Region of opportunity
South American airports are alive with activity in the form of new store developments, expansion projects and refurbishments. David Davies catches up with three of the leading players in this most dynamic of retail markets
Anyone wanting to break into the South American duty-free business – and, let’s face it, with tourism
experiencing a general upturn across the region, there’s no shortage of incentive to do so – has to take on board one essential truth. In sharp contrast to so many other territories around the world, South American duty-free retailing has evolved from an initial and long-enduring emphasis on
arrivals shopping.
José Carlos Rosa, chief operating officer of international travel retailer Dufry’s South American organisation, takes up the story. “In Brazil and some other countries here in South America, the duty-free industry started as a way for the government to keep strong foreign currency in the country, which meant that it began as an arrivals duty-free business,” he says. “Consequently, the evolution of the business over the last 30 years has been pretty much based on that segment, arrivals, although the increase of tourism in Brazil and elsewhere has led to an increase in retail at departures. Of course, departures duty-free is very different from that at arrivals.”
Dufry South America, it is safe to say, has become an extremely powerful player in both departures and arrivals duty-free since it was established in March 2006, following Dufry’s acquisition of regional heavyweight Brasif. At the time of writing in February 2008, the company operates a grand total of 26 duty-free and 21 duty-paid shops at Brazilian airports, chief amongst which are Säo Paulo/Guarulhos International and Tom Jobim Galeäo International in Rio de Janeiro. A glut of recent store developments includes a new duty-paid shop at Congonhas Airport (Sao Paulo), the relocation of its shop at Dantos Dumont Airport (Rio de Janeiro), and an expansion of its T2 arrivals store and the modernisation of its T1 arrivals shop at Tom Jobim Airport. Two new duty-free stores at Confins (Belo Horizonte) airport – one on departures, one on arrivals – were due to begin trading shortly at the time of Rosa’s interview with Frontier, while work is continuing to ensure that all stores across the region comply with Dufry’s global image and concepts.
As if all that wasn’t enough to be getting on with, the retailer also has two departures stores in Bolivia (one apiece at Viru Viru International and El Alto International airports) and is developing its presence onboard cruise liners based in the Caribbean via partnerships with Norwegian Cruise Lines and MSC.
“We are a company that understands exactly the profile of its customers and airports, and is prepared to put up very consistent proposals – and the authorities know it,” responds Rosa when asked to explain Dufry’s rapid development across the region.
Looking forward, Rosa outlines a three-tier approach – revolving around organic growth, new projects and concessions, and acquisitions – to further expansion. Reacting to an evolving category mix will also be crucial. “We are currently seeing a very big growth in gifts and accessories,” observes Rosa. “To be sure, perfumes & cosmetics will remain the best performing category, but gifts is definitely the one which is [developing most rapidly].”
Investing in change
While Dufry is a relatively new player in the South American market, Motta Internacional has a rather lengthier history in the region. A distributor and retailer with more than 50 years’ experience in the duty-free and travel-retail industry, Motta’s extensive South American presence is headlined by its flagship stores at Simon Bolivar International airport in Caracas, Venezuela, and Tocumen International in Panama (where the company secured a new ten-year concession last May).
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And it was at Tocumen where the company recently unveiled its latest initiative – a new commercial identity for its duty free stores entitled ‘attenza’ that marks an emphatic shift away from the company’s previous policy of different store names in different locations. Launched in conjunction with four new stores at the airport, the attenza concept – symbolised by an eye-catching star logo that comprises five different coloured shopping bags to represent the wide variety of products on sale – will soon be applied to other Motta locations in other countries.
“Attenza has two main objectives,” Motta Internacional executive vice-president Carlos A. Motta tells Frontier. “The first is a customer service philosophy which we are instilling in all of our sales representatives. We are also investing a lot in the training and retraining of our staff. Most duty-free stores carry the same products so we are making a conscious effort to differentiate our stores by having well-trained and friendly personnel. The second will be implemented at the end of March when all of our stores change to the attenza name. Currently our stores have different names, [meaning that] it has not been easy for passengers to know which stores belong to Motta Internacional.”
Encouragingly, the concept has received an enthusiastic response from customers since it was unveiled at Tocumen in mid-December. “We have received very positive feedback from the
passengers travelling through this airport [with regard] to the changes that have been made since the new concession began,” says Motta. “The design of the store is very similar to what we have in Caracas, and the combination of the colours, lighting and furniture used has quickly proven to be [effective]. The new attenza identity is also helping to attract passengers.”
Alongside the further roll-out of attenza, 2008 is also likely to bring a refurbishment at Bogota airport, where Motta has had a presence for 15 years and currently operates eight stores (“We are currently working with the new administrators of the airport on this project”). The company will also remain open to the possibility of fresh locations elsewhere in South America. “We will continue to look at and for retail opportunities, both in duty-free and domestic markets, throughout the region that make business sense,” confirms Motta.
Understanding the customer
Presiding over a similarly impressive portfolio of stores elsewhere in South America is Spanish retail giant Aldeasa. In fact, the region accounts for 38 of Aldeasa’s 70 non-Spanish stores, spread across five countries and eleven airports. The company is particularly strong in Colombia (two stores at Cartagena de Indias and Barraquilla), Peru (eight stores at Lima and one at Cuzco) and Mexico (seven stores at Cancun, one each at Merida and Cozumel).
Not surprisingly in such a diverse region, there can be no ‘one size fits all’ approach when it comes to devising a retail offer. “The passenger preferences depend on the airport and, therefore, the type of passenger,” notes Aldeasa’s international operations director, Daniel Montero. “For example, in Cancun there is a significant percentage of young passengers from North America, whose preferences basically lean towards buying traditional drinks (mainly whiskies and tequila), while the South American passenger (in countries such as Peru and Chile) shows a preference towards perfumery products.”
Satisfying these diverse requirements is, inevitably, a task that requires substantial information-gathering exercises. “We manage large databases of customer behaviour,” notes Montero. “A deep analysis of this information in order to satisfy our clients is one of the major reasons behind our success. Furthermore, we develop advanced commercial techniques and we implement them in our shops, but always adapting to features of the country we are present in.”
Aldeasa is currently focusing on consolidating its existing outlets in the region, but it does not rule out taking on further outlets. “There are many cultural and historical similarities that make Latin America one of Aldeasa’s natural markets,” concludes Montero. “That’s the reason why it was the first region we focused on [with] our international strategy. Aldeasa is always interested in participating in new opportunities within the region.”
Revamping Ezeiza
Last but by no means least, we come to a company whose focus is firmly on the Argentinian market, but whose influence and renown extends not just beyond its home country, but also its region. Interbaires’ phenomenal expansion over the last half-decade has long been the stuff of travel-retail legend, and with plans now being advanced for an enhanced offer at flagship airport Buenos Aires Ezeiza and a new CEO, Nicolas Posse, to direct them, the company shows no signs of backing off from its ambitious growth strategy.
Without doubt one of the company’s most significant projects of the last 14 months was its new-look store in the Departures area of Terminal A at Ezeiza airport. Greatly increased capacity for fashion and accessories was the key ingredient for a redevelopment project that ultimately provided an additional 1000sqm of retail space.
“The store is performing awesomely well – way above our expectations,” says Posse, who took
over from the long-serving Enrique Urioste in October. “It has improved the company’s performance as a whole, while the shop itself has added opportunities for passengers in regard to brands – which now include Bvlgari and Emporio Armani – and specific offers... The shopping experience has also changed considerably.”
More recently, Interbaires has unveiled a new La Casa del Habanos cigar store and walk-in humidor, and is now poised to unveil a La Prairie Spa. “It’s all about providing more service and having customers enjoy the whole experience of being at a store,” elaborates Posse. “This leads to people planning to be at the airport with more time to enjoy all of that, and become more and more loyal to our proposal.”
Moving forward, Posse confirms that Interbaires is currently working with Ezeiza operator Aeropuertos Argentina 2000 on a planned airport project expected to begin this July, last for three years and provide a possible 50% expansion in total retail space. Elsewhere, Interbaires doesn’t rule out further expansion at its other Argentinian sites, or the potential for establishing a presence outside the country’s borders (“we are looking at the possibilities that are being opened up in the region”).
Underlying all these developments will be the desire to simply carrying on getting better at every aspect of the retailer’s art. “We’re focusing on better service and continual improvement,” says Posse. “It can be about very small details, like moving the position of a gondola, or adding new category areas or regional products. We want passengers to come earlier and enjoy the opportunities that they have here, and fortunately it is all going very well.”
With exciting new projects currently underway at airports throughout South America, and airport retail in general being driven by enthusiastic regional and international players, there is an overwhelming impression that duty-free retail is finally coming of age across the region. While the initial focus on
arrivals retailing may have engendered a rather unusual developmental cycle, a much more equal
balance with trade at departures was achieved some time ago. Rising passenger levels at many of the region’s airports will, inevitably, lead to further airport shopping projects – and fresh opportunities for retailers. To put it mildly, the next few years promise to be highly eventful as South America moves to take its place at the top table of travel-retail regions.
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