Interbaires sets the pace
It was possible to say in the years following Argentina’s economic hard landing in 2002 that double-digit annual growth was just making up for lost ground. No longer: Argentina is starting to prosper in a way not seen since the late 1990s, and tourism is taking its fair share of that real growth. All the same, business development by Interbaires continues to outpace many other enterprises.
For 2006, Interbaires’ total budget target was $115 million, and the final result came in a precise 0.3% ahead of that. The resulting figure represented an increase of 25% versus 2005, matching the rate of growth recorded in 2005 versus 2004, and constituting an achievement that Enrique Urioste classes as “very good”. “Market conditions are really positive,” Urioste tells Frontier from his office at Buenos Aires Ezeiza International Airport. “We have growing passenger traffic that is good not only in numbers but in the quality of purchasing, so things really are going well.” Could 2007 be even better?
January and February numbers were highly encouraging: total sales for this period were up 34% pcp 2006. Urioste attributes this, basically, to the new departures shop in Terminal A of Ezeiza. The 3,250sqm store allocates additional space to accessories and high-end fashion, with high-end clothing and watches providing significant growth. In-store traffic responded to the high-end area within the departures store, and purchasing was further encouraged by the opening of an Emporio Armani shop in shop.
“It’s not only the enhanced offer of the shops by themselves but also our close working relationships with suppliers that have helped to transform frequent flyers and other passengers into loyal customers,” says Urioste.
Further examples at Terminal A are a Casa del Habano outlet featuring the best Cuban cigars and (opened at the end of March) a joint-venture with La Prairie, in the form of a spa that will offer all La Prairie lines. In the fashion category, the retailer is fine-tuning its local fashion and international brand offer at Ezeiza and Buenos Aires Aeroparque, and analysing which brands are exportable to other airports.
As its name implies, Interbaires has a close association with Buenos Aires, but that is not to say the rest of Argentina is not receiving plenty of attention. Construction of a new airport at Cordoba, Argentina’s second city, provides a case-in-point. “We will launch a new duty free store at Cordoba Airport from May this year and we are confident that there will be an incremental of international passengers there.”
Further south, in the Andean city of San Carlos de Bariloche, expansion is also on the cards. Last year was the best ever for the Interbaires duty free shop at Bariloche Airport, and the company will now add more space to shop, making it much more clearly a walk-through venue.
Interbaires has been a leader in implementing sophisticated in-store IT systems and sharing information with suppliers. The present IT system can manage on a minute-by-minute basis the performance of products, brands, sales and stocks, and can follow up with direct sales analysis,
says Urioste: “This is our core management system and we have opened it to suppliers, with a password they can log on to the system and see, for example, sales per shop, sales per sku, stock in shop, stock in warehouse, stock by total company, orders or back orders. It is a big help to brand management, and enables suppliers to obtain the best performance.”
From March 1, Interbaires is aiming to enhance its use of retail IT even further, to capture and instantly use customer information. Up until now the system has held information on the Duty Free Point loyalty card members, such as home addresses, birthdays, frequency of flying, and brand consumption. The new system delivers to the cashier real-time information on Duty Free Point card holders. A screen will recognise, for example, if a shopper at the checkout usually buys chocolate, and the computer can then display chocolate ads or promotions to encourage repeat purchase. For customers who are not loyalty club members, consumption is tracked by nationality, with suggestions to the cashier based on the national preferences for different categories.
One category that continues to attract broad interest from different nationalities is Argentinean merchandise. Interbaires is remodelling its destination store-in-store at the entrance to its main Ezeiza Terminal A departures store, focusing on luxury, high-end Argentinean goods. At the other end of the store it will group lower-priced goods like leather products and Havanna confectioneries.
As might be expected from this proactive management, Interbaires has moved fast to address changes in security since the terrorist threat involving liquids last August. It has complied quickly with security requirements for flights to the US by implementing a gate delivery system, so the impact on sales has been minimised aside from the associated increase of cost and time involved. Direct flights to Europe also present no problem, but the issue remains that a passenger transferring from major destination airports like Madrid to another European destination will have liquids or gels confiscated.
Urioste is active in working with the duty free associations Asutil, IAADFS and the Duty Free World Council to put pressure on the European Union not to apply restrictions against source countries. The Argentine government has responded to the situation by writing to the EU explaining the security procedures in place at Argentinean airports and arguing that passengers carrying liquids and gels should be free to transit within the EU.
“We cannot address this situation by ourselves alone, and need government support,” argues Urioste, who points out that Interbaires’ controls are as tough as any other. The company continues to strengthen its security controls, with scanning of 100% of its goods moving from warehouse to store to enable complete assurance against explosives.
Facing up to this challenge is essential for achievement of the retailer’s major 2007 objective: “To match our aggressive sales forecast.” Urioste is also attuned to new opportunities to expand the business. “By definition we are always searching for new possibilities, but any decision in that arena has to be profitable and sustainable,” he says. That maxim certainly appears likely to apply to Interbaires’ existing business this year, and its smart marketing and innovative technology will continue to make the Argentineans pace-setters for the industry in the region and beyond.
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