Talking Shop

PARIS — In today’s ailing travel-retail industry, where most executives speak about a revolution to spark sales, Kay Spanger is talking evolution.

This story first appeared in the November 2, 2016 issue of WWD. Subscribe Today.

He has a rarified vantage point: The executive director of categories and logistics at Gebr. Heinemann — estimated to be among the top-five operators in international airports, airlines, cruise liners and border shops — has been in the industry for almost four decades. Some might say he has seen it all, having worked in each company division, including sales and distribution, as well as retail, navigating all the external factors that have buffeted and bolstered the business. (Think terrorist attacks, epidemics and currency fluctuations, to name but a few.)

Industry observers are stunned by the erosion of the $62 billion travel-retail industry, which in 2015 registered a 2.7 percent drop in dollar sales, the first decline in six years. They point to a confluence of forces spawning the woes and the need to change gears radically to stanch them. But Spanger takes a different tact. He is not surprised that a saturation point has been reached and feels the industry needs to evolve to grow.

“We shouldn’t forget where [it] is coming from — from an underdeveloped market to, in my opinion, a qualitative market where today we have everything,” he told WWD at the recent Tax Free World Association convention in Cannes, France. “Every luxury brand in whatever category is [there]. At a certain stage we have to ask ourselves: How much can the consumer digest?”

You May Also Like

That’s where novelty comes in. Heinemann, for one, during recent years has developed the wine category in its stores, and the operator is also expanding its fine-food business.

Spanger ticked off other ideas like special packaging, but recognized that in a category such as perfumes and cosmetics it is difficult, in any event, to register huge sales increases. He cited the adage: “Five is the new 10.”

“We shouldn’t forget what this market is used to: plus 9.2 [percent], plus 10.5, plus 11.1. This cannot continue,” said Spanger, adding that it’s important to remember that a 5 percent gain would be a “fantastic result” in the domestic market.

He has a slew of other strategies for how the travel-retail market can grow. One is to try and lasso the budget traveler. “We can talk for hours with the brands that think they can suddenly change a luxury brand into a brand for low-cost consumers. This is not possible,” he said. “It’s more the retailers with the airports to say: Is this an airport where we need two concepts — an upmarket concept and a concept which is more supermarket?”

There would in that case be a need for products with two totally different price levels.

Presentation of merchandise must change, too, according to Spanger. “You cannot continue to have all the time this famous back wall and counter in front of it,” he said.

Similarly, the traditional selling of luxury products by brand, including all its product categories, should be reconsidered. The executive said research into Heinemann’s cashier receipts show it is rare that people buy products from various categories of one label.

“You find very often that if the brand is strong in fragrance, then people buy one, two or three fragrances from [it], but not necessarily makeup or skin care,” he said. “So we have to approach people by categories.”

The executive counseled that asking how Millennials — a demographic he considers to be similar to other new generations of young people in the past albeit with a digital element layered on — want to see brands displayed is key.

“Make the products more touchable and more [young-facing vis-à-vis] the consumer — from advertising, presentation, type,” he said. “We need more fun in the category.”

Spanger said numerous fragrance companies have been asking for information and videos concerning Heinemann’s most successful liquor promotions. Spirits are being marketed in an entertaining way, he said, adding that “doesn’t mean less-attractive or less-qualitative.”

Mixing products from different categories can cause a lather of excitement in the operator’s stores. In Copenhagen airport, for instance, a successful past tie-in involved Dior fragrances being displayed with bottles of Moët & Chandon Champagne.

“If you look to the enormous success of the sunglass category in the last years, why can’t they be sold with perfume and cosmetics?” mused Spanger. “This is what brand-building is all about.”

It’s also about introducing more exclusive perfume offers for the channel, which can be in the high-price range, as liquor does. He said: “It works.”

Spanger, as well, noted success with rising brands in limited distribution that have a personalized touch, such as Atelier Cologne with its monogramming of outer packaging — great for gifting. The fragrance brand was introduced with a full-time beauty consultant as a test in the Frankfurt airport on an “impulse podium” in the walkway.

“It was outstandingly successful,” he said. “It’s not always a question of doing it big, it’s a question of doing it right.”

Spanger explained that as a retailer, it’s important to be careful how much space is allotted to smaller brands, however. In Istanbul’s airport, Heinemann created a corner with about 15 such labels, for example. “Four are doing 90 percent of the turnover,” he said.

Another category to have been introduced is hair care. In Copenhagen airport, Heinemann sells luxury label Kérastase, whose travel-retail sets are generating 40 percent of the brand’s revenues.

It’s all about focusing on consumers’ needs in order to create incremental business.

“Makeup, I think due to the gesture and service, is the category for the future, but we have to do it in a very well-thought-out way,” said Spanger. “These younger, modern brands have to be presented in a different way than the traditional ones.”

He believes that overall more sampling needs to be done, explaining: “On the domestic market you can see with new makeup launches very often the top brands are offering consumers small sizes, little gifts. [Travel retail] is lagging behind.”

Another challenge for the channel is the sharing and centralizing of brand data. Spanger said it’s imperative for operators to be able to receive new products’ marketing texts in various languages automatically, for instance.

“Digitally, we think that’s essential,” he said. “It’s a question of evolution, and people getting ready for this.”

However, brick-and-mortar will always take precedence for Heinemann. “The company doesn’t want to become an e-commerce retailer,” continued Spanger. “For us, it’s an added service to the consumer to create a 360-degree service, and digital is part of it.”

The executive described a digital loyalty program that has worked well. Called Heinemann & Me, it taps into top customers. With Chanel, for instance, the operator created letters to pre-inform loyal perfume and cosmetics consumers of the upcoming arrival of the No.5 L’Eau — to great results.

“They could get the product a bit before others in the market,” said Spanger. “So it’s a nice tool for additional service.”

Another well-received add-on allows adults with a valid European Union flight ticket and delivery address in Germany to have their purchases made on Heinemann’s site be sent directly to them. Today, the resulting sales, mostly coming from liquor, are not yet “relevant,” although the average basket bought in this manner is double that in stores, he said.

Today, such a service is not possible everywhere for everyone, due in part to taxation issues, continued Spanger. Another complex issue is the future possibility of passengers ordering products online while traveling, then picking them up upon arrival. Here, the questions arise: Who has what type of cost and who gets what sort of profit — among the brands, operators and airport authorities. Such a project would involve compromises, Spanger emphasized.

On the subject of duty-free shops in domestic markets, the executive believes firmly that they should only be opened in a highly professional manner, as DFS does. (That operator most recently launched such a location in Venice.)

“First of all, they do the shops in a luxury way, they really create an adventure for the consumer. But they also have the processes and the tools to get the consumers into the store,” he said. “Just to do another nice store with nice brands doesn’t work.”

Spanger said with downtown duty-free stores, the consumer has to be given an experience throughout the entire shopping journey. “And you can only do it in regions where you have an international clientele,” he added.

Duty-free boutiques located on the arrival side of airports can be successful “selling machines,” thanks to duty-free allowances in some markets for goods such as liquor, according to Spanger. However, it’s not a natural impulse for all travelers to shop once they step off an airplane.

“Think about yourself, when you arrive — what is your aim? Suitcase and bloody back home. If you don’t have a gift with you at this moment, forget it,” he said with a laugh.

Winding down the conversation, Spanger reflected: “Why is there so much unrealistic or unnecessary competition between brands in perfume and cosmetics? I would expect the opposite.” He said Dior’s J’Adore is not the competitor of Chanel No.5, and vice versa.

“The competition is other new categories [such as] jewelry, sunglasses, bags, all digital tools,” he said.

load comments
blog comments powered by Disqus