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Expansion keeps duty-free sales high

Tuesday, Jul 27, 2010

Dubai: Bucking an industry-wide trend of weak sentiments and falling sales during 2009, Dubai Duty Free ( DDF ) easily maintained its number one status for a second year. With sales clocking in at $1.14 billion (Dh4.18 billion), it easily staved off the challenge from London's Heathrow (just over $1 billion) and Seoul's Incheon International Airport which retained third place with over $900 million in 2009.

The latest numbers from Generation Research which tracks the industry show the global duty free and travel retail business suffered a 6.8 per cent decline in sales to $34.5 billion in 2009. This coincided with the impact of the global recession being at its peak.

Among the top 10 performing airport retailers, Dubai also recorded the highest annual increase in sales (3.6 per cent), while the majority suffered declines of up to 17 per cent.

Heathrow's duty free sales dropped 4.1 per cent year-on-year, and at Incheon International airport they were down by a steep 10.2 per cent.

It was not much better at Germany's Frankfurt-Main Airport where sales fell 8.7 per cent, and Charles de Gaulle Airport in Paris, down 9.4 per cent.

So, how did Dubai Duty Free get it right where others failed?

It did so on the back of the high passenger volumes through Dubai International Airport , either on a visit to Dubai or transiting, despite the weak global economy and a timely expansion of the retail complex.

There were also the benefits from the opening of Terminal 3 in October 2008, which allowed Dubai Duty Free to expand its retail area from 8,000 square metres to 15,000 square metres across the three terminals.

All these factors helped sales in the first six months of this year reach $607 million, a 16 per cent increase over the corresponding period in 2009. And it's only going to get bigger.

Looking ahead
Colm McLoughlin, managing director of Dubai Duty Free , said he is looking forward to the new operations at the passenger terminal at Al Maktoum International Airport and the opening of Concourse 3 at Dubai International Airport .

Besides, he added, the travel retail offer in Dubai — and the rest of the region — is on par, if not better, than many airport retail operations around the world.

"Certainly at Dubai Duty Free we are committed to providing our customers with a first-class shopping experience and that spans a number of factors including having the right products available at the right prices, ensuring that the shopping environment is bright, spacious and above all is customer-friendly," McLoughlin told Gulf News.

"[These ensure] the level of customer service is high and that the customer comes away with an overall positive experience."

This year, Dubai International Airport is well on course to attract about 46 million passengers — heady numbers in what has again been a tough year for the global aviation industry.

Colin Beaton, managing director of Limelight Creative Services, said DDF benefits from Dubai's strategic location as a transportation hub for the wider region and beyond. With Dubai continuing to top up the hospitality and retail elements, it will continue to resonate as a choice destination among globetrotters.

"A significant portion of the passengers passing through the Dubai airport are business savvy and adventurous vacation travellers with higher disposable income, are more price-elastic, more inclined to buy big-ticket items, and are conscious of the value offered by duty free shopping," Beaton said.

Annual sales performance of the Top 10 duty free locations
(2009 versus 2008)
1) Dubai International Airport +3.6 %
2) London - Heathrow Airport -4.1%
3) Seoul- Incheon Int'l Airport, South Korea -10.2%
4) Singapore- Changi Airport +2.4%
5) Frankfurt- Frankfurt-Main Airport -8.7%
6) Tallink/Silja line- All Routes, Estonia/Finland -0.6%
7) Paris - Charles de Gaulle Airport -9.4%
8) Hong Kong International Airport -0.6%
9) Bangkok- Suvarnabhumi Airport +1.2%
10) Amsterdam- Schiphol Airport -17.9%

Source: Generation Research, Sweden (www.bestandmost.com)

Sales up in region
While Dubai's has been the standout performance, duty free operations across the region struck an upbeat note during 2009. According to figures released by Sweden's Generation Research, sales at the various duty free locations in the region registered a staggering 271 per cent gain in a decade — from $667.1 million (Dh2,249 million) in 2000 to $2.5 billion in 2009 (see graph).

The region's share of the global market was up from 3.3 per cent ten years ago to 7.2 per cent at the end of 2009. A stellar performance was recorded in Kuwait, which posted 11.7 per cent increase in sales, and Lebanon, which recorded an impressive 21.1 per cent growth.

Airport duty free sales for the whole of the UAE rose marginally by 1.6 per cent, while Oman's witnessed a 2 per cent growth. However, Qatar's were down marginally by 0.8 per cent. Although growth was irregular around the Middle East, the overall sales performance for the region rose by 0.6 per cent. Analysts said the figures suggest that while travel retail operations around the world were weak through last year, the region recovered quite strongly.

"I believe there are a number of factors as to why the Middle East region's duty free business is still doing well despite the recession," said Colm McLoughlin, managing director of Dubai Duty Free . "Firstly, there have been massive investments made in regional airports and in duty free operations in recent years."

Colin Beaton from Limelight Creative Services, a Dubai-based retail strategy firm, concurs with the upbeat sentiments. "It is one of the few regions in the world that is expecting growth in the next few years and continues to attract interest and investment from abroad."

By Cleofe Maceda Staff Reporter

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