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WWD Special Report issue 01/29/2010

The $35 billion travel retail and duty free industry could be cleared for takeoff in 2010. The channel, which often functions like a miner’s canary in warning of global disruptions, had a bumpy 2009.

The average spend per passenger in Europe decreased 2.6 percent on-year in the first 10 months of 2009, according to Erik Juul-Mortensen, president of the Tax Free World Association. “Passenger numbers are showing the first signs of recovery from the recession, and the duty free and travel retail industry is starting to see sales pick up again,” Juul-Mortensen added. “However, I think we have to realize that the recovery is still very fragile and that it will not take very much for it to slow down or indeed to stop.”

This story first appeared in the January 29, 2010 issue of WWD. Subscribe Today.

As well as economic concerns, the industry is also subject to an even more unpredictable outside force — terrorism. Security measures, such as restrictions on the amounts of liquids and gels passengers may take on board planes, which were introduced following an alleged 2006 terror plot, have caused confusion for would-be airport shoppers, for instance.

“The E.U. reached a political agreement in November to lift all [liquids and gels] restrictions at E.U. airports by April 2013,” said Juul-Mortensen. “It was also agreed to lift restrictions on transfer passengers arriving in the E.U. from any departure country from April 2011, provided that their purchases are sealed in tamper-evident bags with a receipt that proves purchase within the last 36 hours.

“This agreement is still subject to the approval of the European Parliament, which must rule by mid-February,” he continued. “But it must be envisaged that their decision will be heavily influenced by the [alleged] attempted terrorist attack on Christmas Day on a U.S. airplane over Detroit, which has proved a further setback.”

Indeed, that incident kicked off heightened security screenings, including full-body scanners, in numerous airports around the world.

“They will inevitably slow the security process down still further and increase the tension levels as passengers watch the available time ticking away,” said Juul-Mortensen. “The whole process is often counterproductive to building an ambience of shopping.”

“The key issue is how to get more people to enter shops,” said Jérôme Goldberg, managing director of JMG Research. “Seventy percent of them are not entering airport shops, which is a huge pool of potential buyers.”

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