The leather Factor
All categories are experiencing a move towards more exclusive and luxurious product offers as travellers around the world are becoming more informed and better aware of what they want from a duty free retail offer. This is also true as far as leathergoods are concerned, although the implications for this category differ from others. “Luxurious item does not necessarily mean expensive item,” Massimo Santi from Italian leather goods manufacturer I Santi tells Frontier. “People are looking for good quality products, but at the same time they are looking for a good price-quality ratio. In other words, value for money.”
For Gerry Munday, global travel retail director for MCM, it goes even further than that. “It’s important to mention that brand-aware consumers today cover a wide age and demographic spectrum. A 30 year-old lover of MCM may not have the same spending power as a 45 year-old lover of MCM. Therefore, although luxury and exclusivity are important, so is the introduction of more non-leather materials that provide equal levels of quality, at a more affordable price.”
Knowing what items will prove to have the greatest selling potential is of crucial importance in a channel that offers limited display space. Although retailers are happy to have a luggage and leathergoods offering, it often comes down to how many items can be fit into a single area. Marcello Frangi, area manager for Africa, East Europe and Middle East for Bric’s, tells Frontier: “Luggage is our core business, and luggage demands big spaces. We help retailers to furnish their space in the correct way and optimise the space dedicated to our brand.”
Sometimes, the requirements of suppliers does not correspond to the space made available by retailers; yet it is important to showcase a company’s products effectively and in the best possible way to attract customers. For Mimmo Mariottini, global travel retail director for Bally, retailers vary from one region of the world to another in how the retail environment is set up. “In Asia, the ideal situation is a stand-alone boutique; in other areas, at least a personalised corner.” Understanding the customer and what they are looking for is therefore vital in order to develop the right product mix that will fit within the allocated space. This is something with which MCM is very familiar. Although the popularity of specific lines varies from region to region, the underlying qualities of sought-after leathergoods are all the same: “Customers are looking for products that meet their needs: image needs, design needs and practical needs.” Munday says. “For travellers, practicality and functionality are vital. What is the point of having an attractive-looking weekender if it can’t stand the rigours of travel? Price is also a consideration.”
Brand name and quality are recurrent criteria as far as travellers are concerned. “To buy leathergoods is an impulse buy most of the time,” Santi says. “So customers will buy if they are attracted by a nice style and/or model, and colour. But quality, brand and, of course, price are also a very important part of the
decision to buy or not.”
Finding synergies
If luggage and leathergoods have their place in travel retail, TR is certainly a very important channel for these companies, and not just as a brand-building exercise. Many a company started selling its wares in duty free in order to boost the brand’s image amongst an enviable target audience, but as sales increased, becoming ever more successful, the approach evolved to reflect the fact that the channel is much more than just a window-shopping opportunity.
“Travel retail is becoming a destination shopping mall in its own right,” Munday says. “For many people it is often the only time they have to shop. For this reason, we will continue to develop MCM in travel retail, to offer items that are designed specifically to meet the needs of the traveller, and we will also look at developing an exclusive travel retail range.”
Travel retail is a particularly important channel for MCM, which is trying to rebuild its image worldwide. “In its heyday, MCM was the fastest growing luxury brand in the world and we strongly believe it will be again. In South Korea, sales last year for the brand had reached $120m, of which $11m was through
travel retail. The potential for MCM, though, is worldwide, and travel retail will play a key role in that resurgence,” Munday explains.
For Bric’s, too, travel retail continues to gain in importance, with sales in 2006 representing 9% of the company’s total sales – and an increase of 34% over the previous year. “At the beginning, we entered the travel retail/duty free business to consolidate our international image, but now it is an important business opportunity where it is possible to make good numbers and profit,” Frangi says.
The company’s strategy to further develop its activity in the channel revolves around finding the right product and maximising visibility. “We have developed products in order to optimise the space, adding value to existing lines. We are also attending the international duty free fairs with a stable and professional sales organisation.”
I Santi focuses on the products as well, with Santi arguing that “good products with good design and quality are the best advertising for the brand itself; and we noticed that people know and understand the quality of the products much more than before.”
But products are not the main priority for all. Although they are an important part of the route to commercial success, for MCM it is as much a question of location as of quality. When the brand was bought in 2005 by Sung Joo Kim, a large number of shops – considered as secondary locations – were closed down so that the company could concentrate on developing those shops in prime locations. “Fast expansion is not the priority,” Munday stresses. “The priority is expanding in the right way.”
In order to do so, MCM controls its growth both domestically and in travel retail, selecting the locations in which it wishes to be present with care, with most domestic openings eventually leading to a similar duty free development.
Bally also puts a lot of importance in the location of its shops. In reference to his development strategy, Mariottini states: “Upgrade and personalise all existing locations. Evaluate new locations where possible to open with a personalised corner/shop.”
Making it your own
Personalisation and innovation are certainly two of the most important elements in a very competitive industry. Luggage and leathergoods manufacturers do not only compete against each other, they also compete with other categories for premium space and visibility.
Each company will devise its own way of standing out and gathering more market share for their brands. Some, like Bric’s, will boost their international presence by opening domestic shops in the centre of cities such as Brussels, Dubai, Hong Kong, Kuala Lumpur and Moscow. Others, like MCM, will concentrate on adapting product offers to the customers in different parts of the world. They are investing heavily in R&D to develop new materials, and the relationship created with MCM’s new designer, Michael Michalsky has yielded growing success for the brand. “Beyond that,” Munday says, “the challenge is to ensure that MCM is represented in the right way within travel retail. Our mission is not to expand very fast, but to expand and manage the business in the right, selective way with state of the art solutions to logistics and distribution.”
Sometimes, the right solution might be to put one’s rivalry aside to take advantage of innovative ways to present brands to travellers, as was done by the Nuance Group at Zurich Airport when it opened a single boutique last year featuring both Burberry and Bally. In other situations, it will be a matter of harnessing a brand’s power and targeting the right customers in the right environment. But whatever it is, luggage and leathergoods have a strong positioning in the travel retail luxury offer, providing companies in the category with an increasingly attractive channel for growth. n
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