Upping the ante
In the three years since the government-operated New Tokyo International Airport Authority was restructured to become the state-owned corporation Narita International Airport Corporation, retailing at Japan’s leading airport has undergone a quiet revolution.
Under the old regime, Narita had for many years operated an even playing field with each of its four retail concessionaires – ANA Duty Free, JATCO, Empire Airport Duty Free and JAL/DFS – having identical categories and similar, adjacent store spaces. Under the structure provided for by the airport privatisation legislation signed into law in December 2002, the Narita Airport Authority (NAA) has now taken on direct operation of duty free stores in the new South Wing of Terminal 1.
The timetable set three years ago specified that the venture’s stores be up and running at Terminal 1 by mid-2006, and with typical Japanese timeliness the Narita Nakamise mall opened in the terminal in June 2006. (The South Wing handles all Star Alliance airlines flights.) NAA set as its objective an expansion of non-aeronautical revenues with duty free to be a major driver, and as a spokesman tells Frontier: “Since the opening of Narita Nakamise in June 2006, retail sales have increased by about 9% over the previous fiscal year.”
NAA’s direct operation of duty free at the airport is via three joint ventures: NAA Retailing (a joint venture with market leader JATCO), NAA/ANA Duty Free, and NAA/JAL-DFS. Between them, the three entities manage all 17 stores in Narita Nakamise’s 3,500sqm of retail space, including a range of category-focused duty free shops trading under the Fa-So-La banner.
Nakamise also has branded boutiques by Coach, Emporio Armani, Ralph Lauren, Salvatore
Ferragamo and Tiffany; the largest Cartier and Hermès stores in world duty free; Japanese gift shops; dedicated perfume & cosmetics and branded watch stores; and Akihabara, a Japanese and electrical products store, named after the famous Tokyo electronics shopping area.
As befits the name (Nakamise is a traditional shopping area of old Tokyo), visitors to the mall will know they’re in Japan. Handmade Japanese paper is used in all the light fittings, with stepping stone
patterned carpet.
The significance of there being a cutting-edge retail precinct at Japan’s gateway airport is hard to overstate. At last Narita Airport has a range of goods and services that many Japanese would typically
expect from a top department store like Mitsukoshi
or Takashimaya. Passengers appear to be responding. “Narita Nakamise’s total revenue is about 3% over original target,” the NAA spokesman says, “and the most successful store is Akihabara.”
How much of this is due to Japanese travellers? NAA reserves comment on the impact that Japan’s recent economic upturn is having on travellers, but acknowledges that in light of the fact that Japanese passenger numbers in 2006 increased by 1% over the previous year, there does appear to be a certain growth in the sentiment to travel.
International traffic at the airport is continuing to rise, with aircraft movements on Asian routes driving much of the increase, and a rising profile for mainland Chinese and Taiwanese. In 2006, there were 23,480 aircraft movements on China routes, an increase of 5% on the previous year, and 9,460 on Taiwan routes, an increase of 14%.
Overall, 31.87m passengers travelled through Narita Airport in 2006, 1% more than the previous year. Figures at present show an increase of 3% over the same period in 2006.
As for retail revenues, the NAA spokesman comments: “Further growth is expected in 2007 due to the opening of Narita 5th Avenue on April 9.”
The second airport mall, Narita 5th Avenue, comprises 32 shops in 2,800sqm of retail space, in a renovated third floor area of the airport’s Terminal 2. Based on the fashion atmosphere of New York’s 5th Avenue – in contrast to the Japanese theming of Narita Nakamise – the Terminal 2 development features a second Akihabara store; Fa-So-La fragrances & cosmetics, liquor, and tobacco stores; and branded boutiques by Burberry, Bvlgari, Cartier, Coach, Hermès, Salvatore Ferragamo and Tiffany.
Kansai International Airport, which serves Osaka, Kyoto and the broader Kansai region, pioneered standalone luxury boutiques in mainland Japanese airports. Now the retail offer from its bigger rival in the Kanto region, and the airport’s overall expansion, is upping the competition. But Kansai
International Airport Corporation reveals that it has no plans to develop any additional retail
concepts in 2007, while suffering a single-digit percentage decline in sales of liquids, aerosols and gels since last year.
Centrair – Japan’s third airport, serving the central Chubu region – is already enhancing its retail offer two years on from its opening in February 2005. “An extensive remodelling, including the opening of new stores, was carried out last December – and we plan to introduce new brand products this year,” says Takuya Nakatsu, Centrair’s commerce & marketing manager.
Centrair too has seen its turnover from fragrances, cosmetics and liquor sales at the airport suffer in the new international regime, with liquor sales down approximately 10%. Nonetheless, Centrair is planning to push its duty-free retail sales to ¥9.7 billion ($81 million) for fiscal 2007 (April 2007 to March 2008).
Interestingly, alongside the modest growth that Narita is recording in Japanese passengers, other airports are struggling to retain their local business. Fukuoka Airport reports that a fall in Japanese passenger numbers and per passenger spend in recent months has been compensated for by increased foreign visitors, resulting in a net gain in duty free sales. “Korean passengers have increased greatly due to the influence of the strong won and their exemption from tourist visas,” says Fukuoka Airport’s Maiko Kanamori. “We expect that we could keep the present situation as long as the value of the won stays high.”
Meanwhile, Narita International Airport Corporation continues on its path to full privatisation. “In the early stages of 2008, we expect to launch our initial public offering on the public stock market,” says the NAA spokesman. Further development is anticipated at that point, with works on extending the airport’s parallel runway planned to be in effect by March 2010. Where the privatisation takes retailing is still to be seen, although the determination to enhance non-aeronautical revenues at the airport will certainly lead to even more activity in the corridors of Narita International Airport. n
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