Big changes are coming to the travel retail industry

moodieBy Martin Moodie
Founder & Chairman, The Moodie Report

It feels like the travel retail industry is at a tipping point.” That observation, made by one of the channel’s most seasoned retail CEOs to me as we chatted in late 2014, struck me as right on the money.

Travel retail, so perennially vulnerable to (and sometimes beneficiary of) external events, has always been a market of non-stop evolution. But, like my industry friend, I believe that midway through the second decade of the 21st century, we have reached a period of seminal change.

That’s being driven by two key factors in particular — sector consolidation, and changes in consumer communication (by and to them), the latter driven by the extraordinary pace of development in the social and digital media world.

Travel retail’s blockbuster story of 2014 (one The Moodie Report was fortunate enough to break) was Dufry’s US$1.7 billion acquisition of The Nuance Group. This transaction didn’t just change the industry landscape, it tore it up.

“A transformational deal not only for Dufry but also for the travel retail industry.” In one short sentence, Dufry
CEO Julián Dí­az, a man I once dubbed “the great transformer,” hit the nail right on the head. The deal represented the biggest consolidation play in travel retail history, creating a new and clear market leader with an estimated CHF5,560 million (US$6.2 billion) in turnover (based on 2013 numbers) and a near 15 percent of global airport retail sales.

And while many of the more obvious targets of a decade have since been taken out (Aldeasa, Alpha, Brasif, Hudson,
Interbaires, Nuance, and others), do not believe that industry consolidation is anywhere near over. As I write this, less than a fortnight before the Duty Free Show of the Americas begins, there is every chance that two major deals may been announced by the time the event’s opening cocktail is under way — both with direct impact on travel retail in the Americas.

Will World Duty Free Group, which has posted more ‘For Sale’ signs than a Florida foreclosure specialist, albeit more subtly, have new ownership announced by the time I see this article in print? I’m not betting against it.

So too the changing face of consumer communication. Though digital media and e-commerce have had a devastating impact on High Street retailing around the globe, travel retail has been surprisingly immune. Until now. But I believe that going forward there will be big winners and big losers in travel retail, the former being those who embrace, not fear, the opportunity.

The biggest opportunity (in fact, need) for our sector is to grow penetration rates. What better way to do that than to
embrace the concept of the total journey — from online travel booking to pre-order duty free purchase to post-trip review. We can and must reach out to the consumer during every click and every step of their journey — no longer are the two separate. Call it ‘from home to hotel,’ if you like. We must be there.