Building for a new era
Building on year-on-year passenger growth at Hong Kong International Airport – numbers rose 9.1% to 44.5m in 2006 – The Nuance Group’s local division, Nuance-Watson (HK), continues to make multi-million dollar investments into the Asian hub. In 2006 it rolled out a new POS system across all stores and opened a new warehouse facility. Successful additions to the store portfolio – like the Master of Time multi-brand luxury watch boutique and the first ever Kiehl’s airport boutique – continued the company’s commitment to be the main driver of retail interests at HKIA.
That commitment takes in a revamped Omega boutique, which since an upgrade in June 2006 has achieved a 30% increase in store sales, as well as the high-profile launch of Asia’s first La Prairie travel retail flagship counter this year. Then there’s last year’s revamp of the main stores in the East Hall departures area, which brought a 28% increase in perfume and cosmetics sales over 2005.
Consolidating the presence at HKIA is the newly opened suite of five stores at HKIA’s SkyPlaza mall: Amazing Grace (arts and crafts), Bags Unlimited (accessories), Calvin Klein Jeans, Fortress (electronics) and Scent & Beauty. Alessandra Piovesana, managing director of Nuance-Watson (HK), acknowledges that the stores were originated as part of a defensive strategy: “At first, it was aimed to be a strategic move to defend our retail position at HKIA, but after we developed the five innovative retail concepts, we believe we can turn them into real opportunities when Airport Authority HK’s airline plan rolls in. The five stores are quite different from those we have in Terminal 1, aiming to target a different profile of customers in Terminal 2, and give us an opportunity to experiment with new concepts.”
But there is no resting on laurels, as the company capitalises on the opportunity presented by China’s extraordinary economic expansion. The operation will enter what its influential managing director calls “a bold new era” with the opening of The Atrium, a multi-category store at The Venetian Macao casino-resort complex this summer. “It represents the first time Nuance-Watson has expanded its travel retail portfolio beyond the airport environment, and we look upon refining our know-how in selling and servicing travellers in a hospitality environment,” Piovesana says.
Without the massive drivers of trade represented by China’s burgeoning travelling class and the related infrastructure developments, Nuance’s established business in Australasia has faced a different range of challenges. The impact of LAG restrictions has been significant in this traditionally strong liquor market, particularly as Australia’s Department of Transport and Regional Services (DOTARS) has only been able to focus on the security issues.
Despite initiatives with a consumer campaign around duty free’s position, Nuance Australia & New Zealand CEO Christian Strang admits that “the consumer campaign is complex and can only work if each airport takes up the challenge to get the positive message out there as well. In reality if there is no global standard for transit/transfer passengers and if confiscations continue, then there is little point in any consumer campaigns; the consumer’s trust will evaporate quickly.”
At least the Nuance Group can negotiate the LAG threat from a strengthened position. Changes in
organisational structure have allowed the team to focus on developing what Strang calls “a new approach to a mature and failing business in a mature market whose value proposition has been eroding significantly since 2000.”
With French-based travel service company Newrest taking a 40% stake in The Nuance Group-Australia and NZ in February, the company has gained a boost and confirmed the validity of its current strategies.
Critical to the future was its retention of the region’s most valuable duty free concession at Sydney Airport. The new concession for this business, worth over A$200 million ($163 million) in annual revenues, began on November 1, 2006. Strang attributes the success to “an ambitious but deliverable business plan, an understanding of the Sydney market, a Sydney-centric approach and a very competitive bid.”
What has followed this year is indeed ambitious – the rebranding and opening of the SYD stores at Sydney Airport, replacing the long-established Downtown Duty Free store brand. The SYD name will be applied to stores progressively as they are redeveloped in Phase 1 of Sydney Airport’s duty free redevelopment program; the overall project does not finish until 2009 after the major reconfiguration of the terminal.
For now the new branding that has been launched in the Mega B store, which has undergone some fine-tuning and improvements, has also been applied to the Pier C landside store, and is about to be applied to the refreshed Arrivals B store. “The major element of development this year is a new walkthrough shop in Pier C. The rebranding also incorporates a branding of the innovative ‘Ready for Collection’ service, which is also being re-engineered across the country,” says Strang.
Strang considers that ‘Ready for Collection’ and arrivals shopping are the future in Australia: “We are particularly pleased that years of Nuance-led lobbying have paid off and that we will soon be able to sell a full range of merchandise in arrivals (currently limited to perfume, cosmetics, liquor, tobacco and confectionery). The Australian government has taken a farsighted approach and understands the benefits of the arrivals shopping concept.” News of the commencement date for the expanded arrivals shop ranges was awaited at time of writing.
With the LAG challenges remaining, the Australasian region is in full business turnaround mode after accelerating declines over the last few years. Major redevelopments beginning in 2007 and continuing through 2008 will see Nuance better able to cope with traffic increases and customer service challenges. The first to be completed will be the redevelopment of its Melbourne Airport stores in May 2007 and the rollout of the Downtown Duty Free replacement brand. In New Zealand, Nuance will continue to develop the business with an eye on the longer term future at Auckland Airport.
For these two arms of The Nuance Group’s Asia business, then, the seminal challenges facing the
industry at present is not dissuading investment.
Central to the turnaround for the Australasian business may well be the ability to adapt to the critical factor in the Hong Kong business’ buoyancy – the Chinese traveller. n
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