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Travel retail State of the industry Points of difference Exchange rates, health crises and geopolitical factors continue to be core infuencers in travel-retail, all while the pace of consolidation accelerates by Tina Milton uty-free and travel-retail sales increased by stronger in Asia, have made total market-share it may be better to have an integrated approach D4.3% in 2014 year-on-year to $62.57bn, gains. Nevertheless, the fragrance category is still and beneft from the awareness and halo-effect according to preliminary fgures from market- delivering growth to global travel-retail, due to of local-market media investments.” research company Generation Research Sweden the weight of sales in Europe, the Middle East In addition to changes in the product mix, (www.generation.se). Asia Pacifc is still the and Americas.” He adds: “Last year also saw there has been a shift in the passenger profle to dominant regional force in the marketplace, differing performances between women’s and certain airports driven by currency fuctuations, logging a rise in sales of 5.5% to $23.56bn, as men’s fragrances. Women’s fragrances growth, health issues and terrorism, notably in North Europe took second place with sluggish growth at 6%, was above total travel-retail growth, Africa and Thailand following the insecurity levels of 2.5% for sales of $20.65bn. generated by recent attacks. The Americas, meanwhile, was just slightly China’s Black Monday and the devaluation of The industry is also now wondering what effect 5.8% to $5.88bn. In the Middle East, airport “ the country’s currency will have on travel-retail behind global growth rates with an increase of 4.2% to $11.63bn, but the Middle East turned in the best performance with sales up by sales. Currency fuctuations have continued to The share of the fragrance in emerging markets. “The low value of yen infrastructure is developing to support growing category has dropped to impact The Shilla Duty Free’s sales, especially passenger numbers as airlines expand their route below 15% of total travel- has seen Chinese tourists prefer to visit Japan networks, despite the threat of ongoing political retail sales and has somewhat impacted our revenue,” unrest. On a much smaller scale than other remarked a spokesperson. “We are conducting regions but nevertheless one to watch, Africa various promotions in providing travel packages just scraped ahead of global growth levels with a and covering Chinese customers’ taxi fares to 4.4% increase in sales to $856m. ” and from our outlets.” Puig global travel retail managing director Patrick Bouchard In addition, Middle East Respiratory Product category changes Syndrome (MERS) has made for a challenging The fragrance and cosmetics category witnessed year for Shilla and its Korean rival Lotte Duty a rise in sales of 4.1% to $17.96bn in 2014. Free, as it has adversely infuenced tourists The growth of some regions, such as Asia, in whereas men’s fragrances only grew by 2.8%.” coming to South Korea (particularly Chinese travel retail has had an impact on beauty’s There have been other changes in the product consumers). However, the situation appears to sub-category sales over the past few years. Puig mix. “Premium and niche brands are gaining a be under control now and both Shilla and Lotte global travel retail managing director Patrick stronger foothold,” says Bouchard. “Traditional, are optimistic about a recovery in sales in the Bouchard explains: “According to last year’s established perfume brands have to look at near future. Generation data, the share of the fragrance better understanding their potential customers The weakness of the euro has also prompted category has dropped to below 15% of total and improving the services given to them. greater spending across the Eurozone primarily travel-retail sales. We have seen a declining There also needs to be a constant stream of by Chinese consumers, but travelers from share over a number of years primarily due innovation. Retailers are increasingly looking for the Middle East and the US also gain greater to the geographic footprint of fragrances and exclusive products, launches and promotions purchasing power. the relative growth in different regions.” He to further differentiate themselves from local Meanwhile, due to the plunge in the Russian indicates the traditional strongholds of fragrance domestic market offerings and other airports.” ruble, Russian travelers’ spending fell by almost have been in Europe and the Americas, but that He adds: “It’s worth highlighting that the 17% compared to 2013. Despite this dip in clearly the current travel-retail growth market avant-première launch strategy will not always spending, Russian consumers remain over is Asia. “Other categories such as cosmetics, be the most effective way to launch a fragrance. three times as valuable as those from the US. watches and fashion accessories, which are For example, if a launch is very media intensive President and founder of market-research 92 November-December 2015 - N°24 - BW Confidential