Dubai Duty Free opened a series of luxury boutiques during the pandemic including this one from … [+]
Dubai Duty Free is forecasting a big hike in sales this year helped in part by a traffic uplift at Dubai International Airport (DXB)—and despite high-spending Chinese passengers still hardly to be seen.
The travel retailer—the biggest in the world operating from one core airport location—expects sales to reach $1.55 billion, sharply up on 2021’s $976 million. Last year’s figure was a bit better than the forecast that Dubai Duty Free’s chief operating officer Ramesh Cidambi gave Forbes.com in December.
Ramesh Cidambi: “The loss of the Chinese had an impact on some brands more than others.”
While the 2022 projection falls far short of 2019’s record of just over $2 billion, it is welcomed by the global travel retail business as a sign that a relatively strong airport retail rebound is possible this year. Also positive is the fact that Dubai Duty Free’s sales recovery in the first half of the year was back to 80% of 2019, ahead of the passenger recovery which was 68% (of 2019) at the Emirates hub.
Speaking to the regional industry during a webinar organized by the Middle East & Africa Duty Free Association (MEADFA) this week, Cidambi said that there were multiple factors that have driven the performance. They range from a new focus on the e-commerce channel (where sales doubled between 2019 and 2020, and increased again last year) to generally higher spending per passenger.
More travelers pre-planned their purchases or bought in greater volumes. This was partly because they have not been flying as much, but also to ensure they could get the items they wanted as supply chain fears were widespread and a ‘get it while you can’ mentality persisted. Cidambi said: “Some of these things are transitory but they are all helping to keep spend per pax higher.”
Far East the outlier as regional sales recover
In the first half of the year, among Dubai Duty Free’s four biggest regional markets, sales to Indian sub-continent travelers were 1.7% ahead of the same period in 2019 at $149 million; Europe hit $126 million (just 0.6% behind H1 2019); and the Middle East was down 5.6% at $129 million.
Spend per passenger through June has remained higher than in the same period in 2019 for Dubai Duty … [+]
However, the Far East, the biggest region for Dubai Duty Free in 2019 with sales that year of $188 million, remained very subdued—by a huge 78% in the first half. Much of that was due to missing Chinese spending. Pre-pandemic Chinese travelers accounted for 4% of passengers at Dubai International Airport, but 17% of Dubai Duty Free’s sales.
A lesson in holding you nerve
“The loss of the Chinese had an impact on some brands more than others,” said Cidambi, citing those in the watches, cosmetics and skincare categories in particular where up to 40% of sales could go solely to Chinese shoppers. To deal with this, the first thing Dubai Duty Free did was to reduce the inventory of these brands by half over six to 12 months.
“However an important thing we also did was to continue with our retail development and invest in improving the shopping offer,” Cidambi said. “That is what helped us when the non-Chinese passengers came back.” These investments included the construction of Cartier, Dior and Louis Vuitton boutiques, which have helped to maintain the airport’s luxury image.
Cidambi said: “There is a lesson here for travel retail. When there is a crisis, you shouldn’t put the brakes on absolutely everything. Every crisis, even a pandemic, eventually comes to an end.”
The strategy has paid off most for the fashion product category. In the first half of 2021, fashion took its share of sales to 13% (from 6% in H1 2019) and it became the third most important product segment after beauty, and wines and spirits.