According to Duty Free Dynamics CEO Nicolas Dobry, the company thoroughly researched the market, and discovered that most of the region’s duty free operators were focusing their business exclusively in the core categories (fragrance, cosmetics, alcoholic beverages, cigarettes and confectionery), and that during these past years most of those product categories have been “stagnant.”
At the same time, the company took into consideration that the Americas has a travelers flow of above 1.5 billon passengers per year, which constitutes an interesting audience for many additional product categories such as watches, jewelry, sunglasses, writing instruments, outdoor, apparel, travel gear, footwear, toys, personal care, electronic gadgets or even pets accessories.
Dobry says that he and his partners understood that in order for this innovative approach to succeed, the company would need to take a more hands-on approach since many operators were not used to handling these new categories, especially the ones like apparel or footwear which are sensitive to seasonality, sizing, or markdowns.
As a result of its research, Dobry says that DFD is now forming partnerships with operators where the partners contribute their experience in the operational part of the business and DFD adds its know-how on each of these new categories by providing the operator with a comprehensive manual on how to set-up and operate the business in an efficient way. In essence, DFD acts as a “master franchisor” and the operator becomes the “franchisee”.
Initially, DFD focused its business in the watch category and inaugurated its portfolio with the Guess brand, which created the fashion watch category and become its global leader. DFD has established the brand as the category leader in the Americas travel retail channel, says Dobry.
During the past year, DFD complemented its watch portfolio by adding entry/mid-priced traditional watch brands Seiko; Luminox Swiss watches, a niche/mid-priced brand targeting aviation and military fans, which is very strong in the US market; and Oris, a key player in the global luxury sports watch segment. Lastly, DFD incorporated globally recognized traditional US brand Timex to cover the US$ 50 to 200 price range.
DFD has also launched the outdoor category with Osprey backpacks, Fjällräven backpacks and outdoor wear, and ENO (Eagle’s Nest Outfitters), best known for its foldable hammocks that can fit into a purse. It also inaugurated the footwear category with brands like Timberland and Toms as well as the travel gear category with its recent incorporation of Samsonite.
During the months to come DFD will not only announce new additions to its existing product categories but will also inaugurate most of the product categories listed above with exciting new brands, he says.
About 12 years ago he began working with Latin American investment conglomerate, The Liberman Group, to create a wholesale & distribution company in the region.
“DFD’s journey began when Guess asked us to help them establish a travel retail distribution network in Latin America and The Caribbean. After working through its domestic partners, they realized they needed one partner who would bring them a global/regional solution,” Dobry tells TMI.
“We are diversifying our categories and expanding our product range, but we are creating a consistent ‘brandness’ within each category,” says Dobry. “By consistent I mean that our brands are completely complementary to each other. In this way, our product portfolio becomes 100% efficient.”
Dobry says that the company is aiming to introduce around 20 new brands during the next 18 months.
Hub location & Logistics
Dobry stresses that its location plays a key role in DFD’s distribution strategy as the company harnesses Panama’s major airport network, the ‘Hub of the Americas’, and port facilities which serve both the Pacific and Atlantic Oceans. The company has now opened strategic platforms in Miami and Buenos Aires as well.
“We have our headquarters in Panama City, and our main distribution hub at the Colon Free Zone. We have an office in Buenos Aires, Argentina, which serves the region’s southern cone and has a front-end team handling sales, marketing and merchandising. We recently opened an additional office in Miami, which handles our North American and Caribbean customers—this region is our main focus this year.”
State-of-the art logistics is another part of the added value DFD brings to the travel retail channel.
Proprietary Operating Systems
“We not only have a very robust front-end team at the selling level, we also have a very robust operational infrastructure with our own operational system called “OES” (ordering engineering system). Our superior supply chain management operates via a proprietary online platform which allows our retail partners to log in to our intranet site. Clients can check our inventory, see all the product specs, place an order and have it shipped within 72 hours,” adds Dobry.
Another important part of DFD’s added values is its ability to provide its customers the possibility of aggregating orders of different categories/brands into one single shipment.
“This allows us the ability to offer our retail partners the possibility of carrying minimal inventory and for us to be able to send them weekly consolidated shipments. In that way they reach the MOQ (minimum order quantity) that they require to keep logistics costs efficient.
“We act as aggregators and this is very interesting both for our operating partners and for our brands,” says Dobry.
Adding Value at retail level
DFD also brings added value at the retail level, becoming more involved in the retail footprint.
“We are not just transferring goods from our warehouse to our partners points of sale, but actually helping them operate the business. In some cases we even collaborate with our own sales people to run their floor sales, at least at the beginning,” says Dobry. “By creating a close partnership between the operator and ourselves, we maximize both parties’ knowledge and develop a sustainable, long-term collaboration.
“Brands see us as innovators – and realize DFD can be the perfect partner for them. Travel retail is a niche market where we think we have the most meaning and ability to add value to the chain.”
Duty Free Dynamics will be in Orlando to talk to potential brands and operators in the Regency Ballroom, booth number 211.