TRAVEL-RETAIL BEAUTY SALES BOUNCE BACK
Byline: Jennifer Weil / With contributions from Brid Costello
PARIS — The travel-retail phoenix is rising again.
After stalling out for more than a year here, beauty sales in airports are starting to soar, say operators and manufacturers. Some even expect double-digit gains by yearend.
The news is a complete about-turn following the gloom and doom dominating reports in the months after the July 1, 1999, abolition of duty-free sales within the European Union.
“The business was really hurt in the first months following the abolition,” explained Eric Lauzat, managing director of L’Oreal’s Parfums et Beaute travel retail. “Fragrances and cosmetics were hit during the first three months, due to confusion in the stores [as to whether there were still price breaks]; then, individuals slowly came back.”
Consumers were frightened by negative media in the run-up to the abolition, causing behavior that precipitated a 9.1 percent drop in the perfumery sector’s 1998 to 1999 business, according to Swedish tracking firm Generation. And this was despite the fact that most prices for intra-EU travelers really hadn’t changed, since airport authorities and concessions now shoulder the duty.
“Slowly — after six to nine months — [shoppers] came back,” said Lauzat. “And now, our sales are above last year’s preabolition levels. In Europe, we are having single-digit growth.”
For the entire category, volume should be up about 6.9 percent for the year, according to Generation estimates.
But brands and operators realize they cannot rest on their laurels. Beauty products might be getting better placement in certain airport stores, thanks to the reduced presence of cigarettes and alcohol — both high-margin items slammed hard by the abolition — that historically took premier shelf space. Yet, executives are aware of the need to work double time to maintain the trust and attention of consumers Europewide.
British airport operator BAA, for instance, continues to plaster its airports and stores diligently with posters proclaiming “Tax Free Prices for All Customers,” and “Everyone Can Buy Half-Price Fragrance.” It also launched an initiative whereby purchasers of sun care products in its stores finding the same items at a lower price on the High Street can get the difference refunded.
German airport and distributor Gebr. Heinemann continues to use its trademarked logo “Travel Value” on products and posters to help clarify the fact that travel retail replaces tax free and continues offering the same price levels as before the abolition.
And it seems the campaign has had a positive effect. “In July and August, sales for fragrance and cosmetics were up by 20 percent over the same period preabolition,” said Harry Diehl, managing director at Heinemann. “All the suppliers are quite happy. The per-capita turnover in the stores is higher than before abolition.”
But airport shoppers, executives say, are becoming increasingly savvy about their purchases. “People are not going to buy because of pure price differential,” explained Claude Palatin, president of Escada Beaute and chairman of the French fragrance association’s task force on travel retail.
That’s why they are opting for a more creative tack in the sky and the airport.
Swiss skin care firm La Prairie, for instance, developed a “turbulence-proof” silver-plated tray it began using in February in first-class Swissair cabins to hold miniatures of the company’s Cellular Time Release Moisturizer and Intensive Cellular Eye Contour Cream, among other products. The platter purportedly keeps products glamorously upright (the idea is that the items will get more attention if they are presented elegantly).
“It’s a killer saleswise after the flight,” a La Prairie spokeswoman said, explaining that such samples whet the appetite of consumers in transit.
That initiative and others like it have helped push the firm’s sales up by 78 percent in the first half of the year over the same period in 1999.
The Lancaster Group also got creative with transport and has recently done tie-ins with Avis car rental company and American Express travel agencies. Lancaster supplied Avis with flyers that customers could bring to certain travel-retail shops and get a free sample of its products; on Amex travel-ticket folders stickers appear showing Lancaster products and touting the Heinemann travel-value message: “Whether duty free or travel value, the prices are the same.”
Meantime, LVMH Moet Hennessy Louis Vuitton’s Parfums Christian Dior recently revamped its travel-retail offer this year whereby all the company’s travel items fall under the “Dior Voyage” banner. The line includes sets of miniature fragrances, skin care and color cosmetics products in boxes that read: “Exclusively designed for travelers.”
LVMH is taking a regional stance with its coffrets. “We’ve done special destination packs specifically for Asian and European markets,” explained Patrick Choel, president of perfumes and beauty for the group.
And as reported, Chanel is even rushing head-on into the travel-retail game. The firm, which had never before had a freestanding store in the travel-retail arena, inaugurated in September its first-ever travel retail shop in Barcelona’s El Prat airport.
Executives say that, while the differences between duty-free and travel-retail venues are blurring, so too are the ones between travel-retail and High Street shopping.
“The old duty-free concept is really dying and being replaced by travel retail,” said Hans-Kristian Hoejsgaard, president of Lancaster. “All of those downtown retailers, like Galeries Lafayette, are competing in the tourist market. It has become sort of a travel-retail environment. The airport shopping has gone from being concession-led to a retail-driven experience.”
Duty Free Associates, or DFA, the French airport operator formerly known as Groupe Saresco, is among those to rejigger its store concepts to try and maintain an edge. It completely revamped its location at Paris’s Roissy terminal at the end of May. Whereas the beauty department used to be on one side of the boutique, it now takes center stage, with specific areas for men’s items, skin care, makeup and fragrance.
The concept seems to be working. “The average basket is 15 percent higher than before the [makeover],” said Christelle Noyer, category manager for perfumes and cosmetics at DFA. She said another such site will be opened in Paris’s Orly West in June 2001, with other locations possible in the future.
Executives are jockeying to get an ever-bigger chunk of the travel-retail beauty business, particularly since it is never expected to become larger than one-quarter of the entire global travel-retail market, according to Generation statistics.
The firm estimated in a recent report: “The market for perfumes and cosmetics will virtually double between 1999 and 2010, when it will be worth $8.846 billion. The category’s relative importance will only continue to grow until 2003,” after which time other types of luxury goods will eclipse beauty. “The present assumption is that perfumes and cosmetics will never be worth more than 25 percent of the global [travel-retail] business,” the report said.
Companies are galloping after new geographic zones in the race to grow their travel-retail business. The rebound in the Asia-Pacific region makes it one of the hot markets. Lancaster, for instance, registered 105 percent increase in the area year-on-year, according to Hoejsgaard, who said other attractive markets include Eastern Europe, particularly Russia and Poland.
L’Oreal’s Lauzat had a similar outlook for worldwide sales. “Last year, Asia had more than 50 percent growth over 1998. This year, the rebound continues and we are up by more than 20 percent.
“There is double-digit growth in Europe and America, which means South America is coming back,” he added. “It is the first year in a long while that we are flying all three engines.”