DUTY-FREE SALES READY FOR TAKEOFF
Byline: Sarah Raper
CANNES, France — Accessories may be overshadowed in duty-free shopping by mainstays like cigarets, fragrances and liquor, but handbags, scarves and jewelry are among the fastest-growing items.
Plus, travel retailers say fashion is a cornerstone in modernizing airport shopping.
“The core products don’t create enough point of difference,” said Daniel Ritchie, senior vice president for global fashion at Nuance International, a travel retail operator based in Canada. Nuance, Swissair’s retail subsidiary, includes Allders International, which was acquired last year. “As we evolve from duty-free to a concept of travel retail where there is less emphasis on price and more emphasis on convenience and a fashion-right assortment, accessories are more important than ever,” Ritchie said.
This trend is also developing as merchants face the possibility that the European Commission will abolish duty-free for intra-European travelers in June 1999, even as the industry tries hard to convince the EC to postpone this. Accessories are seen as considerably less price-sensitive than the commodity goods that abound in duty-free shopping.
Ritchie was one of 2,000 buyers attending the Tax Free World Exhibition here, which ran for four days through Friday at the Palais des Festivals. Of the total 527 exhibitors at the show, there were 150 accessories firms, and a dozen more showed on boats or in nearby hotels.
They ranged from high-end houses such as Hermes, Gucci and Cartier, to the U.S. costume jewelry maker Carolee, which was attending the show for the first time. Other first-timers present included Liberty scarves and handbags, LeSportsac nylon bags, various Guess accessories licenses and Jean Paul Gaultier.
Because few brands produce specialized products for duty-free and most new lines already have been previewed in their home markets, Gaultier, which launched a full range of accessories for the first time worldwide, was the big product news at the show. Gaultier unveiled seven lines made in France, and displayed units especially developed for duty free.
“The success of the [signature] perfume and the success of the haute couture [first shown in January 1997] really gave us an extra punch and convinced us it was time to do accessories in a big way,” said Gaultier president Donald Potard.
Previously, Gaultier had a line of sunglasses, and a line of accessories produced by Kashiyama for Asia. The new collection of handbags starts at $100 (600 francs) retail for nylon under the Public Gaultier label and goes to $630 (3,700) francs for a Gaultier-branded embossed crocodile bag in leather. The line includes fun looks, such as Plexiglas plating on the leather and treatments of vinyl and leather for the house’s signature look of oxidized metal. There were also jewelry, belts and wallets embossed with a dragon and a collection of unusual umbrellas.
The line will be distributed through Gaultier’s established distribution in local markets, but for duty-free, the Paris-based firm will oversee distribution.
Potard said that he expected duty-free sales alone for accessories to total $34 million (200 million francs).
Last year, worldwide duty-free sales of jewelry, fashion accessories, leather goods and watches totaled $4.2 billion, some 20 percent of total duty-free sales, according to Generation Publications of Sweden, the leading market research organization for duty-free.
Watch sales were flat, but other categories gained, with jewelry sales up 13 percent, accessories up 5.9 percent and leather goods up 3.8 percent. Total duty-free sales were up 2 percent over 1995.
Buyers and manufacturers at the show agreed that sales had been helped by health concerns about smoking and drinking, the growth in the number of younger female travelers and the number of senior travelers, two groups inclined to buy accessories.
Generally, the airport traveler is more aware of fashion thanks to media coverage and stepped-up advertising and store openings, especially by Italian brands like Gucci and Prada. Also, airport shops and downtown duty-free stores have been getting bigger, which allows retailers to display and offer a wider selection of handbags, and there’s an important move to sell the high-end brands via corners or even freestanding stores. Cartier, for example, has 14 stand-alone shops in duty-free.
Early this month, Nuance opened a series of shops in the Zurich airport, including an accessories unit that features corners for Hermes, Versace and Hugo Boss. The most important upcoming retail development is the April opening of ChekLap Kok airport in Hong Kong, which will feature freestanding shops for Christian Dior, Nina Ricci, Salvatore Ferragamo, Gucci, Cartier, Bally and Burberrys. Hermes lost out in the bidding for a boutique at Chek Lap Kok, but executives say the company is still negotiating to get in.
“There are a few exceptions, but over the last five years, we’ve been moving to a distribution in duty-free that’s exclusively corners or free-standing shops,” said Florian Craen, European area manager for duty-free operations at Hermes. “My objective in Europe is for any customer in a major airport to find the same environment as they would in our store in Paris.”
The largest Hermes store in duty-free is the 6,500-square-foot shop in London Heathrow Terminal 4; two of the duty-free shops even offer shoes.
Hermes is also innovating in terms of communication. In recent years, liquor, fragrance and beauty brands have used the airports as they would a department store or supermarket to make a splashy product statement, but it is rare for accessories companies.
Craen said that Hermes planned a “significant event” at Charles de Gaulle airport in Paris by the end of the year. “The airport is a way to communicate with people who are interesting for us.”
At Versace, duty-free manager Claudia Pimpinelli said that the company’s start in duty-free five years ago had added business and helped it reach a new customer. “You’ve got a high exposure to people who are our target audience, but many are people who wouldn’t dare enter a store,” she said.
Unlike Hermes, Versace is not limiting itself to corners and freestanding shops in duty-free, but the company seeks to expand into new doors that will also be selling other Italian brands like Ferragamo, Ermenegildo Zegna, Gucci and Etro.
“We’re not competing. We like to be together, and we think we make a statement together,” she said.
Even with the move to corners and boutiques, there are three big leather goods names that have been basically absent from duty-free: Prada, Chanel (with the exception of a few DFS locations) and Louis Vuitton.
Since Vuitton’s parent, LVMH Moet Hennessy Louis Vuitton, acquired DFS last year, the group has decided to introduce Vuitton in as many as nine downtown DFS doors.
Overall, duty-free handbag sales have taken a beating because of problems in Asia. Last year, Asians bought 56 percent of leather goods in duty-free and 37 percent of fashion and other accessories, according to Generation. But the number of Japanese travelers has declined over the past year, the yen is depressed and the Asian currency crisis also has cut into travel and sales.
Jewelry was one of the biggest items in duty-free last year. Interestingly, sales are bigger in-flight than they are on the ground. Steven A. Levi, vice president international at Carolee, said the small size of the product made it easy to store and attractive to airlines.
Also, customers on average spend very little time inside shops at the airport, and most shops offer very basic displays. While that works for perfume, jewelry is easier to sell in the air, at a point where the customer is more relaxed and the flight attendant can take time to present it, executives said.
“They used to just plunk it down, but now the attendants switch on the reading lights so the customers can see the sparkle,” said Yvgve Bia, managing director of Generation Publications.
“Out of 90 items sold onboard an aircraft, a good jewelry item can be among the top five sellers, all categories combined,” said Levi.
Carolee entered duty-free only three years ago, but Levi’s said that in general, a company with a developed jewelry business in travel retail could do between 5 and 10 percent of its volume in duty-free.