by John Gallagher
Argentina-based independent travel retailer London Supply is celebrating its 75th birthday this year. The company started out as a classical ships supplier working out of Buenos Aires port provisioning foreign vessels with Argentina manufactured products free of taxes and duties. London Supply still offers ship supply today but now services 19 ports with an extended product range.
The company became involved in traditional duty free in 1976 when it won the concession to operate duty free boutiques on board 8 passenger ships owned by ferry company Flota Fluvial Argentina, which linked Buenos Aires with Montevideo, Colonia and Asuncion.
Over the next few years, the company won more onboard concessions and expanded into international airport management in Argentina and Uruguay.
One of the key moments in the company’s history was in 1999 when it won the concession to operate the Puerto Iguazu Free Zone in northern Argentina.
Following the win, London Supply opened a new $12.5 million wholesale and retail complex. After ten years of succesful operation, the company doubled the retail space in its flagship store in Puerto Iguazu, investing a further $30 million to create a 10,000 sqm store with the goal of offering the best shopping experience in the Americas.
London Supply Commercial Director Maggie Ducos candidly discusses London Supply’s business situation over the past few months, which she confirms has been difficult in Argentina: “Inflation is hurting all companies working in the country and the value of the dollar is stagnant and moved away from what most economists agree is its true value. For the best part of 2017, we have seen the U.S. dollar exchanged for 15 Argentine pesos whilst its true parity is between 18 and 20. Pricing has been a major preoccupation for us and this year we took a strategic decision to reduce our selling prices and they are now 20% lower than one year ago – the principal objective was to strive to maintain similar levels with other travel retail operators in Latin America,” she explains.
“But things have been tough,” continues Ducos. “Sales are higher but our costs are higher. Salaries, social security costs, and utility costs have all increased. Logistic costs are high in Puerto Iguazu and Tierra del Fuego, the two areas where we have significant retail operations. Our structure is expensive as we strive to give our customers the very best shopping experience.”
London Supply has worked in a stop-go economic cycle for many years and the company executives know they need to be creative to continue growing when times are difficult.
“We are taking a very close look at the way we do things. Many years ago the company decided that we would never cut staff simply to save cash; we will not put people out of work to reduce our costs. Our business must be more proactive and look at other ways to bring costs down and so far we have been successful with this strategy,” says Ducos.
Social Media is the key
For once thing, the company uses more social media and online tools to talk to its customers. “Nowadays we invest much less in billboard advertising which was key for us when we opened in Puerto Iguazu. Facebook, Twitter and Instagram allow us to get our promotional message to our target markets much more economically than before. Customers who follow us on these sites will know when our Black Week promotion is happening and what offers to expect.”
Ducos stresses that while the company has restructured its cost base it has been careful not to damage its image as the premium retailer in the region.
“During times of economic crisis many Argentines and Brazilians take their vacations closer to home and the Iguazu Falls will always be an affordable destination for all social classes. Our job is to make sure that all those coming to the area know that our shop exists, that we have a great range of products and the very best prices. In summary they will have the very best shopping experience.”
While family vacations and weekend breaks from Brazilians and Argentines are key target consumers for London Supply,
Ducos reports a significant increase in company conferences over the past six months.
“More companies that previously went to Miami, Cancun, Punta Cana or even Europe, now are coming here. We have been working very closely with conference organizers to ensure that conference attendees can come to our store when they have a break from business,” she says.
“This is incremental business and conference attendees tend to spend more per ticket than those on vacation. Also, since conference business tends to take place in quieter times of the year, it’s important that we work closely with organizers to increase revenues by offering the best shopping with great service and international guarantees.”
Revised pricing strategy
The fact that today’s travelers compare prices prior to traveling and shopping was a factor in London Supply’s revised pricing strategy, which Ducos says resulted in “buoyant revenues” during the first eight months of the year compared to the previous year. Sales rose by just over 34%, although some products –“especially from our supplier partners who understood what we were doing and worked with us”– increased by more than 40%.
“Even with the new revised prices, our average sales ticket increased, so it is clear that the sacrifices made by us and our suppliers have been worthwhile,” commented Ducos.
Earlier this year, London Supply opened Argentina’s first Apple Store in the Puerto Iguazu store, which has performed very well, says Ducos. “Apple is a very strong brand and the new store has been good for our image and reputation.
There are no official Apple stores in any downtown location in Brazil or Argentina, so almost everyone coming to the store is looking for an iphone, which account for 70% of sales.”
While London Supply’s sales per square meter at the 10,000 sqm Iguazu store have increased, the company is analyzing sales and profit levels of all categories. “Perfumes and cosmetics and liquor are our big sellers but we are analyzing the best way to manage these categories. There will be some changes in the medium term.”
Other categories are also undergoing some changes. Fashion, for example, benefited from the revised pricing strategy.
“We have virtually the same prices as USA and we have reduced the number of brands available but increased the size of some of the collections,” she says, adding that the company will introduce more personalized spaces, such as Victoria’s Secret which was launched last year. The company will introduce a new range of watches as well.
Business booms in Tierra del Fuego
Tierra del Fuego has been a major part of the company’s presence during its 75 years of existence. Following several difficult years, the company is again looking at the stores there with a more strategic focus. It took the company a while to get fully stocked, but then everything brought in sold out almost immediately, says Ducos.
London Supply can see three thousand shoppers on busy days at its main Ushuaia store, she says.
The company is renovating its main downtown store in Ushuaia, and the first stage is expected to be finished by November.
“We will be installing the best practices from Puerto Iguazu into Ushuaia, with the main objective ensuring that we get the right product on the shelves at the right time.”
“The renovation work will clearly be favorable for revenues and we are confident of seeing strong sales increases this coming high season.”
The planned renovation of the store in Ushuaia International Airport has been postponed until early next year but the company is also looking to expand its downtown store in Rio Grande, either with more space or by opening another store.
“The outlook at Tierra del Fuego is very exciting. More direct international flights are scheduled for the region and a very buoyant cruise business is forecasting solid increases for the high season. This is clearly good for our business. Winter tourism is also booming this year and is likely to continue. Better pricing from airlines has been beneficial for everyone.”