The road less travelled

An air of luxury and exclusivity is something that travel retail C&T manufacturers thrive on. But as fewer people travel in the face of a global recession, with their wallets noticeably lighter, what will 2009 hold for this industry and will they have to cut back on the glitz in order to survive?

For many luxury C&T brands travel retail is an integral and revered arm of the business, with much of the sales success hailing from this retail forum. However, with the industry relying exclusively on continued consumer presence, both on the planes and in the terminals, events that result in a downturn in traffic undoubtedly put the fear of god into any brand manager. For this reason the current crisis of the world’s economy was always going to be the hot topic of the 2008 annual Tax Free World Association (TFWA) exhibition in Cannes.

With a who’s who of the travel retail industry all under one roof, the show has become renowned as the meeting place to see and be seen. The contact building opportunities are just as much a part of the event as the meetings and partnership forging so it is often seen as a forum for business opportunities to be made away from the office environment. This year’s show, however, had a much more serious undertone as visitors and exhibitors alike felt the effect of the crunch with the crisis a constant reminder that the booming sales record of the industry is not one to be taken for granted at any time.

Crisis talks

Another area not taken for granted was the continued number of visitors to the show. Indeed, the general feeling among exhibitors was that footfall was down on previous years and that the show reached its peak early on. Traffic fell drastically in the latter two days of the five-day show, with official figures confirming these suspicions.

According to the TFWA press office the total number of visitors during the week stood at 5,756, a 1% increase on last year. A small increase admittedly, but an increase nonetheless. However, with the key visitor category (retailers, operators and landlords) being down by 3%, it seems it may have been a case of quantity over quality. Traffic did indeed fall later in the week with average days per visitor falling from 2.77 in 2007 to 2.57 this year. TFWA president Erik Juul-Mortenson spoke candidly about the exhibition’s expectations: “The board, management committee and executive team were resigned to the fact that visiting companies would adjust their plans. Indeed, some companies sent smaller teams and others cut their trip short.” Some companies however, such as Coty Prestige, actually saw the show as an opportunity to speak to retailers and get their all important insight into the global problem facing the industry.

ECM spoke to Coty’s Rusty Wright, worldwide marketing director of travel retail and Latin America export, about the company’s plans. “Obviously you can bring out great innovation and novelty products but if the passengers slow down and the spend per pack drops then that’s going to have some effect on your business,” he said. “So we are actually waiting to see what the retailers are going to tell us at this meeting. But I would say a lot of the coverage that has come out from the travel retail trade publications over the last two months has been optimistic.”

In the face of crisis, spend

The murmur amongst the big players was that while they are undeniably erring on the side of caution, there is an underlying confidence that consumers will continue to spend on the lower priced luxury items, even while in the eye of the credit storm. “You might not have the footfall you used to have and people may buy more in the domestic markets, but of course there are still the people that have the money to travel and the money to spend, and they will continue to do so,” said Wright.

La Prairie is a brand that is renowned for staying true to the image of luxury, and if there was ever a stand taken against the credit crisis it is the launch of the brand’s new Skin Caviar Crystalline Concentrate at $336 for 30ml in April next year. Speaking to ECM at the show Carla De Veen, international director for travel retail, said: “It’s still very hard to predict about the credit crisis. But if we look at the results so far we see that real true luxury doesn’t really know recession. Of course we will probably get influenced slightly by people travelling less and allocating their budgets differently. But we’ve really seen so far throughout the year that no matter what type of recession the rest of the world is in it doesn’t really hurt us because we’ve really stayed true to our beliefs that we should differentiate with luxury.”

Jill Hill, managing director of Aspects Beauty, is of the same opinion. “We are absolutely not restricting our launches, on the contrary,” she said. “We are not pulling any promotions, in fact we are looking to promote more as I am a believer in promoting through tough times. We have to keep our nerve as an industry and we have to give retailers as much support as we can to help them fight through it as well.”

Alright on the night

This hardy attitude from De Veen and Hill is something that is echoed around the travel retail industry. And a sense of companionship and understanding is in the air as the companies rally round, appreciating that all are in danger of suffering the same fate. A stiff upper lip has been shown and the buzz in the air was a mixture of apprehension and anticipation of the year ahead. But what is noticeable is that only a select few companies conceded to changing launch activity and business plans for 2009, in both the domestic and travel retail markets. In fact, to the credit of those most in the line of fire, they are forging ahead with promotions and partnerships with the flurry of launches still offering a level of optimism that could perhaps be the way forward in such a time.

Christian Dior unveiled an impressive portfolio of products for the travel retail industry with a vast array of limited edition offers and travel retail exclusives. Palettes have started to excel in the eyes of the travel retail brands, escaping LAG (liquids and gels) rules and regulations and fitting nicely into in-flight trolleys and terminal store displays, with the handy sized beauty product now a choice of many. Dior created some palette offerings including the Travel Studio Makeup Palette (limited edition). L’Oréal was also focused on palette offerings with exclusive ranges from the Lancôme brand with another focus of the company being skin care sets and renovating ‘all-in-one’ concepts.

Indeed Sandrine Odile, operational marketing director of travel retail Christian Dior, told ECM that the travel retail industry was still very much gift focused. “Another interesting trend is that there are more and more women travelling these days and they are buying their own products rather than gifts, she added. “What is notable about these consumers is that they are staying faithful to one brand.” Another trend predicted for 2009 was the sheer increase of products in store. De Veen said: “I think we will see more and more products especially in larger and more major airports. We will especially see more walls/units/counters that identify with brand personalisation and that is something La Prairie is following through.

We are looking to personalise our merchandising with personalised counters and expand our services. We have two airports where we do pampering and mini treatments, like in Zurich for example, and we are expanding this concept in the near future.”

Hill spoke about the recent new launches from its Moschino, Versace and DSquared lines into the travel retail sector. However, she also predicted that travel retail will become increasingly dominated by the large players who have the money to create products especially designed for the travel industry. Beaute Prestige International (BPI) is one such player with Caroline Bonnard-Pelot, international press officer, showcasing 2009 launches for all the brands under the BPI umbrella, notably Issey Miyake, Narcissa and Jean Paul Gaultier. One of the hero products for the brand for 2009 was undoubtedly the fragrance, L’eau D’Issey A Drop of Cloud. The fragrance is created by perfumer Daphné Bugey and is made up of white tea, rose, lotus and white wood. Meanwhile, Selective Beauty was actively pushing the launch of the new John Galliano fashion fragrance as the “must have” travel retail product for the coming year.

Cofinluxe was also confident of a golden year ahead with the launch of a new Morgan fragrance and a Salvador Dali It is Love scent, while the biggest coup for the company was the merger with jewellery brand, Charriol. A massive brand in the UAE, Charriol jewellery moving into fragrance follows on from the success of players such as Lalique and Chopard. However, Valérie Dufournier, communications manager for Cofinluxe is aware that the target audience is limited at present to the Middle Eastern domestic and travel retail markets but has high hopes for it to roll out worldwide in the coming year. “The partnership came about on Charriol’s 25th anniversary. It was an obvious choice for the president of the company, Philippe Charriol, to approach our president Jean-Pierre Grivovy as they have a solid friendship already.”

Playing it safe

Despite having an impressive launch portfolio for 2009 with the Incanto Bliss fragrance, Salvatore Ferragamo’s chief executive officer, Luciano Bertinelli spoke openly, and perhaps more honestly than his fellow C&T colleagues, about the impact the threat of falling sales figures has had on the company. “Although we have gained 10% in the travel retail market and continue to grow 2-3% each year we are aware that we may have to change some processes in 2009. For example we may have to consider cutting back advertising and indeed cutting back on everything. We really need to keep costs under control. We won’t be forging any new partnerships in 2009 and we feel that most other companies will be doing the same thing.”

Another company which is continuing to focus on star brands and steering clear of over zealous and costly launch promotions is the Clarins Fragrance Group. As a new wing of the company, the fragrance group is keen to stress that a big focus of the year will be a continued spotlight on the star product Angel and on the continued promotion of the Porsche Design fragrance. Says Joel Palix, president of Clarins Fragrance Group: “This is our new baby and we really want to push forward that it is a designer fragrance and not just a car brand. We will be focusing on existing pillar lines and have no prominent new launches to speak of.” The group has in fact signed a new deal with Swarovski but says it will take time to develop a good range and will most likely hit the counters in 2010.

Although an obvious niche sector of the beauty travel retail market, low priced beauty accessories may be one of the lucky few to actually benefit from the downturn in events. Original Additions, whose sales have grown by 65% over the past year, may see 2009 as its year to truly stake a claim in travel retail. Despite having its beauty accessorises in travel retail for over three years many companies have sniffed at the below average travel retail price point. In fact the hero product, heated eyelash curlers, come in at just £10.

However, Mo Meisuria, national account manager UK and the head of travel retail, assures us that there is a place on the in-flight trolleys for everyone. “Our products are incremental sales. They take a small amount of space on an in-flight trolley and actually complement fragrance sales, not detract from them. Our focus for 2009 is to get into more doors and expand the distribution of the range in travel retail. But it won’t be easy as people are wary of the low price point.” However, with a range of new eyelashes being launched in 2009 at £250 per pair (the lashes are adorned with Swarovski crystals and are initially exclusive to Harrods), it may not be a problem the company encounters for long.

Crack down

Despite the obvious threat of the credit crunch TFWA also managed to make time to concentrate on other issues that have and still are affecting the travel retail industry. Perhaps one of the biggest landmarks of the show was the signing of the Declaration of Cannes – a multilateral declaration between nine countries to help tackle the $700bn counterfeit problem in the luxury goods industry. The French minister for industry and consumer affairs, Luc Chatel, led the proceedings joined by representatives from France, Portugal, Spain, Italy, Romania, Bulgaria, Turkey, Morroco and Tunisia. Building on steps already undertaken by the French EU Presidency to develop a global integrated plan against counterfeiting and piracy, the agreement hopes to develop a protocol similar to those already operating in the duty free and travel retail market. Supply chains and strong security controls are said to provide high protection for luxury brands in an attempt to stem the flow of counterfeit products that makes up 7-10% of world trade. If successful the increased crack down on counterfeit products will no doubt allow for greater sales success in travel retail stores.

Erik Juul Mortenson said of the signing: “Signing the declaration at the TFWA World Exhibition is a strong statement by the countries involved to develop measures that will look to match the secure retail channel and gold standard protection that duty free and travel retail provides. This initiative would encourage consumers to shop at duty free and travel retail stores, precisely because here consumers have the guarantee that they will be purchasing genuine brands.”

Holding your nerve

The level of attendance at the show speaks volumes about the travel retail industry as a whole and gave an overview of obvious trials and tribulations that travel retail operators will have to face in 2009. Speaking about the overall attendance levels of the show, Mortenson said: “Given the high level of pre-registrations, the overall impact was not as severe as we had at first feared.

I view this as a good example of the resilience, perseverance and adaptability of our great industry and our belief in the future.”

Remaining positive, Olivier Plagnol, travel retail worldwide director for Guerlain said: “We see the emergence of new nationalities in international travel who are big cosmetics buyers, namely the Chinese, Russians and Indians. Furthermore, airports are allocating more space to retail leading to larger and more qualitative retail environments.”

Larger retail environments in the travel arena is something that Lyndea Dew, international marketing director for Puig, is very animated about. “To bring the customers into travel retail we need to capture the audience. We need to be more exciting and more bold. We are even thinking about bringing rock music in to support the launch of our Paco Rabanne One Million fragrance.”

A belief in the future is no doubt a must for an industry that is so acutely aware that the heart of its business is in danger of being ripped out if the crisis sinks to new levels. But with other issues still to consider, such as the ongoing problems surrounding LAGs, counterfeit products and continuing to get footfall through the doors, companies are wise to continue to focus on the bigger picture and not get bogged down in the all encompassing nature of the financial crisis. And if all else fails, in the words of Bertinelli: “Then we pray, a lot.”