WDF LOOKS TO U.S. TO GROW ITS BORDERS BUSINESS

Byline: Kristin Young

SAN YSIDRO, Calif. — World Duty Free Americas Inc., which operates about 150 travel retail stores in the U.S., has been quietly developing its six-month-old, 18,000-square-foot flagship here as its prototype for further development.
After 10 years in development, one year of construction and $12 million in investments, executives say they expect big things from the unit based on the area’s demographics. San Ysidro is one of the busiest border crossings in the country, with over 70 million people yearly traveling back and forth between San Diego and Tijuana. About 50 percent of potential shoppers are Mexican, 25 percent are from the U.S. and Canada and another 25 percent are from other parts of the world.
Executives for WDF and its parent company, London-based BAA, began to focus more heavily on the U.S market after the abolition of intra-EU duty-free in Europe in 1999 — a situation that cost the company $30 million of revenue from lost sales, mostly of tobacco and liquor. According to Brian J. Collie, chairman and group retail director for BAA, the company has since recouped some of the loss from broadening its customer base and expanding to other businesses such as fashion and cosmetics. The company earned $2.25 billion in profit last year.
But rather than map out an aggressive expansion plan in the U.S. with a large number of stores, WDF’s future focus will be on fewer larger stores in heavily trafficked areas such as San Ysidro. “I think the important thing about expansion is to get the major border crossings and develop high quality, big spaces and outlets in major markets,” said Collie, who added that WDF is planning to open two stores in the U.S. per year. There are about five major plans in the works but leases have yet to be finalized. Globally, BAA has plans to open about 10 stores per year.
While Collie declined to comment on the first six months of sales in San Ysidro except to say that they have been “comfortably above expectations,” industry sources pegged the figure at about $10 million.
BAA (formerly known as British Airport Authority) is best known for creating a $1 billion duty-free business in Europe and the U.S. Most stores the company operates in the U.S. — a $400 million business — are significantly smaller in size, at 3,500 to 5,000 square feet. BAA operates a $4 billion business in total, including owning seven airports in the United Kingdom and leasing space for 2,000 airport boutiques to tenants like Chanel, Gucci and Harrods. The company also operates 11 outlet malls in Europe.
BAA entered the border-store sector after it acquired Duty Free International in 1997 and became WDF. The company operates about 150 stores in the U.S. and another 70 in Australia and the United Kingdom. There are about 35 shops along the Canadian border and 36 shops along the Mexican border. Major stores include Blain, Wash.; Buffalo, N.Y., and Brownsville, Tex. About 60 shops are located in approximately 20 airports with major markets in Chicago, New York and Boston.
The shop here on a 12-acre site is an oasis in this dingy border town located about 30 minutes from downtown San Diego and a stone’s throw from Tijuana, Mexico. Inside, the store is set up like a department store with liquor and cigarettes on one end and a sizable cosmetics and fragrance area on the other. The merchandise assortment includes a strong cross-section of top brands, including fragrances, cosmetics and toiletries from Calvin Klein, Clinique, Chanel,Tommy Hilfiger, Lancome, Biotherm and Estee Lauder. Collie noted that Laura Mercier created a private cosmetics line for the store called Calisa that features a makeup bar and a color library, in an effort to give Sephora a run for its money. There are 40 nail polishes at $5 each and 60 lipsticks, each retailing for $9. At 13 to 17 percent off regular retail prices, an average sale at the shop is about $50.

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