value for money and more affordable prices.”
Dufry, which regularly surveys passengers, noted travelers’ growing interest in well-being and sustainability.
“It’s accelerating very fast,” said Antonin Carreau, global director of beauty at Dufry Group. “So it’s becoming a priority.
“We are strongly committed to promoting sustainability and well-being in the travel retail and airport sector,” he continued, adding Dufry has been partnering with beauty brands such as Augustinus Bader, Drunk Elephant and This Works, to that end.
Dufry created a new shop-in-shop concept called Mind, Body and Soul, which will be tailored by location to suit consumers’ specific needs and wants. It encompasses various product categories, with beauty playing an important role. The first location was piloted in the airport in Amman, Jordan, and a second one recently opened in São Paulo.
“We are looking at several locations worldwide progressively,” Carreau said. “The first results are very positive.”
At TFWA, Groupe Clarins showcased its natural, CSR-based heritage with a new-look store layout, which includes plant jars on display and wooden wall paneling. That will be rolled out to Heathrow and Charles de Gaulle airports by the end of this year, and to Istanbul in the near term. Five boutiques already have the new design in Hainan, the Chinese island that’s become a duty-free shopping Mecca.
Whereas in the past, the biggest competition for operators and brands selling beauty products in travel retail came from each other, today it’s the likes of Netflix and Spotify. Therefore, the race is on to lure travelers off their screens and into shops to buy.
“Retailtainment is everything,” said Markus Stauss, vice president global marketing travel retail at Coty. “How do we increase footfall into the shop? It is either through knowledge — so [travelers] learn something about products — or it’s gamification.”
Digital acceleration is key to all this.
“Can we transform travel retail into a more modern and beauty-tech channel?” asked Vincent Boinay, L’Oréal president of travel retail.
The answer is resoundingly “yes.” He gave as an example YSL Beauté’s Scent-Station technology, which uses neuroscience for personalized fragrance advice, matching one’s emotional reactions to a scent. That will be introduced at the end of this month in Hainan.
Data-sharing is also paramount to growing business.
“More than ever, the passenger and shopper data that drives customer engagement is the new currency for our industry,” said Juul-Mortensen, adding that the reluctance to share such information among industry cohorts still remains in travel retail. “It is essential to making informed decisions, not least in these volatile times.”
L’Oréal is sharing data with all is partners in Hainan.
“This is, in a way, the grail we’ve been talking about for years,” Boinay said. “It’s to be used to build lifetime value and relationships with consumers.”
“The more data we have, the more personalized the service can be,” Fagan said. “It’s win-win.”
“The travel-retail business is about getting inspiration from the consumer and understanding [their] wants and preferences,” Assa continued. “It’s about trying to add those experiences to the consumer journey, so that we can add value and create the right memories.”
Travel retail is about upgrading the shopping experience, as well.
“You will see a lot more experiential retailing in travel retail,” said Jueptner, explaining that means more service and events.
DFS is opening three stores at the end of October. The T Galleria Beauty location in Macau is doubling its size, to 2,000 square feet. That will include eight brands exclusive to the store, including Fekkai and Davines, marking the first time the operator is launching into hair care.
“This store is going to be mobile POS only, so really about services, clienteling, one-on-one, treatments and introductions to new categories,” Vuchot said.
With its recent annual beauty campaign, DFS entered into the metaverse for the first time, inviting brands to create stores in that digital universe. The activation was brought to life in brick-and-mortar, as well, with figurines.
It’s all part of the omnichannel approach that’s now established in Asia and starting to take off swiftly in the western world. The holistic strategy involves retailer and brand touchpoints with consumers before, during and after travel.
To help reach consumers prior to their trips, Shiseido’s Nars launched its first 3D virtual animation, allowing people to discover the brand’s travel-exclusive products and bestsellers through an avatar before their setting off on holiday. That launched in April and was created to build brand awareness and excitement throughout the consumer journey.
“What’s going to become very exciting for us is to have different strategies according to different types of trips,” said Siv Chao, vice president, strategic marketing at Shiseido Travel Retail.
With the aim of blurring the lines between physical and digital retailing further, Molton Brown debuted at TFWA an artificial intelligence-driven innovation.
“Travel retail — you never know how many people are coming through, when they’re coming through,” said Mark Johnson, president of Molton Brown global, adding there might be a low level of in-store staffing and difficulties in beauty advisers translating certain languages. “So we’ve developed an AI individual who can interact.”
Travelers can ask their questions on screen to the virtual assistant in their local language. Molton Brown’s customer-service team in the U.K. then responds in English, and their answers will be automatically translated into whatever tongue the question was asked in.
Just as geographic recovery is taking place at different rates for travel retail, it’s true for beauty product categories’ rebounds, too.
In 2021, skin care was the only segment to have generated sales above those of 2019 in the channel — by 110 percent — according to Generation. That’s largely been spurred by the Asian consumer, who keeps shopping domestically, as well as other demographics as self-care becomes ever important.
Taking into account the strength of premium skin care brands today, especially in Asia, Groupe Clarins just entered the segment with a brand called Clarins Precious. Its price points run about $300 for a 50-ml. jar of La Crème.
“It’s a new chapter of Clarins’ journey,” said Alexandre Callens, president global travel retail at Groupe Clarins.
The three-product collection was introduced in September on the Chinese domestic market and will be rolled out to the rest of the world in March 2023, before hitting travel-retail counters in September 2023.
Executives also have seen strong demand for dermocosmetics brands. At Lagardère, for instance, Garnier noted interest in La Roche-Posay, Vichy and Filorga.
At TFWA, Shiseido displayed among its skin care brands new entrants to the trade show, including Drunk Elephant, The Ginza and Baum.
Hair care is starting to find real footing in travel retail. Kérastase is helping bring new clients into the channel’s beauty market, according to Anne-Laure Lecerf, L’Oréal Travel Retail Active Cosmetics and Professional Products Divisions general manager.
The Estée Lauder Cos. has been distributing Aveda in travel retail, especially in Asia. And Wella had its own stand at TFWA.
Fragrance sales are also rebounding. Bulgari’s Babin said a big surprise coming out of the pandemic period is that non-Chinese Asians have doubled their purchase of perfumes.
“It opens new horizons for the brand’s fragrance development in Asia,” he said.
At the trade show, Bulgari offered attendees a multisensorial experience for its Le Gemme Tygar scent. In a designated room, a person wore a headset that in real time collected her brainwaves and heartbeats’ reactions to experiencing the scent olfactively and visually, through related images. Data collected from that was after used to create a unique NFT.
“We want in the years to come to grow the high end [of fragrance] disproportionately,” Babin said.
Vuchot underlined the strength of premium niche fragrances at DFS.
“We are way above our objectives for that category, and we are going to roll it out even more,” he said.
“We see once consumers are in our airports, that they’re ready to spend,” Hoffmann continued. “They want to have something special…which is long-lasting. They really want to invest in products.”
Conversely, some consumers are looking for good price and value for money.
“We’re going to expand the price categories within fragrances and bring more brands in,” she continued.
Through Heinemann’s in-house vision hub, Gharage, the operator developed a private-label line of four scents with the aim of filling a white space in the niche of functional fragrances.
“The idea is to bring you into your personal balance,” Hoffmann said.
The collection, called Nullpunkt, marks Heinemann’s first private-label products for the beauty segment.
As part of its fragrance strategy, Coty has been launching high-end collections, such as The Alchemist’s Garden from Gucci and Boss Collection, in travel retail.
“Fragrance is the new lipstick,” Souche declared.
Executives’ enthusiasm to be back at TFWA was palpable this year.
“It feels good to be in Cannes, to see the brands and operators, to be able to share what’s in the future,” Vuchot said.
“We have to keep this spirit, to always reinvent ourselves,” Chao said. “Because this is what consumers are expecting from brands.”